VTDigger is posting regular updates on the coronavirus in Vermont on this page. You can also subscribe here for regular email updates on the coronavirus. If you have any questions, thoughts or updates on how Vermont is responding to COVID-19, contact us at coronavirus@vtdigger.org
With the ink barely dry on the president’s signature for a $2 trillion disaster response package — the Coronavirus Aid, Relief, and Economic Security or CARES Act — the U.S. Small Business Administration has been swamped with questions about how businesses should proceed.
The SBA expects clearer guidelines will be made available by Friday, April 3. However, there are still many unknowns about how exactly local businesses can take advantage of the benefits.
The legislation includes $500 billion in funding for large businesses and municipalities, directs $130 billion to hospitals and dramatically expands unemployment benefits — allowing self-employed people and independent contractors to take advantage of the fund.
The CARES Act also includes significant relief to small businesses — defined as 500 employees or less — and has relaxed eligibility criteria, allows nonprofits to take advantage of programs, and has nearly $350 billion earmarked for employee retention.
Program Overview
Right off the bat, there are three programs available to businesses through the Small Business Administration.
The Emergency Economic Injury Grant program is for small companies that just need a short-term cash injection.
The Paycheck Protection Program is being advised for business looking for money to cover the cost of keeping employees during the economic downturn.
And there is a debt relief program for businesses struggling to make payments on a current Small Business Administration loan.
Economic Injury Disaster Loans & Emergency Economic Injury Grants
The CARES Act includes $562 million for loans and $10 billion for grants, which are currently available and can be applied to online through the Small Business Administration.
These grants provide an emergency advance of up to $10,000 to small businesses and private nonprofits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). This money does not have to be repaid even if the business is denied for the loan.
The SBA Economic Injury Disaster Loans are up to $2 million with interest rates of up to 3.75% for companies and up to 2.75% for nonprofits.
To access the advance, a small business — again 500 employees or fewer — first must apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
The Emergency Economic Injury grants are available from Jan. 31-Dec.31, 2020. The grants are backdated to January to allow those who have already applied for EIDLs to be eligible to also receive a grant.
A high volume of these applications is expected nationally making the turnaround time unclear.
Companies, nonprofits, self-employed people, independent contractors, cooperatives and employee-owned businesses are all eligible. Organizations that are principally “engaged in teaching, instructing, counseling, or indoctrinating” religion or religious beliefs or “primarily engaged” in political or lobbying activities are ineligible.
Paycheck Protection Program
Nearly $350 billion in funding is available for this program to provide interest- and tax-free loans for small businesses that maintain their payroll during the emergency.
Payments on the loans can be deferred for one year. If the employer retains its workers for the duration of the “covered period” — eight weeks between Feb. 15 and June 30 — the loans would be forgiven.
In this way, the loan acts more like a grant if the business retains its staff and payroll. The maximum loan amount is 2.5 times the entity’s monthly payroll and the loan cannot exceed $10 million per organization.
If a business was forced to lay off employees during the eight-week timeframe, the forgivable amount of the loan would be reduced proportionally based on the change in payroll.
Any business with 500 employees or fewer is eligible — including nonprofit organizations, self-employed individuals and independent contractors. Entities that have applied for an EIDL are eligible for the Paycheck Protection program as well.
However, the employee threshold has been amended for the hospitality industry, which has been hit incredibly hard by the coronavirus. The CARES Act specifies that as long as a business has no more than 500 employees at any location, it is eligible.
Small businesses and other eligible entities can apply if they were harmed by COVID-19 between Feb. 15 and June 30, and must do so through a money lender and/or a bank.
However, as of early this week, businesses looking to apply are unlikely to be able to as banks and lenders are still unsure about the procedure around these loans, according to the Small Business Administration.
Small Business Debt Relief Program
There is $17 billion in funding in the federal bill for this program which will provide immediate relief to small businesses with non-disaster SBA loans, in particular microloans. Under it, the Small Business Administration will cover all loan payments on the loans, including principal, interest and fees for six months.
Small Business Tax Provisions
There is also an “Employee Retention Credit for Employers Subject to Closure or Experiencing Economic Hardship” measure in the CARES Act.
This provision would provide a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including nonprofits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings.
However, this tax credit plan is not available to employers receiving assistance through the Paycheck Protection Program.
The credit is provided through Dec. 31, 2020.
Still plenty to be worked out
The Scott administration, lawmakers and agencies are all working to understand the intricacies of the legislation for the unprecedented disaster relief package to understand what and how employees and employers are covered.
On Monday, Vermont’s speaker of the House and Senate president pro tempore announced the creation of a Joint Small Business Solutions Task Force.
This task force, consisting of members of the Senate and House economic development committees, has been charged with making sure resources aimed at helping small businesses are being appropriately directed by state efforts and that Vermont is maximizing federal assistance.’
For more information on the programs visit SBA.gov.
