Good evening fam!
Wow, what a time to be alive! I hope everyone is doing as well as they can during a time like this and also trying to find the silver lining in things too. The last few days I've been doing tons of research about the different programs that are available to small businesses and received tons of questions about it so I decided to put all the information I've gathered below.
*Please note I am not a financial advisor in any way, shape or form.*
Like many small businesses, our business too has been affected by Covid-19 which is what started the search on what to do in our situation. The first area we turned to was to call the banks to put a deferment on our cars + student loan payments. What is typically a very stressful, credit breaking, heavy fee process actually turned out to be quite simple. Both of our banks had a process already in place for those that have been impacted by Covid-19 that waved fees, interest and didn't put a dent in our credit. This move allowed us to not have any car or student loan payment for 60-90 days.
The second place I called was our mortgage lender to see if the same process could happen, however theirs was filled with fine print that worked in their favor. The biggest fine print was that although you could defer your payments, all payments would be due at the end of three months. Granted, I have not called them yet which I intend to do this week because if you have a federally-backed mortgage and you’ve lost income due to the COVID-19 outbreak, you can get a 60-day forbearance on your mortgage payments, with the option to extend that for up to four additional 30-day periods. To do so, you must contact your lender and explain your situation; your lender can’t charge you penalties or fees during this time. The legislation also includes a 60-day moratorium against starting foreclosure proceedings against borrowers with federally backed mortgages.
Also, tenants living in buildings whose owners have federally-backed mortgages cannot be evicted for failing to pay rent for 120 days, and can’t be charged penalties or fees for nonpayment. If you are in the process of getting a new job, receiving unemployment, ect this might be a great option for you but for us we decided not to do that route.
Now for the juicy stuff! I'm going to be diving into the CARES Act a little deeper and share the information that has been passed to us through our different financial advisors.
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
This loan is unique in which it truly is for the payroll part of the business as the amount that you can request is your average payroll month for 2019 x 2.5. If you are your own business (self employed, independent contractor, ect) this would be your average NET income per month in 2019. For us, we decided not to go this route although we had initially filled out the paperwork because net income was extremely lower than our gross income and wouldn't be beneficial to apply. *So note: if you are self-employed do the math to see if the taxes would be worth it to apply for this for yourself.*
Another unique factor about this is that it is fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Aka - that's awesome!
To apply you have to be the owner of the business entity and fill out a simple two page document that can be found here. You simply take it to any qualified 7(a) bank and they should have no trouble processing it. However, no banks have received further information about processing so there is a current hold. I would call our bank to find our more information. *Note: this is a first come first serve basis on available funds so if this is something that you would like to do be sure to call your bank to be the first in line.*
This is the loan that we did apply for! This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19. The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.
To apply for a COVID-19 Economic Injury Disaster Loan and loan advance, click here.
These are two true loan type services. If you are needing this type of assistance I encourage you to look further into them.
Freelancers Union to provide $1,000 per household
Freelancers Relief Fund is operated by Working Today, a nonprofit subsidiary of Freelancers Union, and provides assistance of up to $1,000 per household to qualifying freelancers to cover lost income and essential expenses. Applicants will be asked to submit a detailed funding request outlining their needs. Funding amounts will be determined by magnitude of income loss as a result of COVID-19. Applicants should be as detailed as possible, and provide as much documentation as possible, to support their funding requests.
In order to qualify for grant assistance from the Freelancers Relief Fund, recipients must satisfy all of the following requirements:
Be a freelancer who primarily resides in the United States. To qualify, an eligible freelancer must have performed freelance work as their primary source of income for at least one year prior to their application. Eligible freelance businesses include sole proprietors, limited liability companies, or other entity provided there is no more than one employee.
Experience a sudden decrease of at least 50% of income as a direct result of the COVID-19 pandemic, including those experiencing contract cancelations or loss of work due to social distancing measures, experiencing COVID-19 illness or caring for immediate family members infected with COVID-19. Your application must include a narrative and provide tangible documentation of income loss.
Provide tangible documentation of freelance income and income loss by providing the following supporting documents:
2019 tax filings or annualized financial statements
Two consecutive months of 2020 financial statements
Canceled contracts or relevant client communications
Financial documents can include: tax returns (including schedule C statements if applicable), bank statements, or CPA-certified profit & loss statements.
Hello Alice is offering $10,000 Grants
Hello Alice is offering $10,000 grants being distributed immediately to small business owners impacted by coronavirus, as part of our broader mission to ensure Business for All. In addition to funding, grant recipients will receive ongoing support from the Hello Alice community.
The federal response to the coronavirus outbreak includes a number of changes in business tax regulations. These include:
Businesses are eligible for an employee retention tax credit if 1.) your business operations were fully or partially suspended due to a COVID-19 shut-down order; or 2.) gross receipts declined by more than 50% compared to the same quarter in the prior year. Eligible businesses can get a refundable 50% tax credit on wages up to $10,000 per employee. The credit can be obtained on wages paid or incurred from March 13, 2020, through December 31, 2020.
Businesses and self-employed individuals can delay their payroll tax payments. These payments, the employer share of Social Security tax owed for 2020, can instead be deferred and paid over the next two years. Fifty percent must be paid by the end of 2021 and 50% must be paid by the end of 2022. (Note: The ability to defer these taxes does not apply to a business that has a Paycheck Protection loan forgiven.)
Businesses that have net operating losses (NOLs) have some limitations relaxed. If your business had an NOL in a tax year beginning in 2018, 2019, or 2020, that NOL can be now be carried back five years instead. This may improve cash flow and liquidity for some businesses. Pass-through businesses and sole proprietors will also be able to take advantage of the relaxed NOL limitations.
Businesses that were due to receive corporate alternative minimum tax (AMT) credits at the end of 2021 can instead claim a refund now, in order to improve cash flow during the COVID-19 emergency.
Businesses will be able to increase their business interest expense deductions on their tax returns. For 2019 and 2020, the amount of interest expense businesses are allowed to deduct on their tax returns is increased to 50% from 30% of taxable income.
Businesses, especially those in the hospitality industry, will be able to immediately write off costs associated with improving facilities, increasing cash flow.
The government will make a temporary exception from the excise tax normally applied to alcohol, if that alcohol was used to produce hand sanitizer in 2020.
Grants and other assistance from companies and organizations
Amazon has created a Neighborhood Small Business Relief Fund for businesses affected by COVID-19 in the Seattle area. The company pledged $5 million for the fund.
Intuit QuickBooks is providing a long list of small businesses plans and resources to tap into during the crisis, including financial preparedness information, safe travel tips and workplace prevention tips.
Yelp is providing $25 million in funding relief to small businesses, particularly restaurants and nightlife businesses, affected by COVID-19. This includes free access to page upgrades. You can find more information about how to qualify for aid here.
The National Federation of Independent Businesses, a small business special interest group, is offering legal resources and webinars related to the virus.
If you run a restaurant or restaurant group, the Restaurant Worker’s Community Foundation has information related to grants, financial programs and other resources for restaurants affected by COVID-19. This includes immigrant-specific concerns, USBG relief grants and a COVID-19 relief fund sponsored by the organization.
USA Today has created a centralized location for small businesses to list their companies and encourage customers to purchase gift card for use later. You can visit the site here.
Receive a $1,200 Stimulus Check
The most talked-about part of the $2 trillion CARES Act is its provision to issue cash payments to millions of Americans. Taxpayers earning up to $75,000 a year will get $1,200 for each adult ($2,400 for married couples who file jointly and earn up to $150,000), plus $500 for each child under the age of 17. The payment amount has an income-based phase-out; if you earn $99,000 or more — or if a couple earns $198,000 or more — with no dependents, the payment drops to $0.
Most stimulus checks will be sent via direct deposit, and officials have said they will start being issued in late April. In order to get the stimulus check, you need to have filed tax returns for 2019 or 2018, or draw Social Security benefits.
File for Unemployment and Get an Extra $600 a Week
In addition to bumping up unemployment benefits by as much as $600 a week (depending on your state and how much you earn), the stimulus package includes unemployment insurance provisions for part-time and gig workers, as well as people who are self-employed. What’s more, those eligible can receive unemployment for up to an additional 13 weeks thanks to coronavirus relief measures. To file for unemployment, go directly to your state’s program and follow its guidelines or click here for Texas.
Make Penalty-Free 401(k) and IRA Withdrawals
The stimulus bill temporarily waives the age threshold of 59 ½ for making retirement account withdrawals without having to pay a 10% penalty. The stipulation is good for withdrawals up to $100,000 and covers IRAs, 401(k)s and 403(b)s. You also get three years to pay off the associated income tax on the distribution, or three years to pay yourself (that is, your account) back.
While it could be a lifeline if you’re strapped for cash — and you’re either ineligible for or have already tapped the other assistance options listed here — withdrawing money from your 401(k) shouldn’t be your first choice. Why? For one thing, withdrawing that money now (when the stocks are low and highly volatile) could make it hard to play catch-up later once the market recovers.
Take an Extra Tax Deduction for Charitable Donations
The new legislation lets you deduct an additional $300 to donations made to a qualified 501(c)3 nonprofit organization. This move to encourage people to give back is an above-the-line deduction, meaning that even people who don’t itemize and take the standard deduction when filing taxes will be able to take advantage of it.
I hope this helps you guys as it definitely helped us quite a bit! If there are additional programs out there, let me know below or by emailing me at firstname.lastname@example.org. We're going to get through this together!