What the CARES Act Means for Small Business Owners

The COVID-19 pandemic has caused incalculable losses for American small business owners in the way of profits and clientele, putting many at risk of financial ruin. For most entrepreneurs, we fear for our future and wonder how we may be able to survive this economic crisis. But I’m here to remind you that not all hope is lost–the CARES Act may just be your business’ saving grace.

The piece of legislation passed by Congress in March of this year dedicated over $2.4 trillion to providing financial assistance for Americans affected by coronavirus. It was designed to combat coronavirus-related loss in four areas: U.S. households, state and local governments, large businesses, and (most importantly) small businesses.

For small business owners, the CARES Act provides assistance through the Economic Injury Disaster Loan (EIDL) Emergency Advance. Small business owners can receive up to $2 million through an EIDL loan, which is subject to a modest 3.75% interest rate. Non-profit organizations enjoy an even lower rate at 2.75%, and terms for these loans may extend to a maximum of 30 years.

But wait, there’s more! The EIDL Economic Advance also provides up to $1,000 in loan money that does not require repayment–in other words, $1,000 in grant money.

Through April 24th, the Small Business Administration has issued $4.8 billion in EIDL

advances. However, it is currently only accepting new applications from agricultural

businesses “due to limitations in funding availability and the unprecedented

submission of applications already received.”

The stimulus package also includes a fully refundable tax credit for eligible employers equal to 50% of qualified wages (wages paid after 3/12/2020 and before 1/1/2021) up to $10,000. Therefore, the maximum credit for wages paid to an employee is $5,000. This is designed to further encourage businesses to retain employees, though this tax credit is not available if you benefited from the Paycheck Protection Program[link to the PPP blog here].

As a small business owner, you can also carry back 2018–2020 losses up to five years, on up to 100% of taxable income from these same years. Additionally, the bill has provided a delay in employer-side 2020 payroll taxes for businesses and self-employed individuals until 2021 and 2022.

Coronavirus relief for small businesses is ever-changing and there will likely be additional support coming soon, as the end of this pandemic is still nowhere in sight. Check back here frequently for more updates on legislation and important small business resources!