Now that the CARES Act and the Families First Coronavirus Response Act have been passed, it is time to assess the opportunities available to all small business owners. In our companion article published yesterday, we discussed how this legislation impacts individuals. For reference to this email, please click here .  Now we are focusing on actions that savvy business owners should be considering right now. 

The loan period is from February 15 through June 30, 2020, and the program generally covers businesses with fewer than 500 employees. Borrowers may apply at participating banks and the loans will be forgiven if employment and wage levels are maintained during an eight-week period starting on the loan's origination date. Loans are allowed up to $100,000 per annual salary of an employee (prorated for the covered period).

The SBA has no recourse against any borrower for nonpayment of the loan, unless the borrower has used the loan proceeds for a non-allowable purpose. In addition, the loan can't duplicate payments already under the Families First Coronavirus Response Act.

Loans will be offered at an interest rate of 4%, and there are no origination fees. No personal guarantee or collateral is required and payments for loans under the program will be deferred from six to twelve months including principal, interest and fees. "Good faith" certification is required and must meet the following elements: the loan is necessary, funds will be used to retain workers and maintain payroll, and there are no duplicative amounts in the relief sought.

The Credit

The act creates a refundable payroll tax credit for 50% of wages paid by employers to employees. The credit is available to employers whose: (1) operations were fully or partially suspended due to a COVID-19 shutdown order or (2) gross receipts declined by more than 50% when compared to the same quarter in the prior year.

The credit is based on qualified wages paid to the employees. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit whether the employer is open for business or subject to a shut down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

The Deferral

With the exception of employers who have debt forgiven by the CARES Act for certain loans provided by the SBA (discussed above), employers are also eligible to defer payroll taxes (6.2% Social Security tax on employee wages) from the date of enactment through the end of the year, until the end of 2021 and 2022. More specifically, the 50% of the payroll taxes that would otherwise be due during this period may be deferred until December 31, 2021 and the remaining payroll taxes would be due on December 31, 2022.

While they don't get the same sick and family leave benefits available to employees, the Families First Coronavirus Response Act provides self-employed people with two refundable credits tied to the amount of time they can't work because of the coronavirus outbreak.

The sick-leave credit compensates self-employed people for up to 10 days away from their business for coronavirus-related reasons. And the family-leave credit covers up to 50 days away from work for any reason that would qualify an employee for coronavirus family leave. There are limits based on self-employment income, but it behooves any self-employed business owner to be aware of these options.