The upcoming $2 trillion stimulus package is designed to stabilize the American economy during the coronavirus crisis — and more than $300 billion of that is earmarked for small businesses.
Eligible businesses would be able to defer their payroll taxes until 2021 and receive small-business loans to continue paying employees. Here’s how the stimulus package could help your business, and how to find out whether you’re eligible.
Small-business interruption loans
What is it?
Small Business Administration, under the stimulus package, will oversee the Paycheck Protection Program, which will distribute $350 billion to small businesses that can be partially forgiven if companies meet certain requirements.
Who is eligible?
Businesses with 500 or fewer employees that continue to employ and pay workers through the coronavirus crisis.
How do you apply?
The plan would rely on banks to facilitate the distribution of funding through the Small Business Association, 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.
Applicants must verify the previous six weeks of payroll and later verify that they have paid employees for eight weeks after receiving the loan.
- Loans will be administered by banks and other lenders, attempting to speed up the process
- Businesses can receive loans up to $10 million, based on how much the company paid its employees between Jan. 1 and Feb. 29.
- The loans will carry an interest rate up to 4%.
- For businesses with existing SBA loans, principal and interest would be waived for six months.
If the business uses the loan funds for the approved purposes and maintains the average size of its full-time workforce based on when it received the loan, the principal of the loan will be forgiven, meaning the company will only need to pay back the interest accrued.
Payroll-tax relief
What is it?
A stimulus bill that would give businesses tax credits and allow them to defer their payroll taxes so they can continue paying employees.
Who is eligible?
- Businesses that continue to employ workers through the coronavirus crisis.
- Employers, including those that have been ordered to close, would be eligible for this tax credit as long as they keep workers employed through the crisis.
- However, employers that apply for the above small-business loans would not receive the credit.
What are some additional recommendations for small business owners?
- Try to delay payments or establish payment plans with any landlords or creditors.
- Renegotiate loan terms to lower payments, if possible.
- Cancel all planned nonessential expenditures.
- Begin daily monitoring of expenses, revenue and cash flow plans.
For more information as this situation develops, visit the Small Business Administration’s COVID-19 SMB Guidance and Loan Resource Center, available here.
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Sources: Business Insider, Business News Daily, MarketWatch.
Disclaimer: The included guidance is for informational purposes only. Chicago Tribune Media Group is not making any specific claims or recommendations on how your business should be responding to the above the information. Please refer to the referenced guidance from the US Small Business Administration.