If you are running a small business, it is likely that you have heard about Coronavirus Aid, Relief, and Economic Security (CARES) act. It is an act that has been passed to help small businesses with financial assistance.
While some part of the act has been publicized in the news, you will hardly find any article covering the programs included in this act.
Keep reading for the breakdown of different ways in which the CARES act can help you provide relief to your small business and employees.
What Is The CARES Act?
The CARES Act provided more than $2 trillion in support for the individuals and businesses that have taken a heavy dent due to the pandemic. This act includes multiple initiatives to offer financial assistance and help small businesses carry on in tough times.
Here are a few different channels the CARES act takes to help individuals and businesses.
- Small business debt relief program.
- Improved unemployment benefits.
- Temporary tax breaks & deadline extension.
- Offering financial support to small businesses through SBA lending programs.
To know more about the CARES act and the program it covers, consult BSA Ahmad Bin Hezeem & Associates LLP.
How Does The Care Act Benefit Small Businesses?
As we have already said, the American Government provided more than a $2 trillion relief package. Out of that, $375 billion of the funds were given to small businesses. Two programs were expanded as the part of CARES act:
- Paycheck Protection Program.
- Economic Injury Disaster.
This funding helped the small businesses to receive emergency funds to continue with their business.
1. Paycheck Protection Loans
The CARES act has offered more than $350 billion to small businesses through paycheck protection loans. It is a lending solution to ensure the employees get their paycheck.
Employers who take advantage of the PPP loans and allow them towards the allowable cost like compensation, benefits, and business obligation, can qualify upto 100% loan forgiveness.
The PPP loans offered in the CARES act are separate from existing federal loans. You can apply for the PPP loans only if it covers different expenses.
2. Small Business Debt Relief Programs
The CARES act has already allotted more teh $17 billion to cover payments for the companies. This debt relief program covers 7(a) and microloans funded through SBA. However, this doesn’t cover the recent disaster and existing loans.
Under the business debt relief program, The SBA will cover all the loan payments for the next six months from the date the CARES act was signed.
3. Small Business Tax Provision
Small businesses that were subjected to closure related to the pandemic may be eligible for the tax credit. The employment tax credit for each calendar quarter equals 50% of the qualified wages.
The qualified wages vary based on the side of the company. A company qualifies for this tax provision only if they have 100 or fewer employees. Teh tax credit of 50% is capped to $10,000. That means the max credit can be upto $5000.
4. SBA Economic Injury Disaster Loan
The small business administration provides economic injury disaster loans to cover economic losses resulting from regional and national disasters. In the case of COVID 19, SBA is offering low-interest funding to small businesses.
5. SBA Emergency Cash Grants
The CARES Act provided $10 billion to fund small businesses and non-profit organizations. In addition, the Coronavirus Relief bill provided a $20 billion cash grant to the disadvantaged areas.
The Economic Injury cash grant eligibility is determined by the self-certificate and the applicant’s credit score. So, even though the process goes smoothly, there will be a high demand for this type of funding.
In addition to financial assistance and credits, CARES acts involve providing training and offering assistance with their small business.
Many business owners have found themselves unprepared for the crisis and were taken the direct hit of the pandemic. Industrial experts, via CARES act, offer their assistance and train the small business owner the art of running a business in any situation.