Congress’s Coronavirus Aid, Relief, and Economic Security (CARES) Act aims to help Americans weather the financial storm caused by the virus. The first round of financing ran out quickly, but Congress has passed another round.
Some of the highlights of the CARES act include:
- Money for individuals: Tax-paying Americans will receive a direct deposit for up to $1,200 if single, and $2,400 if married, plus $500 per child. The phase-out limits for these payments start at adjusted gross income of $75,000 for individuals and $150,000 for married couples filing jointly.
- Relief for the unemployed: The program provides an additional $600 per week for four months, plus what the state programs pay, for the unemployed. It also extends unemployment insurance benefits through Dec. 31 for eligible workers. (If you are self-employed or an independent contractor, this applies to you as well.)
- Payroll tax delay: Employers can hold off on paying 2020 payroll taxes until 2021 and 2022.
- Waived withdrawal penalty for retirement funds: Anyone who needs to tap retirement savings for emergency money can do so without incurring the 10% early withdrawal penalty. This applies for distributions up to $100,000. (Note: These withdrawals are still taxed, but the taxes can be spread out over three years.)
- Relief for small businesses: Companies with 500 employees or less can receive up to 8 weeks of money to cover payroll costs. If this loan is used for payroll, mortgage interest, or rent and utilities costs, that money will be forgiven.
- Student loan payments: The U.S. Department of Education has put a freeze on federal student loan payments until October. During this time, no interest will accrue.
The CARES Act for Small Business: Four Areas of Relief
If you have a small business with 500 employees or fewer, there are some different types of financial relief that you might be entitled to under the CARES act. Those include:
- Paycheck Protection Program (PPP) Loans
- Economic Injury Disaster Loan and Advance
- Small Business Debt Relief Program
- Free Resource Partners assistance
Which resources apply to you and your business? Here’s a bit more about each program under the CARES act:
Paycheck Protection Program Loans
What it is: A loan that will help small businesses cover payroll expenses through June 30. These loans are 100 percent forgivable if they are used to continue paying employees during that time. You can receive up to 2.5 monthly payroll expenses for your business, as long as you were in business from February 15-June 30.
The interest rate is 1% with a maximum loan term of 2 years.
What is covered: You can use a PPP loan for financial obligations including:
- Payroll costs
- Group healthcare benefits for paid sick, medical or family leave costs and insurance premiums
- Employee’s salaries, commissions, and similar compensation
- Mortgage interest
If you use the loan for applicable costs, it is completely forgivable. If you don’t, then you will have to repay it. The repayment period is a maximum of 10 years with an interest rate of up to 4 percent.
Who it’s for: Basically any small business impacted by coronavirus-related issues between February 15 and June 30, 2020. That includes 501(c)(3) nonprofits, 501(c)(19) veterans organizations, tribal businesses with fewer than 500 employees, sole proprietorships, and independent contractors.
Economic Injury Disaster Loan and Advance
What it is: A loan of up to $2 million that will give small businesses emergency cash flow within days of applying and being accepted. Rates are 3.75% for small businesses and 2.75% for nonprofits. The maximum loan term is up to 30 years.
Additionally, business owners may be eligible for a loan advance of up to $10,000 that does not have to be repaid.
Who it’s for: Small businesses (less than 500 employees) that are experiencing a temporary loss of revenue due to the COVID-19 pandemic. That also includes sole proprietorships, independent contractors, the self-employed, private non-profit organizations and 501(c)(19) veterans organizations.
Small Business Debt Relief Program
What it is: The U.S. Small Business Association will pay the principal, interest and fees of current 7(a), 504 and microloans for six months, as well as any new 7(a), 504 and microloans issued before Sept. 27, 2020.
Who it’s for: Anyone who currently has a 7(a), 504 or microloan outstanding with the SBA, or plans to apply for one in the coming months.
Free Resource Partners Assistance
What it is: Small business counseling to help you navigate these unprecedented times. This includes local chapters of the Small Business Development Center (SBDC), Women’s Business Center (WBC), or SCORE mentorship chapter. These programs are receiving extra funding to help small businesses in their communities.
Who it’s for: Any small business in the U.S. can benefit from the programs and services offered by local Small Business Association groups. Take advantage of these resources if you need some guidance for running a business during this pandemic and beyond.
Find your local Small Business Association groups here.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes everyone should have access to financial resources and coaching. For more information on the services offered, contact Katie today.