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In most countries around the world, governments have passed legislation to provide financial relief to small businesses facing hardship due to the coronavirus pandemic. In the United States, that relief is coming in the form of the CARES (Coronavirus Aid, Relief, & Economic Security) Act, which was passed on March 27, 2020. If you’re a small business owner, read on to learn what that means to you.
The main features for small businesses are emergency grants and a forgivable loan program for companies with 500 or fewer employees. There are also changes to rules for expenses and deductions meant to make it easier for companies to keep employees on the payroll and stay open in the near-term.
Ultimately, the aim is to increase the number of smaller businesses that survive and retain their employees.
Emergency grants provide up to $10,000 to provide emergency funds for small businesses to cover immediate operating costs. The grants are administered by the SBA’s Economic Impact Disaster Loan. The total amount of these loans is limited to $10 billion dollars, so be sure to apply now before the funds run out.
Forgivable loans provide funds of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt can be forgiven, provided workers stay employed through the end of June.
Relief for existing loans to cover six months of payments for small businesses already using SBA loans.
Paycheck Protection Program loans (PPP) provide federally guaranteed loans until June 30th. These are available at community banks to small businesses that promise not to lay off their workers. The loan can be forgiven if the employer continues to pay workers for the duration of the crisis.
An extended unemployment insurance program offers any workers you have to lay off four months of full pay and raises the maximum unemployment benefit by $600 per week.
Net operating losses for 2018, 2019 and 2020 will be able to be carried back five years, which could help reduce your tax bill.
SBA loan payments for existing loans will not require payments for 6 months.
The employer portion of payroll taxes (6.2% share) from now until December 31, 2020 will be deferred until December 31, 2021 and 2022, with half being due on each date.
Payroll tax expense deferment allows businesses to defer payment of their 2020 employer payroll taxes (half due 12/31/2021 and the other half due 12/31/2022).
Want to dive deeper? Read the full CARES Act.