The recent closures and “stay at home” orders have caught many small businesses off guard. This has resulted in lost revenue until they adjust their marketing and operations to what’s looking like the new normal for several weeks.
To help stave off a huge hit on the economy, the government just passed massive legislation to assist individuals and business owners during this uncertain time. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and it includes several provisions that I.T. business owners can take advantage of.
We’ll break down the provisions that impact small businesses for you below and tell you what you need to do to take advantage of some financial assistance should you need it during the coronavirus impact.
How Can My Small Tech Business Benefit from the CARES Act Stimulus Package?
Businesses having to close to foot traffic and people being ordered to stay indoors has had a drastic impact on small businesses of all types.
While tech businesses are still very much needed (maybe even more so now than ever before), owners have had to adjust their I.T. marketing to account for the shifting dynamic.
They’ve had to rely less on break/fix and more on remote services and come up with new marketing strategies on the fly. While there are still many opportunities out there, that redirection of sales focus doesn’t come without cost or worry.
We’re in hopes that sharing details on the resources you have at your disposal can alleviate some of that burden by arming you with the knowledge to navigate the benefits that this stimulus means for your business, specifically.
Here’s an overview of the things you can take advantage of to improve your bottom line during this pandemic. Following the overview, we’ll give you full details on each one.
CARES Act Small Business Stimulus Overview:
- Paycheck Protection Program Loans (money to cover payroll, rent, etc.)
- Small Business Debt Relief Program (helps with SBA loan payments)
- Economic Injury Grants & Loans (immediate cash help)
- Small Business Tax Provisions (help for employee-related taxes)
- Small Business Counseling (free business counseling)
- Small Business Contracting (for government contractors)
Paycheck Protection Program Loans
For businesses that maintain their payroll through the coronavirus emergency, the Paycheck Protection Program (PPP) allows them to get a loan through the Small Business Administration (SBA) to cover that expense along with others related to employee compensation and other expenses.
This goes for individual owners too! So, if you’re running your tech business yourself, you are still eligible for a loan to cover your own compensation.
If certain criteria are met, you could also get up to 8 weeks of loan forgiveness based on your salary levels and employee retention.
Note: You can only apply for one Paycheck Protection Program Loan.
Businesses that are eligible for a PPP loan include:
- Those in business, operating with employees as of February 15, 2020
- Those with fewer than 500 employees per location
- Independent contractors, sole proprietorships, and those that are self-employed
What expenses can be covered by the loan?
- Compensation (salary, tips, etc.)
- Vacation, leave, severance, or sick pay
- Group health insurance premiums
- Retirement benefits
- State or local tax tied to employee compensation
- Payments of mortgage interest
- Interest in any other debt incurred prior to the covered loan period
What things are excluded from being paid with a PPP loan?
- Employee or owner compensation over $100,000
- Certain taxes (under chapters 21, 22, 24 or the IRS code)
- Compensation for employees residing outside the U.S.
- Qualified sick/family leave that’s covered by the Families First Coronavirus Response Act
How do the loans work?
- These loans are available through June 30, 2020
- The available loan amount is 2.5x your average monthly compensation costs, with a maximum of $10 million
- Maximum of 4% interest rate
- No loan fees or prepayment fees
- No personal guaranty or collateral is needed
- Any loan amounts not forgiven at the end of 1-year, will be carried forward as a loan with a maximum 10-year term
- Principal and interest will be deferred, for a total of 6 months to a year
What is this loan forgiveness thing?
You can apply to get loan forgiveness, which means you won’t have to pay that specific portion of the loan back. You do need to apply for this through your lender.
- You can get loan forgiveness during an 8-week period after the loan is made if you maintain the same number of full-time employees.
- This forgiveness amount is reduced if there is a drop in compensation or full-time employees during that period.
How to Apply for a PPP Loan
Any lender authorized to make SBA 7(a) loans can be used. You can find an SBA 7(a) lender here.
Small Business Debt Relief Program
If your business has a non-disaster SBA loan that you’re already making payments on, then the Small Business Debt Relief Program can give you a respite for six months.
Under the program, during a 6-month period, SBA will cover all loan payments on those loans, including principal, interest, and fees.
This also applies to new borrowers who take out loans within six months of the CARES Act being signed into law.
SBA loans that are eligible include:
- SBA 7(a) loans other than PPP loans
- 504 loans
- Disaster loans are NOT eligible
You can apply for both a PPP loan and also get this small business debt relief, they would just be done separately. The debt relief would have to be requested on a non-PPP loan.
Economic Injury Grants & Loans
For immediate cash help in an emergency of up to $10,000, small businesses or non-profits that have been hurt by COVID-19 can apply for an SBA Economic Injury Disaster Loan (EIDL) and then an accompanying Grant. Funds are delivered within three days.
How it works:
- You must apply for an EIDL and then request the grant advance.
- Once you’re approved for the grant, the money does not need to be repaid.
- You can apply for an EIDL up to $2 million, but the grant only covers up to $10,000, the rest would need to be repaid if your loan exceeds that.
You can use the grant to cover costs for:
- Employee payroll
- Pay for sick leave
- Meet increased production costs
- Pay business obligations (debts, rent, mortgage)
Who is eligible for Economic Injury Grants & Loans?
- Small businesses, less than 500 employees
- Businesses that have been in operation since January 31, 2020
- Sole proprietorships, with or without employees
- Independent contractors
- Cooperatives and employee owned businesses
- Private non-profits
- Tribal small businesses
These Emergency Economic Injury Grants are available through December 31, 2020.
If you also apply for PPP loan forgiveness, any amount received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven for a PPP loan.
Small Business Tax Provisions
There are a couple of provisions in the CARES Act that relate specifically to employee payroll taxes that can also provide some employer relief.
NOTE: If you are participating in the Paycheck Protection Program (PPP), you’re not eligible for either of these tax provisions.
1. A Refundable Tax Credit for 50% of Wages Paid
You can get a tax credit for half of compensation you pay certain employees during the COVID-19 emergency. The tax credit has a maximum of $10,000 and covers wages and compensation (including health benefits) paid to eligible employees.
- Your operations being fully or partially suspended due to a government order limiting commerce, travel or group meetings. So, if your shop has had to switch to remote or “carry out” type business only due to being in an area with “stay at home” restrictions, you qualify.
- Employers that have experienced more than a 50% drop in quarterly receipts (year-over-year).
2. Delayed Payment for Employer Payroll Taxes
You can defer paying the employer portion of certain payroll taxes through the end of 2020. All deferred payments would be due in two equal installments:
- One at the end of 2021
- One at the end of 2022
The following payroll taxes can be deferred:
- FICA taxes (employer portion)
- Railroad Retirement taxes at FICA rate (the employee representative portion)
- Half of SECA tax liability
Small Business Counseling
Key small business resource partners are receiving additional funds to expand their reach and support small business owners during this time.
What this means for you is access to free business counseling to help you adjust your operations as needed to get through the coronavirus crisis. You can find counseling (free) and training (low-cost) at the following places:
- Small Business Development Center (SBDC)
- Women’s Business Center (WBC)
- SCORE Mentorship Chapter
Find one of these local assistance resources here.
Additionally, the Minority Business Development Agency’s Business Centers (MBDCs) are another resource for free business counseling. You can find one here.
Small Business Contracting
If your I.T. business does government contracting work, there are some special allowances in the CARES Act just for you. This includes giving agencies the ability to:
- Modify terms and conditions of a contract
- Reimburse contractors at a billing rate of up to 40 hours per week of any paid leave (including sick leave)
Eligible contractors are those whose employees or subcontractors cannot perform work on site and can’t telecommute due to federal facility closings due to COVID-19.
You can get more information from your agency’s contracting officer, your SBA District Office, or the Office of Small and Disadvantaged Business Utilization (OSDBU)
Help When You Need It
Often small business owners miss out simply because they’re unaware of programs like these they can take advantage of. We hope our listing has given you some helpful options and information to give you the boost you might need.
Have you taken advantage of any of these programs? Please share your experience with other tech business owners in the comments.