Loan and Tax Credit Provisions for Small to Mid-Size Businesses During the COVID-19 Pandemic
The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) became law on March 27, 2020, and provides important financial assistance to small to mid-sized businesses, including:
Protecting Paycheck Loan
• Loan up to 250% of the business’ average monthly payroll based on pre-COVID-19 pandemic payroll levels (subject to an $100,000 annualized compensation amount per employee).
• Loan does not have to be repaid if the loan proceeds are used for permitted purposes and payroll is maintained at pre-pandemic levels during the eight week period following the receipt of the loan proceeds.
• No personal guarantees or collateral are required.
• Applications not yet available, but expected from SBA later this week.
For more details see our Protecting Paycheck Loan Summary.
Economic Injury Disaster Loan (“EIDL”)
• Previously rolled out by SBA on March 19, 2020
• SBA has already began accepting applications at http://disasterloan.sba.gov/ela.
• Loans up to $2 million to address anticipated revenue loss.
• For loans that are $200,000 or less there is no personal guaranty required.
For more details see our EIDL Program Summary.
Employee Retention Tax Credits
• Tax credits are equal to 50% of qualified wages, which are capped at $10,000 per employee (maximum tax credit per employee is $5,000).
• Employer retains payroll tax credit amount as working capital instead of paying to IRS.
• Eligible to claim the credits during any calendar quarter of 2020 for which the employer’s business is closed or suspended, or for which the gross receipts have fallen by more than 50% compared to the same quarter for 2019.
• If an employer obtains a Section 7(a) loan, it is not eligible for the retention tax credits.
For more details see our Employee Retention Tax Credit summary.
Payroll Tax Holiday
• Employers retain as working capital social security taxes on payroll incurred for remainder of 2020, which amounts are payable to the IRS 50% on December 31, 2021 and the remaining 50% on December 31, 2022.
• The amount retained is 6.2% of each employee’s salary or wages subject to the social security wage cap for remainder of 2020.
• This is effectively an interest-free loan to each qualifying employer until the extended due dates.
For more information see our attached summary.
If you have any questions about these loan or tax credit programs, please contact any of the following Meyers Roman attorneys:
Richard Bain
Peter Brosse
David Croft
Bryan Dardis
Mario Fazio
Robert Fuerst
R. Scott Heasley
Scott Lewis
Lisa Lowe
Anne Meyers
R. Russell O’Rourke