In late March, President Trump signed the $2 trillion COVID-19 stimulus bill to provide financial relief to the United States during this trying time. While the majority of this financial relief, around $500 billion, will benefit large corporations, a hefty portion of $350 billion will be offered to assist small businesses. The desired effect of this bill is not only to support businesses but also to prevent a rapid increase in unemployment across the country.
However, not all small businesses will benefit from this portion of the bill. A qualifying small business must have a valid EIN, be located in the United States, and have less than 500 employees. Small businesses can include self-employed individuals, such as gig workers and independent contractors. Unfortunately, if the company was formed after February 15, it does not qualify for the small business financial aid. Only businesses impacted by COVID-19 will benefit from this bill; however, the specifics of this requirement are still transpiring. The company will have to sign an affidavit confirming they were affected due to a lack of demand, supply chain issues, and more.
Under the stimulus, the small businesses can benefit from this loan; however, there is a chance the loan can become a grant, meaning you will not have to pay it back. From the moment you receive the loan, you have eight weeks to spend it on necessary items such as payroll and rent. Since the goal of this bill is to keep people employed, if you have to let go of some of your employees, a portion of the money will not be forgivable.
Loan amounts will be 2.5 times your average monthly payroll. To calculate your average payroll, use the payroll amounts from February 15, 2019 to February 15, 2020 including any bonuses or commission checks. Next, average the paychecks and multiply the average by 2.5 to determine how much you should receive in the loan. The loan caps at $100,000 per employee and $1 million in total.
The loans received will be provided by the Small Business Association as part of the Paycheck Protection Program. To receive the loan, contact an approved lending institution for small businesses between now and June 30, 2020. Before applying you can prepare some of the necessary documents needed:
- EIN documentation
- Proof of payroll prior to February 15, 2020
- Tax return and payroll tax return
- Calculation of average monthly payroll as described above
- Proof of employees
For updates and guidance, you can visit the Small Business Association website.