The coronavirus pandemic has triggered many small businesses to close down temporarily. Both owners and employees are affected by this event. Since no one knows when will this end, everyone is finding their own way to recover the losses brought by the temporary closure of their companies and jobs. The government and other organizations are also helping solve the crisis by giving assistance to both owners of small businesses and those who became jobless through the CARES Act bill.
Just recently, the U.S Small Business Administration (SBA) released the details of two of its programs to help in the pandemic. These are the Economic Injury Disaster Loan and Paycheck Protect Program. These two programs have different purposes but in general, they aim to provide assistance to small businesses that are currently affected by the pandemic. If you are an owner of a small company and you are currently experiencing losses because of its closure, here’s what you can do to avail of the SBA’s disaster loan and PPP program.
SBA’s Economic Injury Disaster Loan
For small business owners who have no idea of this disaster loan, SBA described this as a loan advance that can give up to $10,000 economic relief to small companies that are currently losing. Although described as a “loan” the organization said that the amount doesn’t have to be repaid. According to the recent update of SBA, there were already small business owners from Washington, D. C., and other areas that were able to get the first batch of the Economic Injury Disaster Loan. Together with this information, SBA also disclosed that it will start accepting new applications for its Economic Injury Disaster Loan (EIDL) and EIDL Advance but limited only to those who have agricultural businesses in the U.S.
This time, the organization is aiming to help business owners who are in the agriculture industry. If you think you are qualified to get the relief assistance, you are allowed to send in your application. The SBA came up with two conditions to become a qualified applicant. These are the following:
- Agriculture businesses including those that involved food and fiber production, raising of livestock, ranching, aquaculture, and other agricultural and farming industries. This qualification is based on Section 18(b) of the country’s Small Business Act.
- The organization is encouraging all qualified agricultural companies with 500 or fewer workers that want to apply so they can start preparing the financial information of their business, which is the primary requirement when they apply.
Per the disclosure of SBA, they will only open the said application to agricultural businesses because of the limitation in funding and the voluminous applications they have already received. Those who have submitted their applications will be processed and it will be based on first-come, first-served. Those who have submitted through the streamlined portal before the change of the legislation will be processed as well without the need to re-apply. The qualifications above will be applied to both EIDL and EIDL Advance applications.
SBA’s Paycheck Protection Program
Apart from the disaster loan of SBA, the organization also has a loan program called the Paycheck Protection Program or PPP. This is an SBA loan that aims to assist businesses in order to maintain their employees while there is a pandemic out there. What’s in the SBA loan program is an incentive for small companies so they can keep their employees employed during the health crisis. If small companies will keep their employees on payroll for eight weeks and the grant money will be used for utilities, payroll, mortgage interest, and rent, the organization will forgive the said loan.
Those who qualify can apply through the approved lenders or any depository institution insured by the federal government including credit unions and the Farm Credit System. Other regulated lenders not mentioned can still be utilized. Just in case you want to inquire with your local lender, you may do so to know if they are involved in the program.
SBA’s PPP can be availed of if you own one of the following entities:
- Sole proprietor
- Independent contractor
- A small business that meets the size standards of the SBA (alternative size standard or industry-based size standard)
- A business, veteran organization, a non-profit organization, or tribal business concern with 500 employees or above 500 employees meeting the industry size standard.
- A business bearing a NAICS Code starting with 72 and has more than 1 physical office and has less than 500 workers per location.
The PPP relief assistance was opened last April 27, 2020, after SBA received around $320 billion funds from the Congress. Previously, the organization has given out the $349 billion funds within days after it opened the door for applications in order to maintain small businesses together with their employees.
However, there have been issues when it comes to SBA loan applications. Some small businesses had challenges submitting their application because the portal was not working for a day. There were complaints that some applications were put on hold and waiting for approval. There were also criticisms because there were large businesses and publicly traded companies that received the funds rather than small businesses, which was clearly the purpose of the money. Eventually, those who received the funds but were not qualified will give back the money.
To clear out the issues, the SBA together with the Treasury Department ensured that the second wave of the loans will only go to small businesses this time. Both of the agencies will make sure that those who qualify for the program will receive relief assistance.
AICPA’s Recommendations on SBA’s PPP Forgiveness
To completely help small businesses, SBA’s guidelines state that the PPP can be forgiven if employers will meet certain conditions. Basically, employers just need to retain and rehire their employees and keep them on the payroll for a certain period. The chances for loan forgiveness will be minimized if the number of full-time employees reduces or if the salaries decrease. Together with the financial aid, SBA also gave out loan forgiveness forms with instructions on how they can avail of it. Some measures include the following:
- Alternatives for employers to compute the payroll based on an alternative payroll covered period that matches the employer’s normal payroll cycles.
- Use the loan to pay for payroll and non-payroll expenses within the eight-week period.
- A complete guide on how to do the computation based on the standards of the Cares Act in order to confirm the eligibility for the forgiveness of the loan.
- Statutory exemptions from loan forgiveness reduction if the rehiring date is by June 30.
- A new exemption for employers whose intention is in good faith and the workers decline the rehiring offer.
In order to give clarity to the application of PPP to small businesses, the American Institute of CPAs has provided a set of recommendations so those small companies that received the loans can have the amount forgiven. Here are some of the suggestions of the organization:
- PPP can cover an eight-week period and the start of it should match the beginning of a pay period, not the exact date when the loan is received.
- The eight-week period should begin once the lockdown is lifted, not when the loan is received. Basically, the loan should be used in order to ramp up the operation when the small company is back on business.
- Employees who are tagged as full-time workers (FTEs) should receive their salaries based on a simple wage-based proxy if the employer can’t track the hours worked by them.
- The payroll deduction computation should be on an average payroll basis per week, not based on the total compensation of the employee.
AICPA said that loan forgiveness is an essential element of SBA’s PPP program and the organization believed that the steps to be qualified for the forgiveness should be straightforward and simple so to help small businesses achieve their success. So, the organization’s goal is to remain steadfast and work with the CPAs and other stakeholders around the country to maintain consistency and help smaller businesses who are sending their applications to use a standard approach.
Assistance to COVID-19 Relief Funds
Our company aims to help businesses of different sizes in areas such as bookkeeping, taxation, and payroll. We can also offer assistance to those who need to process COVID-19 relief funds amid this pandemic. Remember, we are facing the worst enemy of our economy and one way we can counteract the effect of the virus spread is to join hands and help each other.
If you are a small business owner or someone who qualifies in the programs by SBA mentioned above, you can reach out WYCOTAX and discuss the steps with our team. We know it’s not easy to manage the application, knowing that this is assistance from the government. Our goal is to give you the helping hand you need so you can recover from the losses you incurred during this pandemic. You don’t have to undergo the hassle of sending the applications. WYCOTAX can help you with everything involved in relief assistance.
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