A $2 trillion stimulus package was signed into law on March 27, 2020, to provide financial relief and help stabilize the economy. It includes a $350 billion employee retention fund for small businesses. The Coronavirus Aid, Relief and Economic Security Act (CARES Act) is designed to aid small businesses with less than 500 employees in keeping their employees on the payroll during this crisis.
“In a matter of ten days, we went from one of the fastest-growing periods of our business's history to completely going to zero revenue,” said Chris Juliani, owner of Boston Chair Massage. “We are confident we will bounce back, but when and how fast is uncertain. Right now the focus is to keep our organization afloat and try to find resources to help our team of massage therapists.”
Here’s how the CARES Act can potentially help your small business and your employees:
The federal tax filing and payment deadline has already been extended to July 15, 2020. In addition to that measure, the CARES Act gives businesses, including those that have been ordered to close, a 50 percent refundable payroll-tax credit as long as they keep workers employed through the crisis.
Access to capital
The Small Business Administration will oversee the Paycheck Protection Program, which provides loans to businesses that can be forgiven if certain requirements are met. A business’s eligible loan amount, up to $10 million, will be based on how much it paid its employees between January 1 and February 29, 2020. The loans will carry an interest rate of up to 4 percent. The loans will be forgiven if the funds are used for approved purposes, including payroll expenses, mortgage, rent and utilities, and the business maintains its full-time workforce through June 30, 2020.
The Act makes eligible far more workers than usual for unemployment benefits, including those that are self-employed, independent contractors, and gig economy workers. Those who are unemployed, partially unemployed, or cannot work for a wide variety of coronavirus-related reasons would be more likely to receive benefits. Under the plan, eligible workers would get an extra $600 per week until July 31, 2020, on top of what their state benefit provides.
Use of retirement funds
The Act waives the 10 percent early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to January 1, 2020, from an employer-sponsored retirement plan such as a 401(k) or from an individual retirement account (IRA). Withdrawals are still taxed, but taxes are spread over three years, or you can use the three-year period to repay without it counting toward the annual contribution limits. In addition, the 401(k) loans limit is increased from $50,000 to $100,000.
This marks the largest emergency aid package in US history and shows how stabilizing the economy begins with sustaining the small business community in our country.
“There are many government loan products coming out at the time,” said Juliani. “Keeping an eye on the programs and making the best decision as to which will best help your specific business is important. That’s what I’m working on at the moment.”
For more information, visit the SBA website.
Thank you to our partner MassMutual for giving us permission to republish their “A primer on the CARES Act and how it can help small businesses" blog.