ANSWERING YOUR BIGGEST COVID-19 STIMULUS CARES ACT QUESTIONS

Small Business Owners

1. Covid-19 is killing my business. I might be forced to layoff employees. Does the CARES Act provide reimbursement for employers who keep on employees during the Covid-19 pandemic?


  • Yes. The Paycheck Protection Program (which is a forgivable loan) provides reimbursement for salaries, expenses, rent, etc that occur between February 15th, 2020 and June 30th, 2020.


2. Will the CARES Act impact my company’s eligibility for Net Operating Losses?


  • Yes, in a positive way. Traditionally NOLs are capped at 80 percent of taxable income, but under the CARES Act, you’ll be eligible to write off 100 percent of taxable income if applicable.


3. I founded a company in 2019 and I don’t have any employees. Is my startup eligible for federal assistance under the Covid-19 stimulus bill?


  • Yes and No. Your company would not be eligible for the Paycheck Protection Program (you must show proof of salaried employees at the time of disaster). 


  • Your company would (if some qualifications are met) be eligible for the Economic Injury Disaster Loan. 


  • The CARES Act greatly expands the eligibility for EIDLs, waiving the personal guarantee under $200,000. The CARES Act also provides small businesses with access to up to a $10,000 advance payment (which would not need to be repaid if the loan request is denied).

Employees

1. My company laid me off because of Covid-19. I am claiming unemployment. How will the CARES Act impact my unemployment? 


  • You will receive an additional $600 a week in unemployment compensation. That is $600 (in addition) to your approved state unemployment. 


  • You will receive the additional $600 a week for up to four months from the time of your Covid-19 unemployment claim.


2. If I claim unemployment, will my job still be there when the Covid-19 pandemic ends?


  • While no one except your employer can guarantee that you will still have a job, many provisions have been added into the CARES Bill, encouraging your employer to maintain his/her staff through this unprecedented crisis.

 

3. My company is making lay-offs, but I’m a salaried employee. Is my job at risk?


  • The CARES Act addresses this concern specifically with a provision called the Paycheck Protection Program. Your employer may be eligible to take out a loan up to $10,000,000 in order to make payroll through this crisis.

Individual Taxpayers

1. Will I get a direct check from the government?


  • Yes. The Recovery Rebate for Individual Taxpayers guarantees that if you make less than $75,000 a year, you will receive a $1,200 check.


  • If you make more than $75,000, your check will decline by $5 for every $100 you make over $75,000.

 

2. Where will the government send my check?


  • The IRS will direct-deposit your check into whichever bank account you received your previous years’ tax-return rebate. 


  • If you did not file a tax return in the previous two years, you can still be eligible to receive the stimulus check (if certain conditions are met).


3. How soon will I receive the Recovery Rebate for Individual Taxpayers?


  • The specific date for dispersals has not been set, but you can start looking for the rebate check within 4 weeks.


4. Will I have to pay taxes on the rebate check?


  • No. The Covid-19 stimulus check will not be counted as income. It will be recognized by the IRS as a fully-refundable tax-credit.


5. Will my kids be eligible for the Recovery Rebate for Individual Taxpayers?


  • If your children are under 17 they will be eligible for $500 checks.

Unemployment Benefits

1. The CARES Act allocates $ 250 billion to unemployment benefits and significantly enhances those eligible to apply.  So long as unemployment is related to the COVID outbreak.


  • Part-time employees, freelancers, independent contractors, self- employed will qualify.


  • The normal work history requirements are waived, this helps the newly hired.


  • The federal government will add $ 600 per week, get added to the normal State benefit amount.


  • Benefits are extended from normal 26 weeks to 39 weeks, additional 13 weeks of benefits.

Retirement Accounts

1. For the calendar year 2020, no one would have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k). That way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses. If you don’t need the money now, you can let the investments sit and hope that they recover.  Other provisions.


  • Penalty-free withdrawals from IRA or retirement plan up to $ 100,000, no 10% penalty. The income tax can be spread over 3 years. This only applies to coronavirus related withdrawals.


  • 401k loans are allowed up to 100% of the value of the account up to $ 100,000.


  • Existing 401k loans get an additional year to repay if due by 12/31/2020.

More Information

Other provisions in the CARES Act include expanding relief for state/local governments, funding the airlines industry, and addressing issues related to healthcare, vaccine creation, etc. The full text of the CARES Act is available at congress.gov. The above information in this section is credited to writer Aaron Martinez.

Small Business Webinar April 2nd @ 11:30

WEBINAR TOPIC - Payroll Forgiveness Loans, Small Business Disaster Loans, CARES Act, Available Small Business Grants

SBA Small Business Disaster Relief loan verse the CARES Act

Know The Difference...

SBA Small Business Disaster Relief loan verse the Cares Act  


There are some big differences between the Disaster Relief Loan and the proposed Cares Act. If you have anyone applying for the disaster relief loan, please advise them to wait until we all have full clarity on the Cares Act as well. This is a fluid situation as the stimulus package works through the final signature from the president. The Cares Act may be the better alternative and you may not be eligible for it if you take the disaster relief loan option.   


Here are some of the proposed differences:  


SBA’s disaster loan program: This is a loan of up to $2MM at 3.75% interest for up to 30 years. This is up and running now but is not administered or issued through the banks. To apply, borrowers will need to apply on the SBA website with administration through their respective governor’s offices so long as their state is under a state of emergency and the underwriting is being done directly at the SBA offices.  
The Cares Act.    


•        Overall: The law will expand the Small Business Act to provide up to $300 billion (likely to increase from negotiations) in loan guarantees in favor of SBA Lenders making SBA Loans to any business concern, private or public nonprofit that employs not more than 500 employees.


•        Amount: The maximum loan amount for an applicant is the lesser of (i) $10 million dollars or ((ii) the average total monthly payments for payroll, mortgage, rent, and other debt payments of the applicant incurred during the 1 year period before the date on which the loan is made multiplied by 4)


•        Use of Proceeds: During the period from March 1, 2020, to December 31, 2020, the loan proceeds may be used to pay payroll (including sick leave), salaries, mortgage payments, rent, utilities, and other debt obligations (so long as such other debt obligations were incurred prior to March 1, 2020)


•        Evaluation: The creditworthiness evaluation and underwriting process are essentially eliminated other than determining whether the business was in operation on March 1, 2020, and had employees for which the borrower paid salaries and payroll taxes.


•        Deferral of Payments: The complete deferral of loan payments would be permitted for up to one year, and the SBA will provide guidance on the deferment process within 30 days.


•        Guaranty: The SBA will guarantee 100% of the balance of the loan outstanding at the time of disbursement through December 31, 2020, and thereafter, 75% of the balance of the loan outstanding at the time of disbursement if it exceeds $150,000 and 85% if it’s less than that. 


•        Loan Forgiveness:  Borrowers will be eligible for forgiveness of the loans up to the sum of the total payroll costs plus payments on debt obligations (if such debt obligations were incurred prior to March 1, 2020) expended during the period from March 1, 2020, to June 30, 2020. This forgiveness amount is reduced proportionally by the percentage of full-time employees laid off by the borrower compared to the borrower’s 2019 employment levels from March - June 2019.  The amount is forgiven also excludes wages of an employee in excess of $33,333 during the four-month period. The amount forgiven is not considered taxable income. 


•        SBA Lenders: The Treasury Secretary is being authorized to establish a process by which lending institutions that aren’t currently authorized as SBA Lenders will be able to provide these types of loans for the duration of the emergency.  
We should also consider that incurrence of the above loans/guarantees is likely currently prohibited under any existing loan agreement between a borrower and lenders so due thought should be given to considering how to address the incurrence of these loans without causing defaults under existing agreements.


This information is credited to Mike Ramsay
Senior Business Development Officer
Bank United

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Fact or Fiction

The Devil Is In The Details

More than half of 1,500 respondents in a recent Goldman Sachs survey expect their small business to survive three months or less under current circumstances, yet more than 67% don’t know how to access emergency funding.


Businesses across the country have been hit and they have been hit hard. With the passage of the Federal Stimulus Package comes hope and confusion. The stimulus bill will provide much needed assitance and a boost to small business.


As it stands, the stimulus package includes $350 billion in small business loans. But these loans don’t need to be paid back. The money would have to be used for expenses like payroll, insurance, rent and utilities – but the loan would then be forgiven.


The Senate’s plan currently supports American small businesses in the following ways, according to policy experts:


• A $350 billion forgivable loan program designed to ensure that small businesses do not lay off employees.


• A 50% refundable payroll tax credit on worker wages will further incentivize businesses, including ones with fewer than 500 employees, to retain workers.


• Looser net operating loss-reduction rules that will allow businesses to offset more.


• A delay in employer-side payroll taxes for Social Security until 2021 and 2022.


• Sole proprietors and other self-employed workers could be eligible for the expanded unemployment-insurance benefits the bill provides.


• A portion of the $425 billion in funds appropriated for the Federal Reserve’s credit facilities will target small businesses.


At a whopping 57 million, self-employed people make up a huge piece of the country’s economic puzzle. But during a global pandemic, when business starts drying up, those who work for themselves are among the most vulnerable.


Finally, the CARES Act includes $349 million for the U.S. Small Business Administration (SBA) to guarantee loans through its 7(a) loan program. 


The SBA is also offering Economic Injury Disaster Loans for qualifying small businesses. These are low-interest loans with terms potentially as long as 30 years for small businesses and nonprofits. 


You can apply for an SBA loan through it's site. Be prepared to provide the following information:


  • Tax Information Authorization (IRS Form 4506T), completed and signed by each principal or owner
  • Recent federal income tax returns
  • Personal Financial Statement (SBA Form 413)
  • Schedule of Liabilities listing all fixed debts (SBA Form 2202)
  • You may also need to provide profit and loss statements, recent tax returns, and balance sheets. 


Are you still feeling overwhelmed or confused? Join us next week for our FREE Webinar with expert guest, Steve Mariani from Raleigh, NC. Steve will assist business owner with the most up to date information and help clarify some of the more confusing elements of the stimulus package.


Register below!

Raleigh business brokers Near Me

Small Business Webinar April 2nd @ 11:30

WEBINAR TOPIC - Payroll Forgiveness Loans, Small Business Disaster Loans, CARES Act, Available Small Business Grants

The Coronavirus Aid, Relief and Economic Security Act

Learn More

There are roughly 31 million small businesses that employ 59 million workers across the nation, according to the Small Business Administration’s Office.


The Coronavirus Aid, Relief and Economic Security Act, includes a $350 billion loan program for businesses with fewer than 500 employees (including sole proprietors, independent contractors and anyone otherwise self-employed). 


Under the bill, loans can be used to meet payroll and cover certain other expenses like utilities or insurance premiums. And, borrowers will be able to apply for loan forgiveness.


The new loans will be available through private financial institutions — i.e., banks, credit unions — that participate in the Small Business Administration’s lending network.


Under the CARES Act, the loans can be for as much as 2.5 times payroll or $10 million, whichever is less. Payments can be deferred by up to a year, and businesses will be able to apply for forgiveness of the loan (or a portion of it), based on the amount used during the eight weeks following loan approval. Any amount not forgiven would have a maximum interest rate of 4%.


The bill also waives typical SBA loan requirements that credit must be unavailable elsewhere and that the borrower must personally guarantee the amount or provide collateral.


Additionally, small businesses applying for a loan will be eligible for up to a $10,000 emergency grant — which would be subtracted from the forgiven loan amount — that would be issued within three days of the application being received.

 

If you are a small-business owner hoping to qualify for one of these loans, start by reaching out to your bank or lending institution.


Register for our FREE Webinar for more details and clarity.

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Helping Raleigh Small Business Owners Get The Help They Need

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Lending Resources

1. Disaster Loan Assistance - Small Business Administration


2. SBA 3 Step Process Disaster Loans - SBA disaster loans offer an affordable way for individuals and businesses to recover from declared disasters.


3. Permanent Equity - Permanent Equity is rolling out a new program we’re calling Safe Harbor. If your business can responsibly utilize $3,000,000 or more, and you are interested in exploring a long-term relationship, we’d love to start a conversation.


4. Facebook Small Business Grants Program - We know that your business may be experiencing disruptions resulting from the global outbreak of COVID-19. We’ve heard that a little financial support can go a long way, so we are offering $100M in cash grants and ad credits to help during this challenging time.

Families First Coronavirus Response Act

This bill would guarantee free coronavirus testing, establishes paid leave, enhances unemployment insurance, expands food security initiatives, and increases federal Medicaid funding. LEARN MORE

Treasury, IRS and Labor

This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump. LEARN MORE:

KPMG - COVID-19 Economic Impacts

Covid-19 will interplay with debt levels and capital markets. LEARN MORE:

COVID-19 NC Small Business Response Resources

 The coronavirus has disrupted the lives of millions of people and is having significant impacts on businesses. Smaller businesses have experienced fewer customers, disrupted supply chains and cash flow challenges. 


Now is the time to assess the impact COVID-19 is having on your business. North Carolina’s small business service providers are here to help you navigate this unprecedented event. As a collective, we have a long history of helping businesses prepare for and recover from disasters.


North Carolina COVID-19 Small Business Response Resources

North Carolina Business Relief Resources

Is your business considered an Essential Industry? NEW Protocol for Essential Business.


However, during times of emergency, local and state government does have the authority to impose restrictions. To continue operations through a restriction or curfew, your business must apply for Re-Entry Certification.

North Carolina Department of Human Health Services

North Carolina Chamber Of Commerce

This page will be updated with new and relevant resources as they become available. If you have information that you would like to share with North Carolina’s business community regarding Coronavirus Disease 2019 (COVID-19).