Summary Of SBA Loans And Tax Benefits
ARTICLE BY: Michael E. Greenburg, CPA
In this rapidly changing environment, it is important that you make the right moves for your business and you personally. We need to move fast BUT smart. Since the economic meltdown the FED and STATE have made significant changes that have been enacted to attempt to save jobs and businesses. Depending on your specific situation and the current state of your business there are different options you need to consider before making decisions. This is a time to look out both to the coming weeks, a month or two out, and the quarter as well as the next 6 months to a year. It is crucial to think through your plans to including the possibility of business not normal through summer and into the fall.
Now that the Federal Laws are in place things are a lot clearer. I have prepared the attached Summary to Highlight what seem to be the More relevant developments affecting Small Business like me and you.
New laws and developments summarized in the included PDF include:
SBA LOANS - Paycheck Protection Loan
EMPLOYEE RETENTION PAYROLL TAX CREDIT - If you aren't getting a Paycheck Protection Loan
DELAYED PAYMENT OF EMPLOYER PORTION OF SOCIAL SECURITY TAX
DELAYED PAYMENT OF SELF EMPLOYED - SCHED C PORTION OF SOCIAL SECURITY TAX
NET OPERATING LOSS CARRYBACKS NOW ALLOWED
SBA LOANS - Economic Injury Disaster Loan (EIDL)
SBA LOAN - EIDL LOAN 10K ADVANCE
FEDERAL PAID SICK LEAVE REQUIREMENTS
FEDERAL PAID SICK LEAVE TAX CREDITS
FEDERAL UNEMPLOYMENT BENEFITS ENHANCEMENTS
CA UNEMPLOYMENT AND PAID LEAVE
Some of these will be extremely helpful. Some won't be helpful. Some won't apply. In some cases, there is cross-over and you need to select the best course of action based on your particular situation. After you digest please reach out if we need to go over your plan. We are all in this together. Texting is the best way to get my attention at the moment and I have been trying to use that to expedite connecting these days.
I have spent many hours over the past few days trying to read and comprehend as fast as possible so I could get this together and be as helpful as possible, and accurate. I used many resources including the full text version of the CARES Act. It should be on-point, apologies if it isn't perfect.
I do still have some unanswered questions.
I want to clarify if Employers can use Employee Retention Credits and still be eligible for EIDL loans, I am thinking the answer is probably yes. I am not sure if the Employee Retention Credits are automatic or if you need to apply for them.
I also want to see if the Paycheck Protection loan can be used by Self-Employed individuals - I am thinking no but I want to confirm.
I spoke to a contact I have that works at one of the Larger Banks and he said application for these types of SBA loans would be done directly by the business owners.
I have an expectation that with the EIDL loans current Financials statements will be required at some point during the process - so we will be working tirelessly over the next 2 weeks to get Q1 numbers together ASAP if those are needed for underwriting. I was told that you can apply for and get BOTH the paycheck protection loan AND the EIDL loan. If applying for both you need to fill-out the applications correctly though or you can lose the Forgiveness provisions on the paycheck protection loan. If you are certain you will be paying your employees for the next 4 months or indefinitely the paycheck protection loan is a no brainer IF it will yield more benefit than taking the Employee Retention Payroll credits - you have to do the math both ways to see what’s best. The option to Defer Payroll taxes - I would avoid this option unless you are ONLY having a short-term cash crunch. To not pay now and be on the hook for greater amounts in the future doesn't make any sense to me especially when we have to take every day as it comes.
Home Loan and other Forbearance and Deferments - Be very wary of these types of programs. They all differ but what I have been hearing and reading is that on at least some of the home loan forbearance plans the balance deferred must be paid in full by the end of the forbearance period - if not your credit gets hit with mortgage late fees. These are suitable options under dire circumstances to slow the bleeding but should not be used unless you truly don't have the money.
All of these new provisions and plans seem to assume we will get back to work in the next couple months. Your plans need to also include a Plan C in case that doesn't happen.