COVID Relief packages for Small Business

If the coronavirus caused you to lose your job or your business, there is COVID-related government support you can count on. This virus outbreak caused many troubles, issues, and difficulties for self-employed workers, freelancers, independent contractors, and small business owners.

All those who lost their jobs and business due to the outbreak are eligible to qualify for unemployment insurance and get adequate financial support. The government decided to provide a $2 trillion coronavirus relief financial package for all who are affected.

There are two new laws related to the self-employed and small businesses that are designed to provide coronavirus relief to those who are left without a steady source of income. This COVID relief includes (a) tax benefits, (b) loan deferment, and (c) access to emergency funds. Read on to find out more about what your options are for getting access to this coronavirus relief program.

Global Pandemic and Small Business

This global coronavirus pandemic left the entire landscape of small business in ruins. Small businesses have never been under such extreme pressure as they are nowadays. If they want to keep their employees and consumers safe, business owners are forced to go to great lengths to change their ways and adopt new practices daily.

In case they fail to do so, they risk everything as their business can be completely shut down to support the prevention of the virus spreading. Fortunately, the government is working around the clock to provide COVID-related financial support and relief to those who are affected the most.

The Coronavirus Aid, Relief and Economic Security Act, and the Families First Coronavirus Response Act (CARES Act) are designed to take care of every detail of this support – from relief and loans for the self-employed and small business owners to retirement account withdrawals, individual stimulus check amounts and unemployment benefits.

Aside from business owners and the self-employed, both acts provide relief for gig workers as well. These acts cover five primary relief packages for independent contractors and small businesses. If you’re a freelancer, self-employed, or a business owner, here are your options, in case your everyday life has been affected by the coronavirus outbreak.

PRO Tip
Check often the “Coronavirus (COVID-19): Small Business Guidance & Loan Resources” page on U.S. Small Business Administration portal for newest programs and information.

1. Postponement of SBA loans

If you, as a business owner, have any business-related loans issued by the SBA, you can count on a six-month delay. You’ll be excused of all your monthly obligations, including making payments for the period mentioned above.

The SBA will handle all your duties and pay your debts to lenders. This benefit starts with your next payment due. If your loan is already postponed, you’re free to apply for this grace period benefit the moment your period of postponement has ended.

2. Immediate Emergency Funds and Loans

Both the self-employed and small business owners can count on two types of loans to support their business activities, to keep growing their business, and to get employees paid:

  • Economic Injury Disaster Loans
  • Paycheck Protection Program

Both loans hit the public around April 3. It was SBA-approved lenders that started offering these while online lenders and fintech companies started accepting PPP loan applications. Let’s delve deeper into the loan details.

Economic Injury Disaster Loans

At an interest rate of 1%, these loans allow you to apply for the maximum loan amount of $10 million. This type of loan can be used for many different purposes, such as:

  • Incurring interest on your business debts
  • Paying utilities
  • Covering your rent expenses
  • Paying mortgage interest
  • Applying for health care benefits
  • Compensation costs
  • Payroll

You have six months to a one year grace period before you’re required to start paying back. What’s great about this loan type is that it doesn’t require any collateral, personal guarantees, or typical fees.

Economic Injury Disaster Loans

This loan type comes from the SBA directly, and it’s intended for those who need quick financial relief. Aside from being an excellent cash injection, this loan also brings you an advance of up to $10,000. You can collect it within three days from the moment of application.

The EIDL also grants you access to loan forgiveness that you can take advantage of, once your loan has been transferred into the Paycheck Protection Program.

PRO Tip
If you choose this option, your advance will be deducted from the overall debt amount prone to loan forgiveness.

3. The Paycheck Protection Program

If you apply for a loan under the Paycheck Protection Program, you get a chance to become eligible for debt forgiveness. This means that you won’t be required to make payments for the loan funds used for utilities, rent, mortgage interest payments, and payroll, in a period of eight weeks from origination.

Here’s a great thing about the PPP loans – debt forgiveness is usually taxable, but this loan here is an exception. The amount that is to be forgiven won’t be taxable as your gross income. While the EDIL is more suitable for self-employed, the PPP relief is more intended for keeping businesses up and running.

Its primary goal is to keep the cash inflow alive and afloat by keeping businesses operational and employees properly compensated for their work and effort. With this being so, the forgivable amount of the loan may be reduced in case you have to reduce:

  • The number of your workers
  • The compensation of any worker

The forgivable amount only stands if these changes aren’t undone by June 30, 2020.

4. Employer Tax Credits

In case you were forced to close your business due to the coronavirus outbreak and comply with government orders or your business experienced a significant decrease in income and gross receipts of 50% or more, you’re eligible for employer tax credits.

This means that you can apply for a 50% payroll tax credit on all wages up to $10,000 per worker. This type of credit is also known as employee retention credit.

PRO Tip
If you’re already using the PPP loan, you can’t apply for this tax credit.

You can also use this employer tax credit to cover all costs associated with the Families First Coronavirus Response Act. The act covers costs related to economic and public health. If you’re an employer, here are the following requirements:

  • Employees with COVID-19 symptoms – in case your workers need to take an absence from work due to COVID-19 symptoms, you can grant them two weeks of paid sick leave. In that case, affected employees can count on compensation capped at 100% of either minimum wage or regular wage. The compensation can go up to $511 daily or $5,110 over two weeks.
  • Employees with quarantined loved ones – in case that you have employees absent from work because they have to provide for their quarantined loved ones, you can get two weeks of paid leave. The credit will be capped at two-thirds of the employee’s minimum or regular wage. The compensation goes up to $200 per day or $2,000 over two weeks.
  • Employees who must care for their children – during the coronavirus outbreak, many child care institutions and schools are closed. The employees who have to take leave from work to care for their children can count on payments that are capped at two-thirds of their minimum or regular pay, whichever is higher. The compensation goes up to $200 per day or $12,000 over 12 weeks.

All owners of small businesses may be eligible for an exemption in terms of their employees taking leave to care for their children due to schools and child care institutions being closed. The requirement for this exemption is that providing paid leave might expose your business to risk.

The requirements are quite costly, but there is reimbursement for both self-employees and employers. They are eligible for it as well as for all expenses related to the maintenance of employee health insurance coverage.

Both the self-employed and employers can count on tax credits for all payments that take place between April 1, 2020, and December 31, 2020.

Employers get one more significant benefit – they can withhold their payroll taxes and use that money to make up for these employee leave payments. They can also go directly to the IRS and request the acceleration of reimbursement.

5. Delayed Tax Payments

The last option on our list is delaying your tax payments. You can do this between now and January 21, 2021. The delay allows you to pay half of the tax amount by December 31, 2021, and the rest by December 31, 2022. (Related: Tax Filing Deadline Moved)

Coronavirus Relief for Self-Employed

Self-employed, freelancers, and gig workers, who are affected by the coronavirus outbreak, are free to qualify for unemployment insurance.

If these workers lose their income due to the ongoing pandemic, they can count on expanded benefits that are included in the coronavirus relief package.

If you’re self-employed, these are the guidelines you should know before you decide to file your claim – read more at the U.S. Department of Labor.

Who Can Qualify

The relief law includes all those who are either not eligible for regular insurance for the unemployed or self-employed workers, including gig workers and independent contractors. If you fall into these groups of employees, you can still apply for unemployment benefits, if you’re unable to fulfill your obligations with an employer due to the coronavirus.

This also goes for those who are experiencing reduced working hours due to the same reason. The benefits for the unemployed include:

  • Pandemic Unemployment Assistance – you receive weekly PUA benefits in the duration of up to 39 weeks. The amount you receive depends on the state you live in. Calculating benefit payouts and determining eligibility depends on their criteria.
  • Federal Pandemic Unemployment Compensation – this benefit allows you to receive an additional $600 on a weekly basis. This weekly financial support is meant to replace PUA or state assistance. To apply for this option, you have to go through your states and apply for unemployment. It’s possible to receive this type of support even if you don’t fully fall into the eligible category for PUA or state unemployment benefits.

Despite all the efforts to provide for all those who need assistance due to losing their jobs or going out of work, state unemployment agencies are still experiencing some delays while awaiting guidance and funding from federal institutions.

In case you decide that Pandemic Unemployment Assistance works for your needs the most, there are a couple of states that are processing these claims. There will be more by the end of the month. The Federal Pandemic Unemployment Compensation that includes $600 weekly starts from this week, while both relief packages will be available retroactively.

PRO Tip
The entire coronavirus relief support program is especially beneficial to those who already spent their unemployment insurance and require additional support. These people can count on Pandemic Emergency Unemployment Compensation that gives them access to additional benefits in the duration of no more than 13 weeks.

How to Apply for a Relief Package

Not every state issues the same type of unemployment insurance. You can find the exact information and guidance you need on your state unemployment agency’s website. Filing a claim includes certain requirements:

  • Your name
  • Address
  • Social Security number
  • 1099 form or a tax return to verify your income

Pro tips for gig workers: If you don’t find yourself in the self-employed group, you can use a W-2 or pay stubs to verify your income and file a claim for the coronavirus unemployment relief. Since there are many unemployed at the moment, claiming unemployment benefits, we recommend that you choose a certain day to apply to avoid long periods of waiting.

Use your area code or the last name to apply. Make sure you’re up to date with all the latest instructions, information, and updates from your state unemployment agency.

COVID-19 Relief Options

Additional Relief Options for Small Businesses

1. Community Advantage Loan Program

The CA loan program applies the same general rules as the 7(a) program and provides access to up to $250,000 for small businesses that operate in underserved markets.

2. Express Loan Program

Falling into 7(a) loan category, the ELP gives you access to up to $350,000. This sum is SBA-guaranteed at 50%. Still, there’s a catch – it’s not up to the SBA to decide on approving this loan. It’s the lender that makes the final decision. If you’re not comfortable with this, you can always apply for the PPP, especially if the COVID-19 crises caused a fallout for you.

3. 504 Loans

504 loans are leaned towards economic support, providing benefits for businesses, and fostering business and economic development. You’re eligible to apply for 504 loans only if you need this type of financial benefit for eligible refinances or the acquisition of fixed assets. 504 loans go up to $5 million.

4. Microloans

If your business operates in underserved markets, you can apply for microloans via non-profit lending agencies. The average loan goes up to $14,000, while the maximum loan size is $50,000.

5. SBA Debt Relief Program

In case you’re a business owner with existing microloans, 504 loans, or SBA 7(a) loans, you can apply for the SBA Debt Relief Program and cover all your loan payments in the span of the next six months, fees, interests, and principal included. It also goes for those who applied for new loans granted by the CARES Act.

PRO Tip
This debt relief program is automatic, so make sure you check this with your lender.

Pro Tips for Money Management

1. Consider talking to a financial advisor

If the COVID-19 pandemic ruined your business, talking to a financial advisor might just be the best way to get some help. They can help go through all available options and provide the best relief program for your exact financial and business needs.

2. Know your coronavirus relief options

The COVID-related government support includes different types of economic relief programs such as a tax deadline extension, business interruption insurance, paid sick leave, and other support packages for businesses and individuals. There’s also the possibility of receiving a COVID-19 stimulus check for business owners. The more you know about your options, the easier it gets to find a solution.

3. Consider additional relief options

Aside from federal institutions, other organizations are providing support to businesses and the self-employed who have experienced a financial loss because of COVID-19. Do some research on all the organizations offering help.

Conclusion – Help Is on the Way

We hope that this guide instilled some comfort that it is possible to get help. On a more positive side, there are many available options, each with its own benefits, suiting different financial, business, and personal needs.

The more you know about these options and benefits, the more you’re able to understand how these coronavirus relief packages can help you, your business, and the loved ones.

The most important thing during these times of peril is to stay safe, watch for your loved ones and do everything you can to keep your business operations up and running.