The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the historic $2-trillion rescue package signed into law in late March, includes federal assistance for all segments of American society, including your practice and its employees.
But how to determine which programs are the best fit for your practice amid wading through the varying application requirements and financial repercussions? Another complication is that time is of the essence. So far, two of the vastly popular programs have run dry and are awaiting additional infusions of funding. To break it down, the CARES Act's major provisions include:
- Economic Injury Disaster Loans: Advances of up to $10,000 for businesses that have suffered severe revenue losses due to the COVID-19 pandemic (awaiting additional funding);
- Emergency Debt Relief: A six-month reprieve on small-business loan payments, interest, and fees;
- Express Bridge Loans: Up to $25,000 in quick loans for those with existing lending relationships;
- Paycheck Protection Program: Funds to pay up to eight weeks of payroll, as well as mortgage interest, rent, and utilities (awaiting additional funding);
- Extended Unemployment Benefits: Additional $600 per week and 13-week extension for filers, with eligibility extended to the self-employed, independent contractors, and others;
- Individual Payments: Direct payments of about $1,200 for individuals earning less than $75,000, and $500 for each child; and
- Tax Relief: Deadlines extended to file tax returns and pay estimated taxes.
The Economic Injury Disaster Loans program includes an advance of up to $10,000 for businesses that have suffered severe revenue loss as a result of the COVID-19 pandemic. The program is open to businesses with fewer than 500 employees, with the advance paid within a day of a successful application. The advance does not have to be repaid.
However, as of April 15, the Small Business Administration announced that it was no longer accepting applications. The agency will continue to process applications already submitted on a first-come, first-serve basis.
The Emergency Debt Relief program provides a six-month reprieve for practices and other businesses for non-disaster Small Business Administration loans such as 7(a), 504, and microloans. Under it, the SBA will cover all loan payments, including principal, interest, and fees. The program doesn't apply to SBA disaster loans or Paycheck Protection Plan loans. However, this program is available to new borrowers who take out loans within six months of the bill becoming law.
Express Bridge Loans of up to $25,000 are available for those who have an urgent need for funding and an existing relationship with an SBA Express Lender. This type of loan may be useful to tide your practice over while waiting for your Economic Injury Disaster Loan to be processed and funded.
Accounting for $350 billion of the CARES Act, the Paycheck Protection Program (PPP) is the largest of the COVID-19 relief programs. However, less than two weeks after beginning to accept applications, the program was already out of money. Congress is currently debating an additional $250 billion to support the program.
Available through most SBA lenders, PPP loans can cover up to two months of average monthly payroll costs from the last year, including benefits, plus an additional 25 percent of that amount for mortgage interest, rents, and utilities, with a cap of $10 million.
The loans will be forgiven, providing that the funds are used to cover payroll, and most mortgage interest, rent, and utility costs, incurred over the eight-week period after practices and clinics receive the loan proceeds.
Although some lenders were not entirely set up to take loan applications when the Paycheck Protection Program kicked off April 3, they were quickly flooded with applications. By April 15, when the SBA reported that funds were exhausted, more than 1.6 million applications had been approved for $339 billion in funding. The SBA said it will not be maintaining an application queue until more program funding is approved.
If you're not planning to apply for Paycheck Protection Program funding to pay employees, those who work for you can file for expanded unemployment benefits. An average of $600 per week from the federal government will be added to state-paid benefits and benefits will be extended for 13 weeks beyond the 26 weeks most states allow.
Currently, only full-time employees are eligible to file for unemployment benefits. However, the CARE Act extends benefits to the self-employed, independent contractors, employees about to start a job, and those unable to work because they are looking after a dependent.
The CARES Act also contains some tax relief for businesses. The tax filing deadline has been extended from April 15 to July 1 and payment of estimated taxes postponed until Oct. 15. In addition, some portion of employer contributions to student loan payments may be forgiven, higher charitable donations may be deducted, and the employer's payment of employee Social Security taxes delayed. For details on how these may apply to your practice, it's best to consult with your tax professional.
If you are having trouble deciding which relief options are the best for your practice and current situation, the SBA is also currently providing counseling through its network of Small Business Development Centers. In addition, the SBA has also produced a comprehensive guide on making the CARES Act work for you.
Due to the rapidly changing guidelines around the available relief programs for small business owners, we recommend you consult your CPA for further guidance.
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