Update: March 30th.
On Friday the 27th of March, President Trump signed the CARES Act. This will provide much-needed financial aid for all Americans including a $500 billion lending program for business and a $667 billion small-business fund.
According to one report, as many as 75% of U.S. businesses are experiencing supply chain disruptions due to the global COVID-19 (Coronavirus) pandemic. In order to curb the spread of the virus, the CDC has also advised businesses to encourage employees to take time off for self-quarantine and work from home if possible.
This has meant that many businesses are struggling to stay afloat during this difficult time. In response, the U.S. Goverment has proposed radical meansures aimed at providing finanical relief for affected businesses:
- Coronavirus scams to watch out for.
Government Response to the COVID-19 (Coronavirus) Pandemic:
On the 13th of March 2020, President Trump declared a National State of Emergency freeing up $50 billion in federal resources to directly combat the Coronavirus. As the pandemic continues to negatively affect the U.S economy, the government has provided the following financial relief programs for struggling businesses.
Are your employees considered "essential?"
Some jobs/employees are considered essential by governments and are expected to continue working, even during times of crisis. You can learn more in our essential employees guide.
Federal Income Tax Deferment:
On the 17th of March 2020, Treasury Secretary Steven Mnuchin announced that individuals and many small businesses will get a 90-day reprieve on paying their income taxes. The deferment extends the original April 15th deadline for corporations, single-member LLCs, and sole proprietors for 90-days without penalties.
This will allow businesses the opportunity to use their tax liability to cover urgent expenses. Visit the IRS website for more information.
Tax Deferral Quick Facts:
- Applies to individuals, corporations, sole proprietors, and single-member LLCs.
- Payments may be deferred for 90-days without interest or penalties.
- Includes up to $1 million in taxes owed for small businesses and up to $10 million for c-corporations.
- The tax filing deadline has been extended to July 15th, 2020.
Employer Tax Credits:
On March 18, 2020, the Families First Coronavirus Response Act passed in the Senate and was signed into law. With the mandated relief package, employers are required to provide eligible and impacted employees with up to 80 hours of paid medical and family leave at their regular rate of pay.
This is in addition to any paid sick leave that employees may be eligible for. The provisions of the FFCRA apply to certain public and private employers with fewer than 500 employees. Businesses with fewer than 50 employees may be exempt from the requirements for childcare and school closings if the leave jeopardizes the vitality of the business.
To offset the costs of paid time off, the new legislation provides businesses with a tax credit equal to 100% of the employee benefits given out during this time. These business tax credits translate dollar-for-dollar to lower business tax liabilities.
Employer Tax Credits Quick Facts:
- A small business employer may collect a tax credit equal to 100% of the qualified sick and family leave payments made pursuant to the FFCRA.
- The credit only covers leave payments made during the period specified by the Secretary of the Treasury and will end on December 31st.
- The tax credit is increased to cover the portion of the employer's health plan expenses allocated to sick and family leave.
- The tax credit is not available to employers who are already receiving existing credit for paid family or medical leave.
Low-Interest Federal Disaster Loans:
If you are seeing a significant drop in sales, you may not have the funds to cover important expenses such as rent, wages, or utilities. The U.S. Small Business Administration is offering low-interest federal disaster loans to small businesses suffering economic injury as a result of the Coronavirus outbreak, including expanded SBA Express Bridge Loans.
According to the SBA, low-interest loans have been made available to small businesses and private, non-profit organizations in designated areas of a state or territory. You can check the updated disaster declared areas here.
Businesses are only eligible if they do not have existing credit elsewhere. Loans may be paid back at an interest rate of 3.75% for small businesses and 2.75% for non-profit organizations.
In order to keep payments affordable, long-term repayment options are available up to a period of 30-years. These funds may be used to pay fixed debts, accounts payable, payroll and other bills that cannot be paid due to the impact of the Coronavirus. If your business would benefit from a low-interest federal disaster loan, you can apply online using SBA online application portal.
Low-Interest Federal Disaster Loans Quick Facts:
- Applies to small businesses and non-profit organizations.
- Loans have been made available in designated states and territories.
- Loans are not available to businesses that have existing loan credit elsewhere.
- Loans may be used for payment of fixed debts, accounts, payroll, and other bills.
- Interest rates for small businesses are 3.75% and 2.75% for private, non-profit organizations.
- Long-term repayment plans are available up to 30-years.
$350 Billion Small Business Loan Program:
On the 27th of March, 2020, President Trump signed a $2 trillion Coronavirus stimulus package which will provide financial assistance to American workers and business owners. For small-businesses, assistance will come in the form of the Paycheck Protection Program.
The Paycheck Protection Program is designed to provide small businesses with 8 weeks of cash-flow assistance to offset the effects of the Coronavirus Pandemic. This will be provided through 100% federally guaranteed loans. Businesses with fewer than 500 employees can apply for loans to cover operating expenses from the 15th of February through to the 30th of June 2020. This includes sole proprietorships, independent contractors, and self-employed individuals.
Paycheck Protection Program Quick Facts:
- Designed to provide small businesses with cashflow for payroll, utilities, insurance, benefits, and mortgage payments.
- Available for businesses with fewer than 500 employees, sole proprietorships, independent contractors and self-employed individuals.
- Covers expenses from the 15th of February to the 30th of June 2020.
- Loan amount capped at 2.5 times your monthly expenses or $10 million.
- Certain loan expenses can be forgiven including salaries, rent, mortgage, and utilities.
Resources for Business Owners:
- Centers for Disease Control and Prevention.
- OHSH guidance on preparing workplaces for COVID-19.
- U.S. Department of Labour Coronavirus resources.
- Coronavirus small business guide.
- Treasury and IRS guidance on deferring tax payments.
- Familes First Coronavirus Response Act information.
- SBA Small Business guidance & loan resources.
- State, local, and corporate relief programs.
How to Protect Your Business, a Step-By-Step Guide:
1. Start with financial triage.
The initial concern for most business owners affected by the Coronavirus is how to keep the bills paid for the next few months and how to retain staff? The first step in protecting your business from going under is to conduct financial triage.
Start by creating a detailed cash-flow budget with a list of all your fixed costs versus your variable costs. Fixed costs are those that are essential for the running of your business and must be paid whereas variable costs are expenses that change in proportion to your production output.
With fixed costs such as salaries, rent, utilities, and insurance, create a list of the most important ones and set aside funds based on when the amounts are due. With variable costs, cut those that are not directly involved in producing revenue and securing new business.
2. Create an emergency plan.
If you haven't done so already, it is time to create or update your emergency preparedness plan. An emergency plan should outline the steps you should take if an outbreak or natural disaster impacts your business. Moreover, the plan should define the steps taken to protect your employees and your business before disaster strikes.
3. Layoffs, furloughs, and terminations.
For many business owners, the most efficient and immediate way to cut costs is to reduce workforce numbers through furloughs, layoffs, and terminations. If you have employees, it is important to protect your talent when considering permanent layoffs or terminations. If you terminate an employee, you are responsible for paying out any benefits and will most likely not be able to hire that person again.
Instituting temporary layoffs is a sound alternative as your employees are entitled to unemployment benefits and you receive immediate financial relief from not paying salaries. You also have the option of extending your layoff period or recalling your employees when the business is financially stable.
Instituting furloughs is another option for business owners where employees are put on temporary leave without pay, but retain certain benefits such as health and life insurance. Furloughing employees gives you the freedom to immediately reduce your costs and recall your employees at any time.
4. Educate your employees.
As a business owner, it is your responsibility to educate your employees on the resources available in dealing with the effects of the Coronavirus in the workplace. The government has provided financial aid to assist employees who are affected by layoffs and reduced working hours.
Paid sick leave is mandatory in 12 states. If your business has a mandatory paid leave policy or an existing leave policy, employees may be eligible for paid time off.
The Families First Coronavirus Response Act provisions up to 80 hours of paid sick or family leave for reasons relating to the Coronavirus.
Employees with student loans can benefit from a 60-day suspension of interest on all federally-funded student loans.
The U.S. Treasury Department is working to allow individuals negatively affected by the Coronavirus to defer their taxes from the original April 15th deadline to July 15th.
The U.S. Department of Labour gave states the flexibility to amend their unemployment benefits laws to minimize the effects of the Coronavirus on the economy. In some cases, employees may be eligible for increased benefits in cases of temporary unemployment.
The Coronavirus stimulus bill provides laid off workers with additional unemployment benefits as well as a cash payment for indivdiuals of up to $1200.
5. Communicate with your staff.
If you are implementing changes to your business, it is essential to communicate updates to your staff as soon as possible. No one likes being left out of the loop, especially when it relates to cost-cutting. Distribute regular mails on Coronavirus updates as well as steps are taken to ensure the continued functioning of the business and the safety of employees at work.
6. Reassess your cleaning policies.
In the wake of the Coronavirus outbreak, many businesses are updating their cleaning policies. This is the time to implement or update your cleaning policy to protect your employees and your business.
- Increase the frequency of your cleaning procedures.
- Increase ventilation rates.
- Encourage employees to sanitize their work stations and wash their hands.
- Ensure sick employees do not come to work.
- Stock up on approved Coronavirus disinfectants.
7. Establish a Work from Home Policy.
If it is possible and financially sound, consider establishing a work from home policy. This will allow you to keep your staff on active work duty while in self-quarantine. Your policy should include guidelines for temporary remote work, employee eligibility, and procedures/guidelines.
8. Take Advantage of Federal Relief.
The Coronavirus has already made a huge impact on the U.S. economy and lawmakers are scrambling to pass legislation to help small businesses weather the storm.
If your business is struggling to make ends meet due to the outbreak of the Coronavirus, you may benefit from the following federal relief programs.
- Low-interest federal disaster loans.
- Federal income tax deferment.
- Employer tax credits.
9. Update your Marketing and Sales procedures.
If you are still open for business, make sure your customers are aware and update them on any changes to your sales procedures. When business is slow, it is essential that you make it easy for your customers to purchase your goods or services. Updating your marketing strategy is the key to finding new business and retaining lucrative contracts.
- Implement a weekly newsletter to communicate with your customers.
- Focus on providing excellent service to your existing customers.
- Use social media to increase your virtual presence in the industry.
- Use this opportunity to explore new sales trends.
- Consider new ways to deliver your product or service.
What is the government doing to assist businesses affected by the Coronavirus?
- A national state of emergency has been declared freeing up $50 million in federal funds to combat the Coronavirus.
- The government is providing low-interest small business loans backed by the SBA
- The government is offsetting mandatory paid sick leave costs with an employer tax credit equal to 100 percent of the benefits dolled out.
- The IRS has announced an income tax deferment for businesses negatively affected by the pandemic. This extends the April 15th deadline for 90-days without penalties.
What is the Families First Coronavirus Response Act?
The Families First Coronavirus Response Act is a federal law requiring certain employers to provide employees with up to 80 hours of paid sick or family leave for reasons relating to the Coronavirus.
Do I still have to file a business tax return on April the 15th?
No, the IRS has extended the tax filing deadline until the 15th of July.
Where can I apply for a federal disaster low-interest business loan?
You can apply for disaster loan assistance online through the U.S. Small Business Administration website.
How do I protect my business against financial ruin due to the Coronavirus?
- Start with financial triage.
- Create an emergency plan.
- Consider layoffs, furloughs, and terminations.
- Educate your employees on government benefits.
- Communicate with your staff about changes to your business.
- Reassess your cleaning policies.
- Establish a work from home policy.
- Take advantage of federal relief.
- Update your marketing and sales procedures.