These are difficult times in your business, and you may be facing tough decisions about your lines of credit, about your payroll, or other aspects.
While the tunnel is dark, there are some points of light that can give direction to your business strategy. If you are a small business owner, the recent federal CARES stimulus package has some provisions that are available to most of the businesses that belong to Fresh Produce Association of the Americas. The provisions are available through the Small Business Administration, which has a Web page dedicated to COVID-19 relief programs. The U.S. Chamber of Commerce has a handy printable guide here.
You should not delay in taking full advantage. Let’s learn some more:
The $10,000 Emergency Grant: This grant can be made available to you within 3 business days. It is available to any small business. The government defines a small business as generally any firm with fewer than 500 employees. If you apply for and receive other stimulus relief funding, this initial $10,000 will be deducted from the amount that you are eligible for in other programs. But here is the key: This is a grant. As long as you use it within the terms of the program, it will not need to be repaid. This is under the SBA Economic Injury Disaster Loans. You can start the whole process here. SBA says it takes a little more than two hours to complete the form.
Working Capital Loans: One program provides up to $2 million in working capital for up to 30 years at 3.75% Payments can be deferred up to a year, and for loans of less than $200,000 a personal guarantee is not required. Just the same as the $10,000 grant, get started here. Express Bridge Loans of $25,000 or less do not require any collateral at all. These programs are also part of the SBA Economic Injury Disaster Loans.
Paycheck Protection Program loan: This program may help your small business get to the other side of the illness curve. It provides loans equal to the lesser of two and a half months of payroll, or $10 million, whichever is less. After origination of the loan, the first 8 weeks convert to a grant. This can be used for payroll, rent, utilities and interest on your mortgage. There is no collateral or personal guarantee required. Note: if you have already made changes to your employee count, the loan forgiveness will be reduced proportionally to the number of FTEs that were reduced. If you have laid off employees, you have 30 days to bring them back and employ them through June 30 in order to have full eligibility. This $349 billion loan package will be administered through local and national lenders. Talk to your banker to learn more.
Employee Retention Credit: If your business is reeling, and you want to keep your employees, this credit could be helpful (although it is for companies that are fully or partially shut down by the virus, and may not be as helpful for seasonal businesses). Basically, this helps employers who lose 50% of their gross receipts compared to the same quarter in the previous years. It allows you to apply a refundable tax credit for up to 50% of the wages (including health care), up to $10,000 per employee. You cannot use this program if you apply for the Paycheck Protection Program loan (see above).
Talk to your Tax Advisor: In addition to the above, there are important changes to how you can file your taxes. For instance, you can delay payment of employer payroll taxes (Social Security) between now and 1/1/21. Half of these taxes will be due 12/31/21 and the other half due 12/31/22. But if you get a Paycheck Protection Program loan forgiveness you cannot use this.
In other tax changes, you can take your Net Operating Loss for 2018, 2019 and 2020 and carry it back five years. This extends to pass-through companies and sole proprietors. There are other provisions, including the ability to accelerate recovery of AMT credits. You can elect to increase your limit on interest deductibility to 50% for 2019 and 2020. And there are tax benefits for Qualified Improvement Property (QIP) fixes.
General Guidances: For other general information about COVID-19 for small businesses and employers, the government has compiled some links here. These include general guidances on safety and employer/employee rights.
These are complicated times, and hopefully these resources can be helpful. In order to qualify, you will have to make a good faith declaration that your business has been harmed during the COVID-19 crisis. You should work with your tax advisor, legal counsel and lenders to understand what is best for you.
As you adapt your business to the new reality, FPAA will adapt to provide the resources you need. As we become aware of more programs, we will let you know. As always, do not hesitate to reach out and let us know how we can help.