Covid-19 help is here but not all local businesses are getting support
We’re a month into the COVID-19 and some of us are doing okay. Most of us are not. The help that was promised us is not arriving. Although there’s talk about reopening the economy in a few weeks, it will be a slow rollout at best. Even then, if the virus infections start increasing, we’ll be back in our houses. Lets’ look at where we are today.
What happened to my loan?
The 2 trillion dollar Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed on March 27th. It took effect on April 3rd. The chief component of the bill for small businesses is the Paycheck Protection Program. In the PPP $349 billion was set aside for small business aid. From the get-go, there have been problems. The Small Business Administration (SBA) was slow providing guidance to banks on how the loan process would operate. Then the portal to apply for loans crashed. Since then things have gotten better. The list of banks that can process loans is growing. You can use PayPal or Quicken as well. Here is a link to the form you will need when you apply at an authorized lender. The SBA released an FAQ site to answer common questions.
The bill covers the following expenses:
- Payroll costs including benefits
- Mortgage interest if the mortgage was finalized prior to February 15
- Rent provided the lease started before February 15. Same for utilities
The loan may be forgiven if employee compensation, and benefit levels are maintained. Make sure to keep the funds separate in your accounting system and keep precise records. You will need them to prove your case that your funds were used as prescribed in the law and SBA guidance.
One more word on this. The IRS usually considered loan forgiveness as a taxable event. The CARES Act specifically excludes loans made under the act from taxation. State income taxes are a bit trickier. Some states follow IRS guidelines as they’re written. Some do not and have to update their laws to be compliant. Regardless of the state you live in consult a PROFESSIONAL TAX ADVISOR BEFORE MAKING ANY DECISIONS.
Help for gig workers and sole proprietors
Sole proprietors and gig workers started benefiting from the CARES Act on April 10th. The CARES Act allows them to apply for unemployment. They also can benefit from the PPP. However, one caveat is that the sole proprietor must pay himself/herself a salary and be able to prove it. That requires a 1099 or similar documentation. Most banks are only helping gig workers who have a business account with the bank. Those with personal accounts only are not getting assistance from many banks.
When will things return to normal
They won’t return to normal soon if ever. Certainly not before a vaccine for COVID-19 is discovered and widely distributed. There has been some talk that the lockdown in various states might start to ease beginning May 1st. Many experts consider that an optimistic goal. Whenever the opening begins, it won’t be an all at once event. It will be done in stages across business niches and locations. Nor will it be smooth. Expect the possibility that once opened you will have to close again. Some customers will be excited to get out of the house and visit their favorite shops. Others will be afraid to leave their home. According to a Gallup Poll, only 20% of Americans want to end the lockdown now. Another 71% are taking a “wait and see” approach. The rest prefer to stay inside for the foreseeable future.
No one is speculating on how the rollout will unfold. With the supply chain badly damaged for many industries starting a rollout with manufacturers and distributors may be a first step. Of course, many products are made overseas and the situation isn’t any better in most of those supplier countries. For retail, those stores that are currently closed will most likely have to adhere to the social distancing practices already in place at open essential locations. Last to open will probably personal care shops where people need to be in close proximity, eat-in restaurants and public venues.
In March we gave advice on what to do to stay in business now. Following those steps will help you get open and stay open as the virus crisis slowing marches into history. Like other horrific events in the past the COVID-19 will pass. Now is the time to get ready for when that time comes.