The $2 trillion stimulus package that passed the Senate on Wednesday and just now passed the House earmarks $350 billion for small businesses affected by coronavirus. The bill provides loans and allows for payroll-tax deferment in an effort to keep companies struggling to stay afloat amid closures and social distancing measures.
Below is a synopsis of what’s available through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and tips for determining eligibility:
Payroll-tax relief
The CARES Act would give businesses tax credits and allow them to defer their payroll taxes so they can continue paying employees. Employers could delay paying payroll taxes for 2020, then pay 50% in 2021 and the other 50% in 2022. The tax isn't forgiven, but businesses wouldn’t need to send the federal government money right now. Net operating losses would be loosened for pass-through businesses, or businesses not subject to the corporate income tax.
Payroll tax relief would give businesses immediate cash flexibility.
Who's eligible: Employers, including those who have been ordered to close, that continue to employ workers through the coronavirus crisis are eligible. However, employers who apply for small-business loans will not receive the credit.
Small-business interruption loans
The Act ramps up aggressively previous stimulus efforts that set $50 billion aside for disaster assistance loans through the SBA. The plan would rely on banks to facilitate the distribution of funding through the SBA, as well as establish a new government lending agency. Additionally, the Federal Reserve has announced plans to create a Main Street Business Lending Program to complement the SBA in lending to small and medium businesses.
Small business interruption loans would provide money to small and midsize businesses to prevent layoffs and to continue paying employees. Individual loans could cover six weeks of payroll, capped at $1,540 per week, per employee. The maximum loan amount would be the lesser of $10 million or a company's average total monthly payroll cost for the previous year multiplied by 2.5. If a firm wasn't in business in early 2019, the cost would be calculated based on payroll from January 1 to February 29, 2020.
Though not a grant program, some provisions in the bill would in some cases allow the loans to be forgiven if the loan is used to cover payroll costs, covered mortgage interest payments, covered rent payments, and covered utility payments.
For businesses with existing SBA loans, principal and interest would be waived for six months.
These loans would be available during an emergency period ending June 30, 2020.
Who's eligible: Businesses with 500 or fewer employees that continue to employ and pay workers through the coronavirus crisis. Applicants must verify the previous six weeks of payroll and later verify that they have paid employees for eight weeks after receiving the loan.
For more information on these loans, click here.
Other stimulative measures for health care
The plan includes a massive infusion of cash into the health-care industry. Health care providers, community health centers, and hospitals are set to receive over $130 billion to fight coronavirus while states and localities are set to receive another $150 billion.
Provisions to ban stock buybacks
The deal includes provisions to stop publicly-traded companies from using stimulus funds for stock buybacks or executive bonuses (or at least expose them to public scrutiny if they do).
The bill now heads to the president’s desk to be signed into law.