Small business owners throughout North Carolina are facing critical decisions, from evaluating the pros and cons of laying off staff, to shaving overhead costs, to finding creative and affordable marketing solutions to generate new leads. Those who’ve seen a substantial downtick in business, or who’ve lost one or more revenue streams entirely, may find themselves in need of emergency financial support simply to keep the lights on.
Fortunately, there is (arguably) no better time for business owners and founders in need of help. The U.S. Small Business Administration (SBA) recently granted a request made by Governor Roy Cooper for federal relief for business owners facing coronavirus-related economic hardship. Specifically, the approval allows qualifying small businesses to apply for low-interest disaster relief loans and grants. The federal government is also offering, through the IRS and other agencies, a variety of options for small businesses at risk of financial collapse.
Here, we will survey a handful of those options and share how your business can benefit from them.
Automatic Relief On 504 Loans
If your business holds commercial properties and received financing through the SBA’s 504 loan program, you may be eligible for relief. Starting in April, the government is automatically making mortgage payments on behalf of qualifying businesses for the portion of mortgages held by the SBA. This initiative is part of the recently-passed Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Economic Injury Disaster Loans (EIDL)
The federal government is offering low-interest EIDLs directly through the SBA. These loans are intended to help qualifying businesses replace working capital income. They carry an interest rate of 3.75 with up to a 30-year term and an automatic one-year deferment. Additionally, there is no personal guarantee on amounts up to $200,000.
Some businesses are also eligible to apply for a grant in an amount of up to $10,000. The grants can help replace lost revenue and do not need to be repaid, even if a loan application is denied.
Payroll Protection Program (PPP) Loans
An existing SBA loan program is adding another $349 billion in forgivable small business loans to help businesses maintain payroll. To qualify, applicants must certify that the pandemic-related economic upheaval necessitates a loan to support the business’ ongoing operations. If you qualify, you can receive a loan up to 2.5 times your company’s average monthly payroll. This includes amounts paid as wages and benefits to employees, including small business owners and those with an annual salary of up to $100,000.
Loans are forgiven if they are used on qualifying expenses like payroll in the eight weeks after the funds are disbursed. However, the amount of the loan that is forgiven may be reduced if the business doesn’t return payroll to pre-pandemic levels by June 30 or if more than 25 percent of the loan is used for non-payroll expenses like rent or utility payments.
Tax Credits For Payroll
If you do not receive – or don’t qualify for – a PPP loan, you may be eligible for other forms of tax relief. New legislation is allowing a refundable employee tax retention credit worth up to $5,000 per employee. To qualify, your business must either be ordered to partially or fully shut down or have experienced a 50 percent decline in quarterly revenue year over year from 2019.
If your company has fewer than 100 employees, the government will pay half of the wages for your employees who are continuing to perform productive work. You can also seek tax deferment, meaning that half your payroll taxes can be delayed until the end of 2021, with the other half due at the end of 2022.
Tax Assistance From A CPA
The CARES Act includes various other forms of tax relief, like the elimination of penalties for withdrawing from 401k funds. As such, speak with your CPA to ensure you are maximizing the relief available to you and to ensure you receive it at the earliest opportunity. To help your CPA and to expedite the process, keep thorough, organized financial records for your company. Be sure to maintain copies for yourself, your CPA, and your corporate attorney.
Increased Vigilance Against Scams And Phishing Attacks
The fallout from the coronavirus goes beyond economic injury: hackers and scammers are capitalizing on the increasing vulnerability of businesses. Cyberthreats like phishing scams are skyrocketing as companies move to remote workplaces, and tech vendors who support the virtual marketplace are finding themselves less able to respond as they try to manage an unprecedented demand for their services.
Small businesses should take all steps necessary to avoid these attacks. When you receive communications from an entity or individual purporting to be a government actor, proceed cautiously: generally, the government will not charge a processing fee to originate a loan or disburse grant money, so an organization or individual seeking a fee is likely not legitimate. With phishing scams on the rise, never release any personal information for yourself or your business without first vetting and verifying the source.
Additionally, do what you can to secure your sensitive business information, from your bank accounts to your login credentials to your CRM system or other customer databases. If you have questions about how to best accomplish this, contact your attorney or an IT professional for assistance.
Professional Financial and Tax-Related Help for Your Business
At Wilson Ratledge, our corporate law professionals include tax and business attorneys with more than 60 years of combined experience helping business owners thrive. We understand that each situation demands particularized attention and as such, we can help your business navigate pandemic-related economic distress. From evaluating your options to navigating negotiations with creditors and financial institutions throughout the loan application process, we are here to help you do what you can to recover.
For assistance managing your corporate financial affairs, call us at 919-787-7711 or reach out to our team via our contact form below. We look forward to helping you overcome your financial challenges and to keep your business running.