During this challenging time, many of our customers are dealing with additional stresses, from slight business disruptions to complete pauses. To help ease this uncertainty, we’re sharing some opportunities for relief for our small and medium business (SMB) clients.
The Families First Coronavirus Response Act (FFCRA) & Tax Relief
You may have heard that HR 6201 (“The Families First Coronavirus Response Act,” or FFCRA) goes into effect on April 2, 2020, and will last until December 31, 2020.
This law directly affects SMBs that employ 500 or fewer people (which happen to be the majority of our business banking customers and almost half of all businesses, nationwide). SMBs are now required to provide expanded paid family and medical leave to full-time and part-time employees who have been employed for at least 30 days and are being impacted by COVID-19.
To familiarize yourself with these new requirements, including whom they apply to, what kinds of payouts are required, and more, we recommend this simple guide from the Department of Labor (DOL).
While the costs of this leave may feel like a burden to companies that are already struggling with cash flow there is a silver lining. According to the DOL: “Covered employers qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA […] Applicable tax credits also extend to amounts paid or incurred to maintain health insurance coverage.” In fact, these tax credits even apply to self-employed individuals.
Put another way:
Every dollar employers pay out for expanded family and medical leave due to the coronavirus, and the cost of health insurance premiums during this leave, will be covered by a dollar-for-dollar refundable tax credit. This tax credit will be immediately offset against payroll taxes, and where refunds are due, the IRS will work to provide them as promptly as possible.
This means that employers will face “no payroll tax liability,” according to the IRS. We recommend you read this advisory from the IRS and keep current via IRS’ Coronavirus Tax Relief information hub.
One last important note for our small business clients: Part of FFCRA expands benefits to employees who need to care for a child (under 18 years of age) whose school or daycare is closed or unavailable because of COVID-19. Some businesses with fewer than 50 employees may qualify for an exemption on this front, “if the leave requirements would jeopardize the viability of the business as a going concern.” DOL has not yet issued guidance on how to apply for and receive these exemptions, so keep an eye out.
Small Business Administration Loan Updates
The Small Business Administration (SBA) has also made important updates to its loan programs.
First, everyone with an SBA Disaster Loan qualifies for automatic payment deferral through December 31, 2020. By making this change, borrowers of home and business disaster loans from previous disasters do not have to contact SBA to request deferment, easing an additional burden.
Second, the SBA has expanded its Economic Injury Disaster Relief Program. Currently, all small businesses (and private non-profits) in all 50 states can apply for low-interest loans through this program. Working capital loans of up to $2 million over 30 years are available. According to SBA, “These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.” You can apply for one of these loans here.
SBA has created a new information hub with guidance for small businesses affected by coronavirus. We’ll share updates with you as we receive them, and you may want to bookmark this link for your own reference too.
Gateway Bank is here for you — and with you
While these uncertain economic times are a source of anxiety for everyone, Gateway Bank is here to weather the storm with you. As always, you are our #1 priority.
See our COVID-19 updates for the latest changes and additional steps we’re taking to protect our customers and team during the coronavirus pandemic. And as always, you’re welcome to contact us at any time. We’re here for you, now and in the future.