Small Business Loan Options

COVID-19 Support

Small Business Loans and Financial Support during the COVID-19 Crisis

Here at Sparrow Websites, we understand that the Coronavirus and COVID-19 is taking a major toll on the financial health of small businesses across the country. As companies and businesses seek ways to stay afloat and reorganize goals and agendas, we wanted to share some information on the small business loans and financial support available to businesses during the COVID-19 crisis. Our hope is that small businesses, employers, and employees alike will find encouragement during these trying times. 

All of the resources that we describe here are administered by the SBA or US Small Business Administration. In addition to the resources listed here, they have other programs and loans for you to explore. We would encourage you to check out what they have to offer. 

In regards to applications, local banks have been approved to process SBA applications and help with questions. Another valuable resource would be your Accountant or CPA.

The Employee Retention Tax Credit (ERTC)

The first resource that can be of help to small businesses and employers is the Employee Retention Tax Credit. The ERTC is for businesses that are either fully or partially shut down due to a mandate OR have had revenue decline by more than 50% compared to the same quarter last year. The Employee Retention Credit is essentially a credit against an employer’s portion of the payroll tax. This credit is for businesses that have had a significant revenue decrease and continue to pay their employees while not currently working.

This is an extremely useful resource because it helps eligible businesses that are forced to suspend or close operations due to COVID-19.  It provides a refundable payroll tax credit for 50% of wages paid between March 13, 2020 – December 31, 2020. Eligibility requirements include having a significant revenue decrease and continuing to pay employees while not currently working. Remember that Credit would be taken during the filing of quarterly payroll taxes and that it cannot be combined with the Paycheck Protection Program. 

Payroll Tax Holiday

A simple yet highly effective resource available to businesses right now is what is being called “ The Payroll Tax Holiday”. Through this “holiday”, businesses may defer paying their portion of the 6.2% Social Security payroll tax during 2020. They would then repay 50% of those deferred taxes by 12/31/21 and the final 50% by 12/31/22. This can give some relief but like the ERTC, it cannot be combined with the Payroll Protection Program.

Paycheck Protection Program

Another timely and useful resource during this crisis is the Paycheck Protection Program Loans (PPP). This program provides loans to businesses equal to 2½ months of payroll costs based on the average of the 12 months prior to the date of loan origination

There are a number of valuable benefits to this loan. These include a “covered period” of eight weeks that starts when you get the loan. All eligible costs paid during those eight weeks will be forgiven and the costs associated with it include payroll costs (not including ER portion of payroll taxes), payments to subcontractors, utilities, rent, and mortgage interest (does not apply to mortgage principal). In regards to full forgiveness, a factor that influences this loan is not reducing your number of employees or reducing how much you pay them. 

Again, as loans go, there is a tremendous amount of benefits from utilizing the PPP:

  • No personal guarantee
  • No collateral is necessary.
  • There is potential for full forgiveness.
  • There is no interest accumulated for the eight weeks “covered period”
  • The possible forgiven principal will not be considered taxable income.
  • Payments on the loan are initially deferred by 6 – 12 months
  • There is a strong possibility that businesses utilizing the PPP may see a disbursement as quickly as 2-3 weeks after applying.

Additional guidance from the SBA is forthcoming by April 11th. Additional information on possible tax advantages to these loans should be shared then. While it is clear that the funds from the loan that is forgiven will not be taxable income, it is yet to be determined if the expenses paid with the loan funds will be tax-deductible.

At Sparrow, we understand the need for supporting small businesses and keeping people employed. While we strive to be a supportive and encouraging workplace, it is our hope to spread as much information and encouragement as possible during this epidemic.

Be encouraged; COVID-19 will not beat us and we all will get through this together.

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