On Friday, March 27, 2020, the US Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2 Trillion Economic Relief Package for the Coronavirus pandemic. The legislation provides multiple forms of assistance to businesses and private individuals. The US Chamber of Commerce has developed a website to outline all of the many provisions within the bill. Also, many webinars and interactive learning sessions are being conducted on the relief package; visit Sugar Land Economic Development's "Additional Resources" page for a consistently-updated listing of these events.
On Friday, March 20, 2020, Governor Abbott announced that the U.S. Small Business Administration (SBA) has now granted Texas’ Economic Injury Disaster Loan (EIDL) assistance declaration, making loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the Coronavirus (COVID-19). An advance of up to $10,000 can be requested to be used for payroll, it can be transferred to the business bank account within 3 business days, and the remainder of the loan funded will be delivered within 3 to 4 weeks. If used for eligible expenses, the advanced portion of the loan will be forgiven.
CARES Act Provisions
With a massive $2 trillion allocated for businesses, individuals, federal agencies, and state and local governments, the CARES Act has been designed to distribute capital quickly and broadly. There are a number of provisions that impact small businesses. Below are some of the highlights for businesses:
The Paycheck Protection Program (PPP), one of the largest sections of the CARES Act, is the most important provision in the new stimulus bill for most small businesses. This new program sets aside $349 billion in government-backed loans from private banks up to $10,000 of which is automatically converted to a grant when used to maintain payroll, which means that if you meet the requirements you won't need to pay the loan back. SBA has developed an Information Sheet for Borrowers. Applications for the PPP will open on April 3, 2020. Applications will be submitted through SBA-Approved private lending institutions, which can be found on the SBA Assistance Locator. The Houston District Office of the SBA also has a list of approved lenders in the Houston region.
The CARES Act makes select changes to taxes and tax policies in order to ease the burden on businesses impacted by COVID-19. These changes include:
Businesses are eligible for an employee retention tax credit if 1.) your business operations were fully or partially suspended due to a COVID-19 shut-down order; or 2.) gross receipts declined by more than 50% compared to the same quarter in the prior year. Eligible businesses can get a refundable 50% tax credit on wages up to $10,000 per employee. The credit can be obtained on wages paid or incurred from March 13, 2020, through December 31, 2020.
Businesses and self-employed individuals can delay their payroll tax payments. These payments, the employer share of Social Security tax owed for 2020, can instead be deferred and paid over the next two years. Fifty percent must be paid by the end of 2021 and 50% must be paid by the end of 2022. (Note: The ability to defer these taxes does not apply to a business that has a Paycheck Protection loan forgiven.)
Businesses that have net operating losses (NOLs) have some limitations relaxed. If your business had an NOL in a tax year beginning in 2018, 2019, or 2020, that NOL can be now be carried back five years instead. This may improve cash flow and liquidity for some businesses. Pass-through businesses and sole proprietors will also be able to take advantage of the relaxed NOL limitations.
Businesses that were due to receive corporate alternative minimum tax (AMT) credits at the end of 2021 can instead claim a refund now, in order to improve cash flow during the COVID-19 emergency.
Businesses will be able to increase their business interest expense deductions on their tax returns. For 2019 and 2020, the amount of interest expense businesses are allowed to deduct on their tax returns is increased to 50% from 30% of taxable income.
Businesses, especially those in the hospitality industry, will be able to immediately write off costs associated with improving facilities, increasing cash flow.
The government will make a temporary exception from the excise tax normally applied to alcohol, if that alcohol was used to produce hand sanitizer in 2020.
Many of these changes will apply to small businesses all over the country, so it is vital to discuss with a tax professional which can apply to your company.
The CARES Act makes small changes to the Families First Coronavirus Response Act (FFCRA) in regards to paid sick leave, paid FMLA and more. These changes include:
Paid family and medical leave (FMLA) under the FFCRA is capped at $200 per day and $10,000 total per employee.
Paid sick leave under the FFCRA is capped at $511 per day and $5,110 total per employee. This amount drops to $200 per day and $2000 total for sick leave taken by an employee in order to care for a family member in quarantine or care for a child whose school has closed.
Workers that were laid off after March 1, 2020, but then rehired, are eligible for paid FMLA leave provisions described in the FFCRA immediately instead of needing to be an employee for 30 days.
Businesses can keep money that they would have deposited for payroll taxes in anticipation of refunds from the Treasury Department for paid sick leave and paid FMLA leave outlined by the FFCRA, including amounts that would have been refunded later.
SBA Disaster Assistance Loans
The U.S. Small Business Association (SBA) is also providing targeted, low-interest disaster recovery loans to small businesses that are severely impacted by the situation surrounding COVID-19. Small businesses, small agricultural cooperatives and some private nonprofit organizations may be eligible for an Economic Injury Disaster Loan (EIDL) of up to $2 million, providing them with the necessary working capital to help businesses survive until normal operations resume.
SBA has streamlined the Economic Injury Disaster Loan initial application process to facilitate a larger number of loan applications. Businesses need to complete two forms, a Business Loan Application and a document for supporting information, and upload them. After submission of these documents, an SBA case manager will call and provide you with the rest of the forms. SBA is continuing to host daily webinars through the week of March 30 to April 3. If you need assistance with the application process, the Fort Bend County Small Business Development Center is a great resource.
The U.S. Small Business Association (SBA) can assist small businesses with accessing federal resources and navigating their own preparedness plans as described by the CDC’s Guidance for Businesses and Employers.
The U.S. Small Business Association provides a number of loan resources for small businesses to utilize when operating their business. More information on loans or how to connect with a lender is available on the SBA website.
The U.S. Small Business Association (SBA) has developed Lender Match, a free online referral tool that connects small businesses with participating SBA-approved lenders within 48 hours. Many of these programs can also be accessed at the Houston District Office.
7(a) program offers loan amounts up to $5,000,000 and is an all-inclusive loan program deployed by lending partners for eligible small businesses within the U.S. States and its territories. The uses of proceeds include: working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.
Express loan program provides loans up to $350,000 for no more than 7 years with an option to revolve. There is a turnaround time of 36 hours for approval or denial of a completed application. The uses of proceeds are the same as the standard 7(a) loan.
Community Advantage loan pilot program allows mission-based lenders to assist small businesses in underserved markets with a maximum loan size of $250,000. The uses of proceeds are the same as the standard 7(a) loan.
504 loan program is designed to foster economic development and job creation and/or retention. The eligible use of proceeds is limited to the acquisition or eligible refinance of fixed assets.
Microloan program involves making loans through nonprofit lending organizations to underserved markets. Authorized use of loan proceeds includes working capital, supplies, machinery & equipment, and fixtures (does not include real estate). The maximum loan amount is $50,000 with the average loan size of $14,000.
The Office of the Governor has developed a website containing a comprehensive list of resources and important COVID-19 updates.
The Texas State Comptroller's Office is offering assistance in the form of short-term payment agreements and waivers of penalties and interest. More information about the options can be found on the Comptroller Website, or by calling 800-252-8880.
The Texas Workforce Commission (TWC) website contains resources for employers and job seekers impacted by COVID-19, including:
If an individual’s employment has been affected by COVID-19 they may apply for benefits either online by using the Unemployment Benefits Services (UBS) or by calling TWC at 800.939.6631 from 8 a.m. to 6 p.m. Monday – Friday. UBS can be accessed at any time. For additional information, visit TWC’s website.
The Texas Department of Insurance (TDI) website contains an overview of insurance-related questions regarding COVID-19.
The TX Restaurant Relief Fund will distribute grants of up to $5,000 PER UNIT to immediately support their financial needs. These funds are earmarked specifically for use to keep their doors open and their workers employed.
The Consumer Data Industry Association (CDIA) provided guidance to those directly or indirectly impacted by COVID-19.
Community Development Financial Institutions (CDFIs) are an alternative source of finance for small businesses. For additional information, please visit with each organization below:
SBA Lender Match connects small businesses with participating SBA-approved lenders.
Small Business Development Centers (SBDCs) provide counseling to small businesses. They have put together a national list of resources to manage the impact and recover, which can be located on their website. The local SBDC for Sugar Land is the Fort Bend County SBDC.