Bay Area Small Businesses Have A Variety Of Options For Financial Assistance To Weather The COVID-19 Crisis

May 11, 2020 Published by

With much of the media coverage focusing on the funding shortfalls faced by the federal Paycheck Protection Program (PPP), it is understandable how Bay Area small business owners could believe that program is the only available option to help them stay solvent during the COVID-19 pandemic. In fact, there are a number of other federal, state, and local programs available to assist small businesses in distress.

In addition to the PPP, the recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act empowers the U.S. Small Business Administration (SBA) to provide the following programs for businesses affected by the COVID-19 crisis:

  • Economic Injury Disaster Loan Advances;
  • SBA Express Bridge Loans; and
  • SBA Debt Relief.

The federal government is also offering affected businesses employer tax credits and the option of delaying their tax payments.

California is doing its part to assist small businesses. The state is offering its own small business disaster relief loan guarantee program, granting interest-free sales tax deferrals, and granting a six- or seven-month extension for all business tax returns. Additionally, many California cities like Oakland and Hayward are offering financial relief to local small businesses.

We will take a more detailed look at each of these federal, state, and local programs for small businesses in the following sections.

The Paycheck Protection Program

The PPP is an SBA loan that gives small businesses an incentive for keeping employees on their payroll during the COVID-19 crisis.

The most notable aspect of the PPP is that the SBA will forgive loans from the program if the small business keeps employees on its payroll for eight weeks. The loan money must also be used for the business’s payroll, rent, utilities, or mortgage interest. At least 75% of the forgiven amount must have been used on payroll.

Businesses affected by COVID-19 may apply for a PPP loan if they meet at least one of the following criteria:

  • Are in compliance with SBA size standards;
  • Are sole proprietorships, independent contractors, or self-employed persons.
  • Are a 501(c)(3) non-profit, a 501(c)(19) veterans organization, or a tribal concern with more than 500 employees; or
  • Are a business that qualifies as accommodations and food services under the North American Industry Classification System, has more than one location, and employs fewer than 500 at each location.

Eligible small businesses may apply for PPP loans through any participating lender in the SBA’s 7(a) loan program, federally insured depository institution, federally insured credit union, or farm credit system institution. PayPal, Intuit, and Square have also been approved to offer loans.

Economic Injury Disaster Loan Emergency Advance

Small businesses that have lost revenue due to the COVID-19 pandemic may apply for an Economic Injury Disaster Loan (EIDL) advance of up to $10,000. The EIDL has exhausted its appropriations funding but will continue processing applicants who have already applied on a first-come, first-served basis.

The EIDL advances provide economic relief for small businesses that have experienced a temporary loss of revenue and will not need to be repaid. The program is open to any small business with fewer than 500 employees, private non-profit organization, or veterans organization. Some businesses with more than 500 employees could also qualify if they meet the SBA’s size standards for their industry.

Express Bridge Loans

The SBA’s Express Bridge Loan pilot program allows those small businesses that already have a relationship with an SBA Express Lender with quick access to loans of up to $25,000. The loans provide support to small businesses attempting to overcome a temporary loss of revenue and bridge the gap when applying for an SBA EIDL loan. The bridge loan must be repaid in full or in part by the proceeds of the EIDL loan.

SBA Debt Relief

The SBA is also undertaking a number of debt relief efforts. It will automatically pay the principal, interest, and fees of any businesses with a current 7(a) loan, 504 loan, or microloan for a six-month period. Additionally, the SBA will pay the principal, interest, and fees on any new 7(a) loan, 504 loan, or microloan issued before September 27, 2020.

Finally, the SBA is providing automatic deferments for the home and business disaster relief loans it services until December 31, 2020. Interest will continue to accrue on deferred loans, so borrowers that would like to continue making regular payments through the deferment may do so.

Federal Employee Retention Tax Credits

The Families, First Coronavirus Response Act was enacted in March. It provides that businesses closed in compliance with a government order or suffer a decrease of 50% or more in gross receipts compared to the same period last year are eligible for a 50% federal payroll tax credit on wages of up to $10,000 for each employee. The credit is not available to employers that have received a PPP loan.

To receive the credits, an employer with fewer than 500 or fewer employees must offer employees the following:

  • Two weeks of paid sick leave at the regular pay rate if the employee is unable to work due to quarantine or COVID-19 symptoms;
  • Two weeks of paid sick leave where the employee is compensated at two-thirds of the regular pay rate if the employee cannot work while caring for an individual subject to quarantine or who is unable to attend a school or child care due to COVID-19-related reasons; and
  • Employees who have been employed for at least 30 days must be offered an additional 10 weeks of expanded family and medical leave where the employee is compensated at two-thirds of his or her regular pay if the employee is unable to work due to child care obligations stemming from COVID-19 closures.

Delayed Federal Payroll Tax Payments

Under the CARES Act, employers may postpone paying their portion of 2020 Social Security payroll taxes through the end of 2022. Employers must pay at least 50 percent of their 2020 payroll tax by the end of 2021, with the remainder due at the end of 2022. Self-employed individuals are allowed to delay 50 percent of their Self-Employed Contributions Act tax payment.

California’s Small Business COVID-19 Aid Programs

California is offering small businesses with 750 employees or fewer who have been negatively impacted by COVID-19 a disaster relief loan guarantee program. Some non-profits are also eligible for the program which provides funds to help businesses stay open or recover from economic injury resulting from the pandemic.

The loan can be guaranteed for up to seven years and cover 95 percent of the loaned amount. Interest rates must be negotiated between the business and lender and the lender will determine which businesses are eligible.

The California Infrastructure and Economic Development Bank (IBank) has partnered with financial development corporations across the state to provide the guaranteed loans. For more information on participating financial development corporations and lenders, please check out IBank’s website.

Additionally, California offers small businesses with less than $5 million in annual taxable sales a 12-month, interest-free payment plan for up to $50,000 of their sales and use tax obligations. Businesses may request payment plans through the state’ss online service system (this form will notify you when the system comes online).

Finally, the California Franchise Tax Board will automatically grant all corporations a six-month extension to file their returns, this includes exempt organizations. Businesses that are not corporations are allowed an automatic seven-month extension. The forms for automatic extensions are available here.

California Cities Also Offering Relief

Many California cities are also offering their small businesses with help weathering the pandemic. For example, our offices are in Haward, which has made grants of $5,000 available for the city’s small businesses and independently owned restaurants. Nearby Oakland has partnered with Facebook to offer a small business grants program and Alameda County is discussing implementing one. Check out your local municipal and county websites to see what is available in your area.

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This post was written by Sean Allaband

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