Small business owners are facing hard decisions due to the Coronavirus pandemic. Some companies have been able to stay open in a diminished capacity and are doing their best to keep a portion of their employees on the payroll. Many others have been forced to close their doors completely and lay off their entire workforce. In an effort to stimulate the flagging economy and put protections in place for businesses, The United States Congress passed the $2 trillion dollar Coronavirus Aid, Relief, and Economic Security Act (CARES).
One of the main provisions of the bill was the Paycheck Protection Program (PPP). The goal was to provide forgivable loans to small businesses with the assurance that the majority of the funds would go to covering employee’s salaries and other regular expenses associated with your workforce, such as retirement benefits, paid time off, healthcare benefits, and state and local taxes. All of CARES, but especially PPP, is intended to act as business interruption insurance for small business owners in order to help them and their employees.
However, there was such an overwhelming demand for these loans that the funds ran out in a matter of days, to the frustration of many business owners who felt their application never saw the light of day. Fortunately, Congress wasted no time in drafting a second piece of legislation, which infuses another large amount of funding into the PPP.
Protecting your biggest assets; your employees
As with the first round, loans from the second pot of money that have been earmarked for the Paycheck Protection Program will be provided by lenders approved by the Small Business Association and will be guaranteed by the SBA. In order to qualify for a loan, a business must maintain the same number of employees for 8 weeks following the date of loan origination that it had either from 2/15/19-6/30/10 or 1/1/20-2/29/20.
To qualify for a forgivable loan, one of the major requirements is that at least 75% of the funds should go toward eligible payroll costs. As a business owner, you should apply through your bank and be ready with all applicable materials to streamline the process. It is recommended that you work with your accountant to coordinate compiling all of the necessary documents. He or she can also advise you regarding any additional grants for which you may qualify as well.
Keep watching the news
Paycheck Protection Program 2 was approved on April 23, 2020 and applications are slated to open up Monday, May 4, 2020. If you have any questions regarding how the CARES Act affects you or how to request forgivable loans that provide the ability to keep paying your employees, contact Blankinship and Foster for the answers you need.
The COVID-19 pandemic has created difficult times for all of us, but small business owners are taking a particularly hard hit. We can assist you work through the financial issues you’re facing, adjust your business plan, apply for paycheck protection, learn about applicable pandemic clauses, and prepare for the next stage of your company’s life.
Call today for a free consultation and we can help guide you through this uncertain time.