During these uncertain economic times, we understand there are a lot of questions concerning small business aid & funding.

To ensure we are connecting our local businesses with accurate & timely answers, we coordinated a conference call with Glenn Spencer, Senior Vice President, Employee Policy Division at the U.S. Chamber of Commerce. 

During the call, Mr. Spencer outlined all current benefits that are being provided to business & industry under the Cares Act, pointed us in the direction of vital resources and answered pressing questions to problems most businesses are facing.

The following is also covered in the slides below, but the following provides a breakdown of the 2 Trillion in Federal Funding allocated to the Cares Act Bill and how it applies to businesses with under 500 employees.

Employer Tax Change

An Employee Retention Tax Credit has been enacted, which essentially delays settling with the treasury, to each quarter. Now, the guidance is to “settle up” at the end of the quarter to allow businesses the chance to hold on to their current cash flow.

First, all employers can delay payment of payroll taxes between now and January 1, 2021.  Half of this deferment must be made up by December 2021 and the other half by December 2022.

Second, an Employee Retention Tax Credit has been enacted, which essentially allows a refundable tax credit for 50% of the wages paid to an employee up to $10,000.  This applies to employers that have seen a 50% or more drop in revenue (until such time as your revenue returns to 80% of its pre-virus level).

Payroll Protection Program

This applies to to a company with less than 500 employees, 501(c)3, independent contractors, the self-employed &  sole proprietors. The funding under this program will be initiated as an SBA Loan through your local qualified SBA lender, and can then qualify for loan forgiveness after 8 weeks of the loan origination date, if the loan was used to pay for payroll, rent, mortgage interest or utilities.. If you have already laid off employees you can qualify for loan forgiveness if you bring them back on payroll within 30 days and maintain them through June 30, 2020.

Loan Forgiveness Eligibility 

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:

  • Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
  • Interest on the mortgage obligation incurred in the ordinary
    course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation,
    telephone, or internet)
  • For borrowers with tipped employees, additional wages
    paid to those employees
  • The loan forgiveness cannot exceed the principal.

If you lay off workers or reduce wages paid by more than 25% the amount of loan forgiveness will be reduced proportionally.

The goal of these provisions is to encourage businesses to keep workers on payroll even if those employees are not doing any actual work.  This is to preserve their connection to the workplace so that when things turn around you can get your business back up and running without the need to hire and train an entire new workforce.


Questions from Local Business Owners

Q1. Are all funding options mutually exclusive? Or can we only choose to use one?

ANSWER: A few are able to overlap, but not all. For example, if you take the paycheck protection program loan, you won’t apply for tax credit. But can still apply for the SBA disaster relief loan.

Q2. Is Insurance covered under the Payment Protection Program?

ANSWER:  Only insurance paid out to employees through their paycheck.

Q3. Does the SBA Emergency Disaster Relief Loan require collateral?

ANSWER: $10K in emergency grand funding is available within 3 days, and does not have to e repaid. But you must meet the SBA’s definition of a small business.

Q4. Are businesses mandated to pay employees if they decide not to come to work, out of fear?

ANSWER: Paid sick leave only applies to individuals who have received an isolation order from a certified health authority or if schools have closed causing an individual to have to care for their children. Must have documented medical orders.

Q5. Do local government entities qualify for the Payment Protection Program?

ANSWER: We don’t believe so, but are awaiting guidance.

Q6. What funding is available for self employed sole proprietors?

ANSWER: Eligible for the Emergency Disaster Loan which upon completion of the application, could have funds made available within three days. Loan terms are 3.75%, 30 years fixed and may qualify for a $10K emergency grant. Check with your local lender, qualified to process SBA loans.

Additionally self employed sole proprietors now qualify for the pandemic unemployment program through the Alabama Department of Labor. 

Q7. Could new businesses use to refinance loans & decrease interest rates?

ANSWER: Yes. Check with your local lender for details.

Q8. Do I have to keep my business opened to qualify for the Payment Protection Program?

ANSWER: The Cares Act Bill does not specify that your business must be open or closed. Just that funds must be spent on keeping your business foundations “accessible” to maximize start up, once the distancing order is lifted.

Q9. What do my employees qualify for?

ANSWER: Other than regular salary requirements, made accessible through the SBA disaster relief funds, employees may qualify for paid sick leave with certified medical orders. Paid sick leave is to be worked out with the treasury at the end of the quarter.

Q10. Are there spending restrictions on the SBA disaster loan?

ANSWER: No restrictions on use. However, to qualify for loan forgiveness, there are certain things you must spend it on.

Q11. My business is currently healthy. Should I prepare for what’s to come if earnings drop below 50% of my historical earnings?

ANSWER: Visit your local banker for further guidance as Governor Kay Ivey recently urged businesses to go through the process in preparation for what the future could hold.

Governor Ivey Recommends

On Wednesday, April 1st, Governor Kay Ivey urged Alabama Small Business Owners to respond to the COVID-19 (Coronavirus) pandemic by taking steps to ensure their business will withstand the troubling economy.

Emergency Loan Checklist

This small buisness loan document answers questions about interaction with the tax credit for paid sick or paid family leave, the paycheck protection program, and loan forgivness guidelines.

Cares Act Presentation

The U.S. Chamber has hosted conference calls with Chamber’s and their members, across the country. This presentation sums up how small businesses can quickly access disaster relief funds.