Federal Programs for Small Business Relief During COVID
There are three phases to the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748), also known as the CARES Act. While the first two phases deal with (1) initial support and vaccine development, and (2) paid leave, unemployment, and food assistance, the third phase (the economic stimulus package) will be most important for small businesses in Maryland.
Phase three, enacted on March 27, 2020, is a $2 trillion dollar stimulus package which will provide loans and support for major industries, as well as direct payments to qualifying individuals and families. The CARES act provides additional capital to small business through approximately $350 billion in forgivable loans through the Paycheck Protection Program (PPP) and expands the small businesses’ eligibility for the Economic Injury Disaster Loan Program (EIDL). Where a small business may not have previously qualified for relief under EIDL, the March 27, 2020 “phase three” expansion makes this program available to more small businesses including those in the food and beverage industry. Phase three also provides some tax relief to small businesses by codifying a delay in employer-side social security payroll taxes until 2021 or 2022, creating a refundable 50% payroll tax credit on worker wages, and establishing less strict operating loss-reduction rules. Further, unemployment insurance benefits have been expanded to sole proprietors, self-employed workers, and independent contractors. If you think you may fall into a category
The Small Business Administration (SBA) Paycheck Protection Program (PPP) is a loan to provide additional cash-flow assistance through 100% SBA-backed loans to employers through a newly created loan program. Applications must be submitted through an SBA-approved lender and most organizations including non-profits, sole proprietorships, and independent contractors, with 500 employees or fewer are eligible. The loan offers up to 250% of one month’s payroll up to $10 million dollars to cover various expenses in the eight-week period after loan disbursal. Federal direction indicates that the loan will be forgiven if 75% of the loan is used for payroll costs, and the remaining 25% is spent on qualifying expenses.
The EIDL program was first announced in March 2020 and provides a maximum of $2 Million working capital loan directly from the SBA at a rate of 3.75% for businesses and 2.75% for non-profits with up to a 30-year term for businesses which can demonstrate that they have suffered substantial economic injury. Generally, the same entities which are eligible for the PPP program and eligible for EIDL and payments are deferred for one year. EIDL also provides applications to receive a $10,000 within three days of application. Both the loan and grant are intended for use on fixed debts, payroll, accounts payable, and other bills.
Borrowers can apply for both EIDL and PPP, but the money cannot be used for the same purpose or the same expenses. Further, borrowers may be eligible to refinance an EIDL into a PPP loan to take advantage of the PPP forgiveness provisions.
Consult with an Experienced Small Business Attorney. Whether you have a question about operating your business, applying for a Small Business Loan or just want to know what options you have we are here to provide advice and help you. If you are interested in obtaining legal advice for your business, please reach out to one of our business attorneys at Mulinazzi Law Office by calling us at 410-290-6270 or email to email@example.com or firstname.lastname@example.org.