What Economic Assistance is Available to Small Businesses During the Coronavirus Pandemic?

The federal and state governments have offered a variety of aid or relief to individuals and small business owners related to the coronavirus pandemic and the COVID-19 disease.  Our attorneys at EPGD have been closely monitoring all legal developments and changes in administrative policy to make sure we can guide you through this difficult time and help you to capitalize on all attractive opportunities available to you or your business.

Federal Small Business Association

On March 11, 2020, President Trump addressed the nation about the COVID-19 virus for one of the first times. In his address, President Trump called for an additional $50 billion to be allocated to the Small Business Association (SBA) and for the immediate availability of SBA loans to small businesses. The SBA has since announced that it would provide more low-interest loans for qualifying small businesses through its Economic Injury Loan program.  The SBA determines whether your business qualifies as a small business by looking to both revenue and number of employees. Additionally, your business must have been founded prior to January 31, 2020.

The maximum loan amount available is $2 million and the amount a business is awarded is calculated using an analysis of the business’s creditworthiness. The SBA loans carry a 3.75% interest rate for small businesses and 2.75% interest for nonprofits. The repayment term for the loan can be up to 30 years, but the exact term varies based on the business’s ability to repay the loan. Unlike the Florida Disaster Loan, discussed below, the SBA does require businesses to submit collateral for large loans.

To qualify for an SBA loan, a business must demonstrate that its business has been or will be effected by the coronavirus pandemic. The SBA allows businesses to use any financial documents to demonstrate expected losses but it particularly looks for month over month sales projections. If you think your business may benefit from a SBA loan, visit the SBA website to apply. The application will ask for a variety of information, including which disaster declaration your business is relying on for the loan. When selecting your disaster declaration in your application, ensure you use the state in which your business resides, even if its main operations is elsewhere.

The application and additional information are available here: https://disasterloan.sba.gov/apply-for-disaster-loan/index.html

Section 1102 – Paycheck Protection Program

The single most attractive form of relief our attorneys have found this far is the Paycheck Protection Program, passed into law on Thursday, March 26, 2020 in conjunction with the CARES Act.  It truly is unprecedented – in scope, reach, and scale.  The federal government has made non-recourse loans available that are 100% fully backed by the FDIC do not require traditional the personal guarantees or collateral requirements to qualify and receive the funds.  Furthermore, these “loans” are essentially being treated as grants such that you will not have to repay any of the money, so long as the money is used for approved payroll expenses within a given period.  The specific amount your business is eligible for will be wedded to payroll expenses for a certain period and can be as large as $10 Million per business in some cases.

There are some other traditional loans with attractive terms that are also available to you and your business, which we discuss herein, but the Paycheck Protection Program is unlike anything else we have seen and is geared to produce maximum relief right away without any of the traditional underwriting or regulatory constraints.  In fact, the federal reserve will be disbursing the funds directly through any FDIC insured bank to ensure speed and ease of distribution.  This means your local bank will have the full support of the U.S. Government to provide you free money with no capital or regulatory risk to the bank.  These funds will allow you to keep your team employed and help them support their families.

Again, this is a truly unprecedented opportunity that we urge you to take advantage of in order to assist your company as it navigates this uncertain economic time.

IRS Filing Extensions

The April 15th deadline for the payment and filing of individual and corporate taxes (IRS Forms 1040 and 1120) has being extended for a period of ninety (90) days to July 15, 2020. This extension does not apply to any state tax filing or payment obligations (although individual states may choose to extend similar relief as well; but keep in mind that Florida does not collect income tax from its residents).

Below is a concise explanation of the relief being offered by the IRS, as expressed in IRS Notice IR-2020-58:

The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15. Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.

Our tax attorneys at EPGD are available to assist you or your company as needed, but you may also consult the Frequently Asked Questions page on the IRS website to address any remaining questions or concerns you have.  FAQs: https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers

Facebook Small Business Grant Program 

Facebook recently announced that it would provide relief for small businesses worldwide. Facebook has allocated $100 million in cash grants for up to 30,000 eligible small businesses. The social media giant also is providing an advertisement opportunity to those small businesses through an ad credit. The program is said to help with keeping your workforce going strong, helping with your rent costs, connecting with more customers, and covering operational costs.

Small businesses can apply for the grant and ad credit by visiting Facebook’s website at www.facebook.com/business/grants.

Florida Department of Economic Opportunity – Short Term Compensation Program

Florida’s Department of Economic Opportunity has created the Short Time Compensation Program to assist employees and employers during an economic slowdown and incentivize employers to defer or delay layoffs. The program permits prorated reemployment assistance benefits to employees whose work hours and earnings are reduced as part of a Short Time Compensation plan to avoid total layoff of some employees. Here are some details and eligibility requirements:

Plan and Estimate: The employer must describe a plan for giving notice, if feasible, to an employee whose workweek is to be reduced, together with an estimate of the number of layoffs that would have occurred absent the ability to participate.

Client Companies: If you are a client company trying to apply for a plan for leased employees, contact the leasing company. They will need to file a plan separately on behalf of their employees.

Application: Reduced hours must be used as a temporary solution to avoid a layoff. The employer must submit a Short Time Compensation plan application to the Short Time Compensation Coordinator, Reemployment Assistance Services

Employer-Sponsored Training: Individuals participating in an employer-sponsored training may also be eligible to participate in the short-time
compensation program.

Participating employees must be full-time (at least 32 hours per week prior to Short Time Compensation reduction), permanent employees (not seasonal) and the employees must have a set number of hours (excluding overtime) that they work each week in order to participate. Employees paid piece rate, on commission, or who are hired to do certain jobs regardless of the time required are not eligible for participation. Short Time Compensation benefits are payable when normal hours of work are reduced from 10-40 percent. If normal work hours exceed 40, the percentage will be based on 40 hours.

Florida Small Business Bridge Loan Program

In addition to the federal and private resources available for small business, Florida has established the Disaster Loan program which “aims to provide short-term, interest-free loans to small businesses experiencing economic injury from COVID-19.”[1]

The loan is available for up to $50,000, and in some circumstances $100,000. The loan is a short-term loan that carries no interest for the first year. If the business cannot repay the loan within a year, the loan will carry 12% interest for each year moving forward until it is repaid. However, the loan does not require collateral be put forth by the business.

The state of Florida has outlined requirements for small businesses to be eligible for a disaster loan. To qualify for one of the loans, the business must be: (1) a privately held small business that maintains a place of business in the state of Florida, (2) located in a designated disaster area, (3) established prior to March 9, 2020, and (4) able to demonstrate economic injury as a result of the disaster. However, the state has announced that businesses deriving more than one-third of gross annual revenue from legal gambling activities or businesses that may promote indecent behavior are ineligible for the loan. International businesses operating in Florida are not eligible to apply for the loan.

If a business is eligible to receive a loan, the owner of the business must sign an agreement stating that the proceeds of the loan will be used “only for purposes of maintaining or restarting the business in the designated area.” Additionally, the borrower must certify that any insurance proceeds recovered due to the disaster will be used to repay the loan.

If your business would like to apply for a Florida Disaster Loan visit www.floridadisasterloan.org. Businesses will fill out an application and submit it to the Florida Small Business Development Center (SBDC). A loan committee from the SBDC will review the application to ensure the business is eligible and will contact the business if it has been approved for the loan.

[1] Office of Commissioner Jorge Fors

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If you would like more information or guidance with regard the economic assistance available to small businesses during this time, please do not hesitate to contact one of our experienced attorneys at EPGD Attorneys at Law. EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

Categories: COVID-19

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