Resources for Small Businesses
PAYCHECK PROTECTION PROGRAM (PPP)
Loan Details: The Loan matures in 2 Years at an interest rate of .5 percent fixed rate. Payments are deferred for 6 months and there is no prepayment penalty. The loan is not collateralized and does not require a personal guarantee.
Application Period: through June 30, 2020.
Eligibility: Small businesses with less than 500 employees. There is an exception for restaurants with more than one location, franchises, and certain industries (which I do not think applies to anyone on this email) that meet certain SBA criteria.
Supporting Documentation*: See the attached Application for the information that will be required of applicants. It is recommended that you compile the following documents in support of your application:
Last five quarters of each Forms 941, Employer’s Quarterly Tax Return [UCT-6, Florida Department of Revenue Employer’s Quarterly Report OR NYS-45, Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return];
and a copy of your 2019 Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
* ADP and Other Payroll Services are Working to Generate Reports that Comply with the requirements of the Application.
Loan Forgiveness: The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
Below are some updates to Guidelines for the PPP Loans, including forgiveness:
The requirement in order to qualify for loan forgiveness that at least 75 percent of the loan proceeds must be used for payroll costs during the covered period, is reduced to 60 percent.
Forgiveness for reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with worker or customer safety requirements related to COVID–19.
The maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020 extended for up to 5 years.
The deferral period for payment of principal, interest, and fees on PPP loans is extended to the date that SBA remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period.
Emergency Injury Disaster Loan (EIDL) Program
Unlike PPP Loans, EIDL Loans are submitted to the SBA for approval, not private lenders.
Terms of the Loans
Amount: Loans will be available in amounts up to $2 million.
Use of Funds: Loans will be available to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of COVID-19. Please note that these loans are not intended to replace lost profits and are not for expansion. The loans cannot be used for the same purpose as a PPP loan.
Interest Rates: 3.75% for small businesses; 2.75% for nonprofits.
Payments: Deferred for one year.
Term: Determined on a case-by-case basis, based on each borrower’s ability to pay, up to a maximum of 30 years.
Guarantee: For loan amounts greater than $200,000, the SBA may require guarantees.
Collateral: Collateral will be required for loans greater than $25,000. Based on the SBA’s other disaster loan programs, we anticipate some flexibility in this requirement.
Delivery of Funds: Targeted within five days after execution of loan documents, but has been taking much longer.
Terms of Advance Program
Amount: Advance of up to $1,000 per employee, up to $10,000.
Repayment: This advance will not have to be repaid.
Delivery of Funds: Delivery of advanced funds is targeted within three days of a successful application.
Application: Concurrent with underlying loan application.
Brief Outline of CARES Act Tax Benefits
Built into the CARES Act are significant amendments to the Tax Code and even to the fairly new Tax Cuts and Jobs Act (TCJA). With careful planning, your business can benefit greatly from these provisions of the CARES Act. Below is a brief summary to offer you guidance. in addition to discussing these changes with your accounting professionals, feel free to contact me if you have any questions.
I. NET OPERATING LOSSES (NOL) arising in 2018, 2019, and 2020 can be carried back to the five preceding years
A. How this Works: If your company has unused losses arising in 2018, 2019, and 2020, and paid taxes in one or more of the preceding years, you can file an amended tax return seeking a refund of taxes paid.
B. Losses can fully offset taxable income beginning in 2021. The 80% limitation is lifted.
II. DEFERRAL OF PAYROLL TAX
The Social Security Tax and Medicare Tax that employers have to pay (6.2%) will be deferred for the rest of the year (ends on December 31, 2020). It will have to be repaid in two installments due on or before December 31, 2021 and December 31, 2022.
Employers who had SBA loans forgiven are ineligible for this deferral.
III. EMPLOYEE PAYROLL RETENTION TAX CREDIT
A. What is the benefit? Eligible employers will receive a payroll tax credit of up to $5,000.00 per employee. if the credit exceeds the employer's tax liability, the excess is refundable!
B. Who Qualifies? The Employer must have suffered a significant decline in gross receipts due to the COVID-19 outbreak. This is generally established when a business’s gross receipts in a calendar quarter in 2020 are less than 50 percent of the gross receipts of the same calendar quarter in 2019
An Eligible Employer Cannot Receive BOTH the Employee Retention Credit and the Payroll Protection Program (PPP) benefit
IV. INCREASE OF INTEREST EXPENSE DEDUCTION LIMITATION
Companies will be able to deduct their borrowing costs up to 50% of their earnings (adjusted taxable income) for 2019 and 2020, instead of 30% limit in the TCJA. Also, significantly, it allows companies to elect to use their 2019 adjustable taxable income, instead of 2020 in order to maximize the increased business interest deduction.
I hope that this helped. Tax attorneys and accountants work differently. Speak with your accountants and do not hesitate to contact me as I am certain I can help your business navigate these changes so that you can maximize your tax benefits.
Other Resources for Small Businesses
FUNDING FOR RESTAURANTS AND RESTAURANT WORKERS: https://secure.restaurantworkerscf.org/np/clients/restaurantworkerscf/donation.jsp?campaign=2&forwardedFromSecureDomain=1&test=true. The Restaurant Workers' Community Foundation is offering direct funding in the form of grants for restaurant workers and zero interest loans to restaurants.
THE FLORIDA SMALL BUSINESS EMERGENCY BRIDGE LOAN PROGRAM: http://floridajobs.org/rebuildflorida/businessrecovery. The Florida Department of Economic Opportunity is providing loans at zero interest for up to one year to businesses that have between 2 and 100 employees.
FEDERAL DISASTER LOAN ASSISTANCE: https://disasterloan.sba.gov/ela/Account/Login. United States Small Business Administration (SBA) loans for Businesses, Private Nonprofits, Homeowners, and Renters.
EXISTING LOANS: Additionally, lenders are being encouraged to work with existing borrowers to defer payments and lower interest rates. The American Bankers' Association has been updating a list of relief options offered by lenders on this page: https://disasterloan.sba.gov/ela/Account/Login You can search for your lenders alphabetically. If your lender is not on this list, consider contacting them about options that may be available to you. There is a moratorium on foreclosures and the courts have been closed until at least March 30th, which has delayed all other proceedings that now much be rescheduled--So no one is going to be suing any time soon.
Links to Additional Resources Related to COVID-19
Centers for Disease Control and Prevention (CDC) – Coronavirus (COVID-19)
Florida Department of Health’s Coronavirus (COVID-19) Information Page
Broward County’s Coronavirus (COVID-19) Information Page
Miami-Dade County’s Coronavirus (COVID-19) Information Page