COVID-19 Small Business Response Steps
- Post FFCRA (Families First Coronavirus Response Act) poster no later than 4/1/2020 (or as soon as you can).
- Assemble tax documents, income records, lost income records (canceled appointments, projections for seasonal businesses, etc.). Also include big fixed costs and accounts receivable that will go unpaid and the list of items relevant to steps 3 and 5 below.
- Apply for a $10,000 EIDL (Economic Injury Disaster Loan) grant right away! The online application takes 15 minutes max. In the application, check the box for the $10,000 advance grant, confirm that the grant will be used to cover associated costs like payroll, lease/mortgage, etc., and your application will be submitted. Keep in mind, there is a limit to how much they are paying out and that, since announced, there are a lot of organizations that qualify who have since applied. See more details about the grant on page 7 of this document.
- Apply for and recommend that employees who have reduced hours or have been laid off file for unemployment. Here are the links for Washington and Oregon. Most of the rules for unemployment have changed, so don’t assume you don’t qualify. For example, sole proprietors, gig workers, and independent contractors can also apply for unemployment. Seek information on the SharedWork program, which pays unemployment if hours were reduced, and the Standby program, which allows employees to collect unemployment without searching for a new job. Keep filing weekly regardless of whether they are “still thinking about it” or “still processing” your claim.
- Seek SBA loan assistance. The following are just a few of the emergency programs that are available. You can also ask to be assigned a mentor (see page 9 of this SBA Guide).
- The new Paycheck Protection Program (PPP on page 2) loans address business interruption caused by COVID-19 allowing small businesses to retain employees. Most significantly, loan amounts paid toward payroll and other overhead are eligible for forgiveness and exclusion from gross income for tax purposes. See this Guide for more details.
- Under the Small Business Debt Relief Program (page 6), the SBA will cover all loan payments on certain SBA loans, including principal, interest, and fees, for six months.
- Businesses with immediate financing needs may consider first applying for an Economic Injury Disaster (EIDL on page 7) loan directly with the SBA via the online portal here and then seek to refinance with a PPP loan. The eligibility requirements for these loans have been loosened substantially. The EIDL loans do not have forgiveness provisions, but they are low interest and long term (3.75%, up to 30 years). aThe EIDL could be used as a bridge loan to catch up on mortgage or lease payments at the end of any forbearance period your landlord or mortgage company grants (step 5), with interest forgivable and principal refinanced.
- If you buy insurance on the health insurance exchange, update your application with the new, “I have no money because the government closed me” information to seek a premium tax credit (this might potentially send some people to OHP/free health care).
- Ask for a forbearance from commercial lessor, lender or mortgage holder.
- Check your business insurance policy for coverage for lost profits resulting from closures due to government orders.
- Talk with your CPA and/or tax advisor about payroll tax deferrals and employee retention credits (see page 11 of this guide), delayed tax filing dates, and other emergency tax options.
- Consider loans and/or hardship distributions from your retirement plan, suspending contributions, or even terminating the plan after consulting with your financial advisor. Withdrawals up to $100,000 are now allowed without penalty to a participant if he, his spouse or dependent has been diagnosed with the virus or the participant has suffered financially from COVID-19 due to:
- being laid off, furloughed, quarantined, having had hours reduced, or cannot work due to the unavailability of childcare or;
- the participant’s business has closed or reduced its hours.
Repayment of the distribution over the next three tax years will be considered a tax-free rollover of the distribution. Contact Horenstein Law Group PLLC today for all of your business transactions, planning, and finance questions.