As the coronavirus pandemic continues, the need to help small businesses in Tennessee and throughout the United States to survive this crisis is critical. First came the Families First Coronavirus Response Act, which we wrote about at the end of March, and now comes the Coronavirus Aid, Relief, and Economic Security Act – also known as the CARES Act.
The CARES Act aims – in part – to help small businesses stay afloat during these hard economic times. This pandemic won't last forever, but collateral economic damage flowing from the pandemic could force small businesses to shutter permanently. With the CARES Act, small businesses stand a chance. Here's what you need to know.
What Financial Help does the CARES Act offer to Small Businesses in Clarksville TN?
The CARES Act offers loans, debt relief, and grants, among other benefits to qualifying Clarksville businesses. These loans are administered through the Small Business Administration (SBA) and are provided through Treasury-approved banks and credit unions. There are three specific programs under the CARES Act that can make a difference in whether a small business survives or not, and below is a brief description of each.
Paycheck Protection Program (PPP) Loans
Valued at $349 billion, the Paycheck Protection Program is a loan program aimed to help eligible companies maintain payroll through June 2020. A qualifying business can borrow up to 2.5 times its average monthly payroll costs up to $10 million, and the interest on the loan will not exceed 4 percent.
But the PPP Loan program doesn't end at providing loans; it is complemented by a loan forgiveness program. A PPP loan can be wholly or partially forgiven if you followed the rules of the program. You must apply for forgiveness through your lender and provide proof of:
- the number of employees on your payroll
- employee pay rates;
- payments of rent;
- payments of utilities; and
- payments of interest of mortgage obligations.
The forgiveness amount, however, is reduced in proportion to how many employees are retained or terminated as compared to the previous year. The forgiveness program further incentivizes employers to rehire employees already laid off due to the COVID-19 crisis.
Your small business may qualify for a PPP loan if you were in operation on February 15, 2020, and are:
- a 501(c)(3) nonprofit;
- a small business with fewer than 500 employees;
- a business meeting the applicable SBA size standard for your industry;
- a sole proprietorship;
- an independent contractor;
- companies in the Accommodation and Food Services Industry (NAICS code beginning with 72) with fewer than 500 employees at each physical business location; or
- a franchise receiving funding through the Small Business Investment Company.
Eligible Payroll Costs
You can only use the funds from a PPP loan for certain payroll costs, including:
- compensation (e.g., salary, wages, commission, tips, etc.)
- paid time off for vacation or leave for family or medical purposes
- continuation of health care benefits
- retirement benefits
- dismissal or separation costs
- state and local taxes assessed on employee compensation.
Ineligible Payroll Costs
Some payroll costs cannot be funded via a PPP loan, including:
- compensation for salaries $100,000 or over
- compensation for employees with a residence outside the United States
- taxes under chapters 21, 22, and 24 of the IRS Code (imposed or withheld)
- sick and family leave qualifying for a credit under the Families First Coronavirus Response Act, sections 7001 and 7003.
Other Eligible Uses
Other uses of the funds from a PPP loan are also allowed, including payments on:
- utility bills
- interest on mortgage obligations (but not the mortgage itself)
- interest on debt incurred before the covered period.
Small Business Debt Relief Program
If you have taken out one of the following loans before or up to six months after the date of the CARES Act becoming law, you may be eligible for immediate debt relief:
Loans that do not qualify are PPP loans and disaster loans. Debt relief is available through the SBA.
Under this program, the SBA will cover loan payments for six months, including:
- interest; and
If you are a small business in Clarksville, one of these loans – if you haven't already taken one out – may help your business survive the current economic whirlwind.
Economic Injury Disaster Loans & Emergency Economic Injury Grants
The Economic Injury Disaster Loans (EIDL) and Emergency Injury Grants program is another significant program where a qualifying small business takes out a loan, and upon approval, is provided $10,000 immediately as an emergency grant. This $10,000 does not need to be paid back regardless of how it was applied. Approval depends on eligible businesses and intended uses of the funds.
Qualifying Small Businesses
Small businesses in Clarksville that may qualify are those businesses employing fewer than 500 employees, including:
- small businesses (e.g., limited liability companies, corporations);
- sole proprietorships;
- independent contractors;
- employee-owned businesses;
- cooperatives; and
- tribal small businesses.
Eligible Uses of EIDL Funds
EIDL funds can be used for many purposes, including:
- keeping employees on payroll;
- paying sick, family, or medical leave;
- paying business debts, rent, mortgage; and
- meeting product costs that have increased due to coronavirus-related supply chain disruptions.
Where Do I Go in Clarksville TN to Learn More about the CARES Act?
The CARES Act is meant to help small businesses survive the coronavirus crisis and rebound quickly after the economy opens for something akin to normal. You can go to the Small Business Administration's website to learn more and/or apply for an applicable loan.
You can also reach out to a small business attorney to guide you through the process. Making sure you apply for the right loan is important to the survival of your business. Plus, new relief may be imminent. So, a small business attorney in Clarksville keeping up with the latest news in small business efforts during the COVID-19 emergency crisis may be your best bet to maximizing the relief available to you.