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COVID-19 Government aid for businesses

Small businesses are being encouraged to do their part to keep their employees and customers.  The government has created several plans to help businesses during the COVID-19 crisis.

The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retentions and certain other expenses.  Under this program:

Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.

Loan payments will be deferred for six months.  If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.

Economic Injury Disaster Loans and Loan Advance

Small business owners are eligible for an Economic Injury Disaster Loan Advance for up to $10,000.

The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans for up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.  Funds will be made available within three days of a successful application, and this loan will not have to be repaid.

SBA Debt Relief

The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.  Under this program:

The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.

The SBA will pay the principal and interest of current 7(a) loans for a period of six months.

SBA Express Bridge Loans

The Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork.  These loans can be used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan.

IRS Employee Retention Credit

The Treasury Department and the IRS created the Employee Retention Credit, which was designed to encourage businesses to keep employees on their payroll.  The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

The credit is available to all employers regardless of size, including tax-exempt organizations.  However, businesses that take small business loans are excluded from the Employee Retention Credit.

Businesses should determine if they would receive more benefit from the business loan or the Employee Retention Credit.

If you are not sure which option would provide the most benefit, I would recommend that you contact a qualified tax professional.

David Zubler is a tax accountant in East Tennessee, the author of four books, and a philanthropist.  All of his proceeds from the books go to a charitable foundation he created for underprivileged children.  He is also the founder of Your Tax Care which provides tax education. David can be reached for questions and consultation at yourtaxcare.com.