CARES Act: A Quick Briefing on New Resources for Impacted Businesses
Washington State’s Stay Healthy, Stay Home order is critical to keeping us safe, but necessitates a halt to our daily lives, businesses and community activity. The economic impact has been felt across our State – in the last week of March alone, unemployment applications surged 843%. The recently-passed Coronavirus Aid, Relief and Economic Security (CARES) Act brings several new programs to the table to assist businesses impacted by the economic fallout. Here are a few quick takeaways on these programs:
The Paycheck Protection Program:
Designed to help businesses and organizations keep their employees working, the Paycheck Protection Program allows eligible entities to apply for a loan of up to 2.5 times their average monthly employment costs - including payroll, benefits and other related expenses - up to $10 million. Both for-profit and nonprofit organizations with less than 500 employees are eligible. The loans will carry an interest rate not exceeding 4%, but more importantly, a portion or all of the loan may be forgiven if the organization pays their workers their regular wages for a minimum of eight weeks after receiving the loan. Find out more on the US Small Business Administration’s Paycheck Protection Program webpage.
Expanded Economic Injury Disaster Loan Options
As part of the new CARES Act, the SBA’s Economic Injury Disaster Loan program received an influx of funding and an expansion of coverage for businesses. Eligible businesses and organizations can apply for low-interest loans of up to $2 million, with for-profit organizations paying 3.75% interest and nonprofits paying 2.75% - with loan terms up to 30 years. To help provide working capital as soon as possible, companies that apply for a loan can request a $10,000 advance, which will be distributed to the applying organization within three days if the loan application is approved. These loans can be refinanced into a Paycheck Protection Program loan as well, opening the door for potential loan forgiveness.
Tax Changes and Credits
Several tax provisions have been implemented to assist businesses and organizations. If an employer has to fully or partially suspend operations due to COVID-19, or if revenues declined 50% or more compared to the same quarter the previous year, the organization is eligible for an Employee Retention Credit. This credit provides a 50% tax credit for wages paid from March 13, 2020 through December 31, 2020 – up to $10,000. Additionally, businesses and organizations can also defer payment of employer and payroll taxes for 2020, if they do not receive a Paycheck Protection Program loan that is forgiven.
Things are changing rapidly as the COVID-19 situation continues to unfold. While the challenges are increasingly present, solutions and programs to assist are available. We encourage any organization that’s been impacted by COVID-19 to become familiar with these new resources through the CARES Act, stay up-to-speed with our COVID-19 Resource Page, and most importantly, stay healthy!