Has your small business been affected by the coronavirus pandemic?
If so, you aren’t alone. Countless businesses of all sizes across the country have struggled to go on amid COVID-19. Tight margins, a dwindling workforce, and increased safety measures are just a few of the problems weighing on business owners’ minds.
Fortunately, help is available through COVID relief funds like the CARES Act. Signed into law in March 2020, the CARES (Coronavirus Aid, Relief, and Economic Security) Act was the largest economic stimulus package in U.S. history. Of particular interest to business owners is the Paycheck Protection Program, or PPP, which is part of the CARES Act stimulus package.
The PPP was created to help struggling businesses keep their doors open by helping cover payroll costs. In this article, we’ll discuss what the PPP and the CARES Act mean for you as a small business owner. Keep reading to find out how you might benefit from this COVID-19 relief fund.
What Is the CARES Act?
The CARES Act is the $2.2 trillion economic stimulus bill that was passed near the start of the coronavirus pandemic in 2020. In addition to $300 billion in one-time cash payments to individual Americans, it included the Paycheck Protection Program.
The PPP provides forgivable loans to small businesses. Through the PPP, small businesses can apply for COVID relief money that comes in the form of bank loans. Unlike standard loans, however, the government guarantees the banks that the loans will be paid off.
As you’ve probably guessed, this means banks take on far less risk when offering businesses money through the PPP. Best of all for small businesses, the loans can be partially or entirely forgiven or deferred if they have difficulty paying them off.
How Can the COVID Relief Fund Help?
The coronavirus relief fund helps businesses by providing funds to cover the basic necessities of running a business. This includes up to eight weeks of payroll costs, employee benefits, mortgage interests, rent, and utility costs.
The PPP can provide comprehensive business relief from financial pressures, at least temporarily. As long as you can get back to normal cash flow in a couple of months, the PPP may be all your business need to return to normalcy.
The PPP broadens the pool of businesses eligible to receive government assistance. It also allows more agents, including small banks, to offer loans. And 100% of loans are temporarily guaranteed by the government, regardless of the loan amount.
What Can You Get From the PPP?
The PPP can cover costs for business tools and resources you need to keep your organization running. More specifically, it can help pay for the following:
- Salaries, wages, and commissions up to $100,000 per employee
- Cash tips
- Payment of vacation
- Allowances for dismissal and separation
- Parental, family, sick, and medical leave
- Group health benefits, including insurance premiums
- Retirement benefits
- State and local taxes assessed on employee compensation
- Independent contractor compensation or sole proprietor income up to $100,000
As you can see, nearly all of the major expenses most businesses face can be covered by the PPP.
What isn’t Included in the PPP?
Although most of a business’s largest expenses are eligible to be paid with PPP loans, there are some exceptions. These are the expenses that aren’t eligible to be paid:
- Salaries, wages, commissions, or compensation exceeding $100,000 per employee (as prorated for the period)
- Salaries, wages, or commissions for employees whose principal residences are outside of the United States
- Qualified sick leave – a credit is permitted for under Section 7001 of the Families First Coronavirus Act
- Qualified family leave – a credit is permitted under Section 7001 of the Families First Coronavirus Response Act
Although most business expenses you experience can probably be covered by the PPP, it has its limits. However, most businesses should find PPP loans more than sufficient for helping them break even.
Who’s Eligible for the PPP?
Of course, the biggest question you probably have is, are you eligible?
As long as your small business has been in operation since before February 15, 2020, you’ll probably qualify. Businesses and organizations with fewer than 500 employees are eligible, including the following:
- Nonprofit organizations
- Veterans organizations
- Tribal business concerns
- Self-employed individuals
- Sole proprietorships
- Independent contractors
The reason you must have been in business since before February 15, 2020, is because the Paycheck Protection Program isn’t for new businesses. It’s only intended to help support already established organizations with employees that rely on them for work. If you’re looking to start a new business, there may be other programs or government grants you could qualify for.
What if your business has more than 500 employees? It’s possible that you could still be eligible as long as you meet other applicable SBA standards. An organization like ERC Today can help you determine which programs your business is eligible for.
Get Financial Help With ERC Today
If you want to take advantage of the COVID relief fund, you may need help. From figuring out where to apply to knowing how to fill out the correct paperwork, getting the financial assistance you need can be a challenge.
Fortunately, ERC Today makes the federal relief fund quick, easy, and flexible. With secure processes and expert consulting, our team of tax and finance experts can have your application submitted in five days or less. Best of all, you can get your Employee Retention Tax Credit filing estimate at no cost.
To get more information, contact ERC Today right away.