What Business Owners Should Know About Stimulus Programs that No One is Talking About
Founder + Partner + CEO
Published Wednesday, March 27, 2020
Recessions and downturns in the economy pave the way for massive benefits and programs that help a lot of people. This downturn is no different as stimulus and relief programs are rolled out. When I say “massive” it might be an understatement – some of these packages are almost too good to be true.
Since we are all working from home, we have all heard of the stimulus programs – and I am the last person to want to waste time telling you things you already know. That being said, listed below are provisions and explanations that have not been publicized, as well as details that have just been finalized.
The Difference Between the Two SBA Loan Programs
There are two relief programs that have passed through Congress intended to help small businesses. Please note, these programs are different and have different purposes. 1. SBA Economic Disaster Loan Program, and 2. the Coronavirus aid, Relief, and Economic Securities Act (CARES Act). Both help, but now that the CARES Act has been passed, it is the much better program.
SBA Economic Disaster Loan Program is an extension of the SBA’s disaster assistance program where the SBA provides low-interest working capital loans of up to $2 million to small businesses and nonprofits. This is similar to a traditional term loan that you would use to cover all types of business expenses. You can apply through the SBA website: www.disasterloan.sba.gov. The loans have an interest rate of 3.75% and the repayment terms will vary by applicant. Please note, this program does not have a forgiveness option, therefore you will have to pay back all that you borrow plus interest.
Coronavirus Aid, Relief, and Economic Securities Act (CARES Act) is a relief package for small businesses and comes with a loan forgiveness program. It’s designed to help businesses (and employees) that were negatively impacted by government actions used to control the spread of the virus (which applies to just about all of us). In addition to the forgiveness component, there are a number of awesome parts of the relief package you should know.
Perks No One Talks About You Should Know:
Student loan repayment benefit (up to $5,250) to employee’s loans on a tax-free basis – the payment would be excluded from the employee’s income.
Refundable payroll tax credit for 50% of wages paid by employers during the crisis. (Read up on this because there are some provisions to qualify.)
Social Security tax deferment to allow payments to be spread out over 2 years.
Net operating loss (NOL) arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns.
Temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns. The 30-percent limitation is increased to 50 percent of taxable income (with adjustments) for 2019 and 2020.
Enables businesses, especially in the hospitality and restaurant industry, to write off immediate costs associated with improving facilities, instead of having to depreciate those improvements over the 39-year life of the building.
Allows charitable deductions of up to $300 to churches and charitable organizations in 2020 regardless of whether contributors itemize their deductions or not.
Increases the limitations on deductions for charitable contributions by individuals who itemize. For individuals, the 50 percent of adjusted gross income limitation is suspended for 2020.
CARES Act Small Business Loan Program:
The loans will be administered by the SBA and can be acquired by using any approved SBA lender (most banks).
Business owners can obtain up to a $10 million loan based on its payroll over a 12-month basis.
The loans will have a 10-year term with an interest rate not to exceed four percent.
Loans can be used for payroll and other employee compensation for employees that make less than $100,000, health care, mortgage interest, rent, utilities, and interest on any other debt obligations.
The loans will not need any personal guarantees, collateral, or a “credit available elsewhere” underwriting.
Forgiveness Provisions:
Following an 8-week period from the origination point of the loan – payroll costs, mortgage interest or rent, and utility costs will be forgiven.
Must retain 90% of workforce at full compensation until September 30, 2020.
90% of workers laid off prior to February 1, 2020, must be restored.
Must not outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan.
Must remain neutral in any union organizing effort for the term of the loan.
What You Need to Prepare:
As soon as the banks receive their instructions from the Fed they will quickly be accepting applications and dishing out cash. Get your documents ready now so you don’t miss out. Here is what you need: Most recent tax return, current P&L, current A/R and A/P, personal finance statement, balance sheet, list of liabilities, business organization documents, insurance documents, mortgage interest expense or rent payments, utility expenses, and previous year’s payroll expenses (broken down monthly).
Other Programs and Deals:
Facebook Small Business Grants Program
Facebook has committed to offering up to 30,000 small businesses $100 million in cash grants and Facebook advertising credits. The grants will be provided to businesses in more than 30 countries. Information is limited, but sign up to get more details from the company when they’re available.
Comcast is making Xfinity WiFi hotspots across the country free (including non-Xfinity Internet subscribers). For a map of Xfinity WiFi hotspots, visit www.xfinity.com/wifi. They are also pausing data plans for 60 days so everyone will have an unlimited data plan at no additional charge.
Shopify has a few changes to plans that will help save money if you have an online store on their platform. Gift cards are now available for all plans, therefore you can drop down to the basic plan if you are only using this feature. The free trial has been extended to 90 days. Additionally, they are making $200 million in small business funding available: www.shopify.com/covid19.
Adobe Creative Cloud has an option where you can get two months of services free. Watch this short video on how to receive the offer. - https://petapixel.com/2020/03/18/adobe-is-giving-everyone-2-months-of-free-creative-cloud-heres-how-to-get-it/
Square is refunding all software subscription fees for the month of March for existing sellers who currently use Square Appointments, Retail, Restaurants, Loyalty, Team Management, Payroll, Marketing, and Square Online Store. You can also use the new curbside pickup option and local delivery features with no fees for the next three months: www.squareup.com.
Business owners, I encourage you to know all your opportunities well. Those of us that manage these correctly have the opportunity to drastically improve our cash position and accelerate our growth plans. What else is out there? Please share comments and other opportunities we all should know about: