South Dakota small businesses are facing an unprecedented economic disruption due to the novel coronavirus (COVID-19) outbreak. Cities have implemented mandatory closures of public spaces to ensure social distancing to prevent the spread of the virus, so those difficulties have only increased.
Congress has reached a bipartisan compromise on a $2 trillion economic stimulus package to address the economic impact caused by the COVID-19 outbreak titled the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This act was signed into law by President Trump last Friday.
We’ve summarized the information that we have as of today, March 30, 2020, below. As more details become available, we will send out another update. For a more detailed description of the programs listed below, see the attached Small Business Guide to CARES.
Here is a summary of the provisions included in the CARES Act:
Paycheck Protection Program
The stimulus includes nearly $350 billion in funding for a provision to create a Paycheck Protection Program (PPP) that will provide small businesses, certain non-profits and other entities with zero-fee loans of up to $10 million. Up to 8 weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. Principal and interest is deferred for up to a year and all borrower fees are waived. These loans are available through SBA 7a lenders.
Economic Injury Disaster Loans and Emergency Economic Injury Grants
The stimulus includes $10 billion in funding for a provision to provide an advance of $10,000 to small businesses and nonprofits that apply for an SBA Economic Injury Disaster Loan (EIDL) within three days of applying for the loan. EIDLs are loans of up to $2 million that carry interest rates up to 3.75 percent for companies and up to 2.75 percent for private non-profits, as well as principal and interest deferment at the Administrator’s discretion. The loans may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses. You can get information and make application at the following website: https://disasterloan.sba.gov/ela/
Or businesses can contact the SBA call center at (800) 659-2955 (TTY: 1-800-877-8339) or email firstname.lastname@example.org. The call center is open Monday – Sunday, 8a.m. – 8p.m. ET.
Debt Relief for Existing and New SBA Borrowers
The stimulus includes $17 billion in funding for a provision to provide immediate relief to small businesses with standard SBA 7(a), 504, or microloans. Under this provision, SBA will cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out an SBA loan within six months after the President signs the bill. While SBA borrowers are receiving the six months debt relief, they may apply for a PPP loan that provides capital to keep their employees on the job. The six months of SBA payment relief may not be applied to payments on PPP loans.
Paid Leave for Government Contractors
The stimulus includes a provision that provides paid leave for employees working on small business contracts with the federal government. The measure allows agencies to modify the terms of a contract to reimburse small business contractors for the cost of providing paid leave, including sick leave, to employees or subcontractors who are unable to perform work on-site due to a facility closure and cannot telework.
Resources for Business Counseling Services
Many large companies are struggling to respond to the unprecedented economic disruption our nation is facing, so small businesses that have even fewer resources to dedicate to navigating the economic impacts of COVID-19 must have access to reliable counseling and mentorship services. The stimulus provides $250 million in grants to the nation’s network of Small Business Development Centers (SBDCs) and Women’s Business Centers (WBCs), as well as the Minority Business Development Agency’s Business Centers (MBDCs), to provide mentorship, guidance and expertise to small businesses.
Employee Retention Credit for Employers Subject to Closure or Experiencing Economic Hardship
This provision would provide a refundable payroll tax credit for 50 percent of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers who have experienced a greater than 50 percent reduction in quarterly receipts, measured on a year-over-year basis. The credit is not available to employers receiving assistance through the Paycheck Protection Program. The credit is provided through December 31, 2020.
Delay of Payment of Employer Payroll Taxes
This provision would allow taxpayers to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Payroll taxes that can be deferred include the employer portion of FICA taxes, the employer and employee representative portion of Railroad Retirement taxes (that are attributable to the employer FICA rate), and half of SECA tax liability. Deferral is not provided to employers receiving assistance through the Paycheck Protection Program.
For both our small businesses in South Dakota or our lending partners, please don’t hesitate to contact us if we can be of help.
As a reminder, here at FDDC we are concerned about the stress on our borrowers and the small business community. If you are experiencing a hardship and currently have a loan through the First District Development Company office (including revolving loan funds or SBA 504 financing), please contact our office so that we can discuss your needs promptly. If needed, we can defer your SBA or RLF loan payments for up to six months.
For all small businesses, we will be sending out periodic notices as we learn of resources that are available.
Here is list of current resources that are available:
SBA Disaster Assistance in Response to the Coronavirus
For the most current information from SBA on COVID-19, please visit www.sba.gov/coronavirus.
The Centers for Disease Control is working around the clock to combat this illness and you can visit www.cdc.gov/coronavirus/2019-ncov for the most up-to-date information and resources.
IRS Tax Relief information can be found at https://www.irs.gov/coronavirus
First District Development Company