Last month, I shared some financial resources for small business owners and entrepreneurs to help you through the COVID-19 pandemic and business shutdowns. Hopefully, you’ve been able to take advantage of some of those resources to keep your business afloat during this difficult time.
With stay-at-home orders extended, and uncertainty still being rampant, I want to share some additional resources that have become available.
Paycheck Protection Program
The Paycheck Protection Program is administered by the Small Business Administration as part of the CARES Act, which was enacted into law last month. The purpose of the program was to enable business owners to continue to pay employees even if they have closed as a result of the pandemic or if they have experienced a significant decrease in revenue.
The PPP allows small business owners (defined as businesses with fewer than 500 employees) to borrow up to 250% of their average monthly payroll costs for 2019. The note is a two-year, 1% note with payments deferred for six months. However, the loan may be completely forgiven.
Any amount that you spend during the first eight weeks after receiving the money will be forgiven if you spend it on:
- Payroll costs
- Mortgage interest
Not only will the loan be forgiven, it will be forgiven on a tax-free basis. With those requirements, it’s easy to understand why over two million business owners rushed to apply.
The PPP began accepting applications on April 3 and the $349 billion allocated to help small businesses had been depleted by April 16. However, the program has been replenished and the loans are still available.
One thing you should be aware of is that if you apply for and are granted a PPP loan, you will not be eligible for our next resource. Keep that in mind.
Employee Retention Tax Credit
The Employee Retention Tax Credit is an alternative to the Payroll Protection Program. Given some of the ongoing issues and loopholes with the PPP, if you have not already applied, you may want to consider opting out to get a tax credit instead.
The ERTC is available to employers who have:
- Fully or partially suspended operations in 2020 due to a government mandate regarding the COVID-19 pandemic; or
- Experienced a significant decline in gross receipts during any quarter in 2020 due to the pandemic. (A significant decline is defined as a decrease of 50% compared to the same quarter in 2019.)
For businesses with fewer than 100 employees, all employees are eligible. When there are more than 100 employees, only those employees who are being paid without providing a service (in other words, non-essential employees who are unable to work) are eligible. You should be aware that health care costs may be included in the calculation of eligible wages.
Employers may claim a maximum of 50% of employment taxes up to a maximum of $5,000 per employee for wages paid between March 12, 2020 and January 1, 2021. As I mentioned above, any employer who receives a Paycheck Protection Program loan is ineligible for the ERTC, and vice versa.
Because you cannot claim both the PPP and the ERTC, my recommendation is to think carefully before choosing. If you have already received a PPP, you cannot get the ERTC. If you missed out on the first round of PPP loans, take a few minutes to calculate which option is best for you before deciding what to do.
So far, I’ve focused on financial resources. But, with more states talking about how to reopen businesses – and many medical experts suggesting that there may be a lull in new cases during the warm summer months – it’s important to think about how to reopen your business safely.
Reopening is not something you can without a plan. One resource I like comes from the Small Business Development Center, which works in tandem with the SBA. You can read their full reopening guide here, but some of the things you’ll need to address include:
- Creating a safe and healthy environment for your employees
- Allowing at-risk employees to work remotely
- Setting up a notification system to inform employees and customers when they have come into contact with an infected person
- Encouraging sick employees to stay home
- Reworking employee schedules to minimize crowding and the risk of infection
- Maintaining agility, so you can respond quickly to regulatory changes and recommendations
The chances are good that we will experience a second wave of infections later this year, and that means that you should plan for it now. The rapid shutdown in March took a lot of business owners by surprise, but you’ll have time to prepare for the next one.
The business reopening guide isn’t the only free resource provided by the SBDC. They also have a series of free webinars for small business owners. They include:
- Strategies for Business Survival
- E-Commerce During COVID-19
- Navigating Cash Flow Crunch
- Financial Strategies to Survive and Thrive in the Pandemic
What I like about these webinars is that they provide business owners with different ways to address the challenges presented by the pandemic.
The Small Business and Entrepreneurship Council, or SBE, has a special page dedicated to resources for business owners. It includes:
- Updates on the CARES Act and SBA loan programs
- Guidance for how to navigate the ADA and other regulations during the pandemic
- Information for companies wanting to produce medical supplies
- Links and information related to business taxes, including credits and filing extensions
- Workplace risk management
More than anything else, this is a situation that requires agility on the part of business owners. We aren’t in a position to predict what the rest of the year (or next year) will bring. Taking a systematic approach to planning won’t save every business. However, I feel confident saying that the businesses that do survive are those that emphasize practicality and creativity as they navigate the pandemic.