With most of the country still under stay-at-home orders, many small businesses have been forced to adopt new practices in order to keep their employees and customers safe. For many, this has meant closing completely to help control the spread of coronavirus. Even as states and counties begin to relax measures and reopen, many businesses must still operate in a safe manner that complies with social distancing measures.
In response to the current pandemic, recent legislation including the Families First Coronavirus Response Act, the CARES Act, and the Paycheck Protection Program have detailed a number of unemployment benefits, loans, and relief for small business owners as well as the self-employed.
If you’re a small business owner in Pennsylvania who has felt the financial devastation of this ongoing pandemic, there are options out there designed to offer relief and help keep your business afloat:
Option #1: Access Loans and Immediate Emergency Funds
Small business owners and self-employed individuals (including sole-proprietors) are eligible to receive relief through the Paycheck Protection Program (PPP) as well as Economic Injury Disaster Loans (EIDL). SBA-approved lenders began offering these loans on April 3. Funding, however, ran dry on April 15 for the first round of the $349 billion program. To replenish the available funds, an additional $310 billion was approved and allocated to the PPP through the Paycheck Protection Program and Health Care Enhancement Act signed into law on April 24.1
Paycheck Protection Program loans are meant to be used for payroll and compensation costs, healthcare benefits, mortgage interest, rent, utilities, and interest incurred on other existing debts.1 They have been offered at an interest rate of one percent and are forgivable if the funds are used for payroll, mortgage interest payments, rent, and utilities in the eight weeks following its origination date.3
If you are a sole proprietor or single-member LLC with no employees, you are still eligible for a PPP loan. Your monthly "payroll" would be your annual net earnings (capped at $100,000) divided by 12. More guidance on how to calculate your loan amount as a sole proprietor can be found here.
To apply, inquire at your local bank where you have a current business checking account, as most banks are only giving PPP loans to existing business banking customers.
Alternatively, Economic Injury Disaster Loans (EID) are offered directly from the SBA. Grants up to $10,000 are available as an advance within days of applying, in order to provide relief as quickly as possible.2 These will need to be applied for directly from the SBA website.
* Update - At this time, only agricultural business applications will be accepted for an EIDL due to limitations in funding availability and the unprecedented submission of applications already received. Applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.
Option #2: Employer Tax Credits
You may be eligible for an employee retention credit if your business closed to comply with government regulations or suffers a decrease in gross receipts of 50 percent or more, compared to the same period of time last year. This would amount to 50 percent payroll tax credit on wages up to $10,000 per employee and is not available if you’re utilizing a PPP loan.4
The Families First Coronavirus Response Act has some requirements in the interest of public and economic well-being, but the tax credits offset these costs. Employer requirements include:
- Two weeks of paid leave to quarantined employees or those with coronavirus symptoms awaiting diagnosis. This amount is confined to 100 percent of their regular wages or minimum wage (whichever is higher) up to $511 per day, or $5,110 over two weeks.
- Two weeks of paid leave to those who are unable to work because they are caring for a quarantined loved one, limited to two-thirds of the employee’s regular wages or two-thirds minimum wage (whichever is higher) up to $200 per day or $2,000 over two weeks.
- Up to 12 weeks of paid leave for employees who must care for their children whose school or childcare is closed due to COVID-19. These payments are restricted to two-thirds of the employee’s regular pay or two-third minimum wage (whichever is higher) up to $200 per day or $12,000 over the 12-week period. When it comes to leave related to childcare and school closures, small businesses may be eligible for an exemption, provided that paid leave would put the business in jeopardy.5
Employers and self-employed individuals are eligible for reimbursement of these payments and the costs to maintain employee health insurance coverage considering the expense of the associated requirements. In the form of tax credits, reimbursement is available for payments that take place between April 1, 2020 and December 31, 2020.5
Option #3: Pandemic Unemployment Assistance
The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new temporary federal program called Pandemic Unemployment Assistance (PUA).
In general, PUA provides up to 39 weeks of unemployment benefits to individuals who are normally not eligible for regular unemployment compensation or extended benefits. Individuals covered under PUA include the self-employed (e.g. independent contractors, gig economy workers, and workers for certain religious entities), those seeking part-time employment, individuals lacking sufficient work history, and those who otherwise do not qualify for regular unemployment compensation or extended benefits.
If you have been forced to temporarily close your business, reduce your business hours, or seen declines in income due to COVID-19, you may be eligible to collect under PUA.
Individuals collecting PUA will receive $600 per week from Federal Pandemic Unemployment Compensation (FPUC), in addition to weekly benefits as calculated by previous income. PUA benefits may not be more than the state's maximum weekly benefit rate for regular UC, which is $572 in Pennsylvania. PUA benefits may not be less than half of the state's average weekly benefit amount, which is $195.
For example, let's say you qualify for the maximum of $572 per week. You will receive the $572 plus the extra $600 per week in total PUA benefits. That can be a nice boost if you've had to totally suspend operations or seen a large drop in revenue. Even if you only qualify for the minimum benefit of $195 per week, you will still receive the additional $600 weekly for a total of $795.
Go here to visit the PUA website to read the FAQ and begin the application process.
* You may run into issues if you collect PUA benefits and also receive a PPP loan. Guidance from the SBA is still unclear on whether this is allowed, so I recommend using what best meets the needs of your business and avoid trying to "double-dip" on benefits unless you can make a strong case for why you need both. Potential legal consequences could arise, so make sure you are carefully documenting the use of any benefit you receive.
Option #5: Delayed Tax Payments
Lastly, as a small business owner, you may delay payroll tax payments that would otherwise be due between now and January 1, 2021. Instead, half of the delayed taxes will be due on December 31, 2021 and the remaining amount will be due by December 31, 2022.7
While staying in business is undoubtedly difficult during this time, federal and state aid is available. With a number of accessible grants and loan options, understanding the relief programs out there can help your small business get back on its feet in the long run.
If you need assistance navigating through your options or need guidance on what strategy to use, feel free to reach out to me at (570) 524-0120 or email me at email@example.com.
Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Vision Wealth Advisors are separate entities from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy including asset allocation can ensure a profit or protect against a loss. Investing involves risk including loss of principal. Guarantees are based on the claims-paying ability of the issuing company.