COVID-19: SBA Loans and Employment Implications - Largest Fiscal Stimulus in U.S. History
In response to the COVID-19 pandemic, Congress enacted massive stimulus packages -The Families First Coronavirus Response Act and the CARES Act-- that provide significant relief to employers of all sizes. Andersen has summarized these provisions in the following charts. This chart summarizes key employer-relief provisions. The charts below provide detailed summaries of each relief provision. Contact us for assistance with assessing eligibility, calculating potential credits and/or deferred taxes, and specific guidance on how these provisions impact you.
SBA Loans and Loan Forgiveness
Provides lenders with the authority to grant Sec. 7(a) Small Business Administration (SBA) Loans under new criteria and new terms for companies with less than 500 employees “substantially affected by COVID-19”, including supply chain disruptions, staffing challenges, a decrease in sales or customers, or shuttered businesses. Borrowers are eligible for loan forgiveness of the amount spent on payroll, interest on mortgages, rent and utilities during the initial 8-week period after the loan origination date.
Employee Retention Credit
Qualified employers are eligible for a 50% employee retention payroll tax credit for wages paid to employees during the COVID-19 emergency.
Deferred Payment of Employer Payroll Taxes
Eligible employers, including self-employed individuals, may be eligible to delay payment of their applicable 2020 payroll and railroad retirement tax payments until 2021 and 2022 under Sec. 2302 of the CARES Act.
Loans from Qualified Retirement Plans
For loans to qualified individuals from March 27, 2020 to September 23, 2020, the maximum loan is increased to $100,000 from $50,000 and can be based on 100% of the individual’s vested accrued benefit rather than 50%.
Early Distributions from Qualified Retirement Plans and Individual Retirement Accounts
Distributions, not to exceed $100,000, made between January 1, 2020 and December 31, 2020 to an individual who (1) Is diagnosed with COVID-19 or has a spouse or a dependent diagnosed with COVID-19, and (2) experiences adverse financial consequences due to being quarantined, furloughed, laid off or reduced hours due to COVID-19.
Paid Leave Provisions
As part of the tax credits available to employers under Families First Coronavirus Response Act, employers with fewer than 500 employees should be aware of new payroll tax credits designed to reimburse them for the cost of providing leave to employees affected by COVID-19.