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Coronavirus Stimulus – Where do we Stand Today?
POSTED 03/23/2020
As mentioned in recent days, things are changing fast in the wake of Covid-19. There is a lot of information out there, which makes it difficult for business owners to make informed decisions.
As of today, March 23, 2020, we know that Congress has passed two bills; the main components of which were to appropriate money to the right places and to provide emergency sick paid leave and require paid FMLA leave for certain employees impacted by COVID-19. The legislation also provided a payroll tax credit to help employers with cash flow for these payments. This is part of enacted legislation today, but we know there is more to come.
The Senate has drafted a bill that contains more assistance to businesses impacted by Covid-19 which will further impact decision making today. Part of the proposed legislation provides financing through the Small Business Administration for businesses with less than 500 employees. As drafted, requirements for these loans are much less stringent for collateral, fees and payment terms than a normal SBA loan.
Currently, the bill would allow financing to be used for certain expenses incurred March 1, 2020 – Dec 31, 2020, including:
- Payroll and related expenses (payroll taxes, health benefits)
- Mortgage or rent payments
- Utility bills
- Payments to service monthly debt obligations
In addition, the bill includes loan forgiveness provisions for the amount of financing used for:
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- Payroll and related costs
- Payments to service monthly debt obligations
Under the drafted bill, the average number of employees paid during the period covered cannot be less than the average number of employees on payroll between March 1, 2019 – June 20, 2019. If the average number of employees is less than that time period, the amount of loan forgiveness will be reduced by the same percentage. In addition, there are reductions of the loan forgiveness amount if the payroll decreases more than 25% than the last full quarter reported.
What does this mean for businesses today?
In the event you are considering terminations during this time of uncertainty, you may want structure these as temporary layoffs, rather than terminations, to ensure you can maximize the assistance that may be available once the next round of stimulus gets passed. Because the current draft is dependent upon consistent average employee numbers as well as compensation amounts, it is important you understand what the impact of permanent terminations could mean to your access to such funding.
Stay tuned to Clayton & McKervey for more information on this topic.