Coronavirus-Related Resources Available to Small Businesses

Since the coronavirus has become a pandemic, small businesses have been hit with mandatory closures and hefty safety measures to help “flatten the curve.” While this is an unprecedented time, this is certainly not a time to panic.

Thanks to the stimulus package passed by the United States Congress, and the work completed by the Maine Legislature, there are many resources and options available to small businesses in Maine, including the Paycheck Protection Program, SBA Disaster Loans, SBA Economic Injury Disaster Loan Emergency Grant, SBA Express Bridge Loan Pilot Program, federal income tax filing payment deadline extension, the Employee Retention Credit, the COVID-19 Relief Interim SBA Finance Loan Program, and the COVID-19 Relief Business Direct Loan Program. Each of these programs is described below.

Paycheck Protection Program

The Paycheck Protection program is offered by the Small Business Administration and specifically designed to allow small businesses to keep their workers on the payroll. The SBA will forgive the loan if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. This program is available through June 30, 2020.  Last week, Rudman Winchell attorney Mark K. Laverdiere, Esq. wrote an article detailing the program. To read more, please click here. For more information, or to apply for this loan, please visit the SBA website.

SBA Disaster Loans

The Small Business Administration is offering another program in the form of disaster loans. This is a low-interest loan available to businesses located in a region affected by a declared disaster. As all U.S. States and territories have been declared a disaster area, businesses in Maine may apply for this loan, which may be awarded to assist with working capital to small businesses suffering substantial economic injury as a result of COVID-19.

The loan may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid due to the impact of the virus. The SBA offers loans with long-term repayments, up to 30 years, in order to allow affordable payments for the borrower. For more information, or to apply for this loan, please visit the SBA website.

SBA Economic Injury Disaster Loan Emergency Grant

Small businesses with fewer than 500 employees who have applied for a Disaster Loan, as described above, are eligible for an emergency grant from the Small Business Administration up to $10,000. This advance may provide economic relief to those small businesses that are currently experiencing a temporary loss of revenue, and will not have to be repaid. Once the application is submitted and deemed successful, the advanced funds will be made within days. For more information, or to apply for this loan, please visit the SBA website.

SBA Express Bridge Loan Pilot Program

A small business that already has a business relationship with a Small Business Administration Express Lender may be eligible to access $25,000 quickly under the SBA Express Bridge Loan Pilot Program. This loan may be either a term loan or a loan used to bridge the gap while applying for a direct SBA Economic Injury Disaster Loan. It may be used to provide economic support to help overcome a temporary loss of revenue the small business may be experiencing. For more information, or to apply for this loan, please visit the SBA website.

Federal Income Tax Filing Payment Deadline Extension

Part of the stimulus package extended the deadline to file federal income taxes from April 15, 2020, to July 15, 2020. Additionally, taxpayers may defer their federal income tax payments due on April 15, 2020, to July 15, 2020, regardless of the amount owed, without penalties and interest. This applies to all taxpayers, including individuals, trusts, estates, corporations, and those who pay self-employment tax. The qualification for this deferment is automatic relief, and taxpayers need not file any additional forms or contact the IRS. If you are due a refund, the IRS is urging you to file as soon as possible. For more information, please contact your tax professional or visit the IRS website.

Employee Retention Credit

To help small businesses combat COVID-19, the IRS has launched the Employee Retention Credit, which, like the Paycheck Protection Program, is designed to encourage businesses to keep their employees on the payroll. This refundable tax credit is up to 50% of up to $10,000 in wages paid by an eligible employer. To be eligible, a small business must fall into one of two categories:

  1. The employer’s business is fully or partially suspended by government order due to coronavirus during the calendar quarter; or
  2. The employer’s gross receipts are below 50% of the comparable quarter in 2019.

If a small business falls into the second category, they will no longer qualify once their gross receipts go above 80% of a comparable quarter. This is measured at the end of each calendar quarter and qualifying wages are determined based on the number of employees employed by the small business.

For an employer with less than an average of 100 employees in 2019, the credit is based on wages paid to all employees, regardless of whether the employee worked or not during the calendar quarter. For employers with more than an average of 100 employees in 2019, the credit is only allowed for wages paid to employees who did not work during the calendar quarter. Eligible employers may be immediately reimbursed for the credit by reducing required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

These employers will report their total qualified wages and health insurance costs for each respective quarter on their quarterly tax returns or Form 941, beginning with the second calendar quarter of 2020. If the tax deposits are insufficient to cover the credit, the employer may receive an advanced payment from the IRS by submitting Form 7200. For more information, please contact your tax professional or visit the IRS website.

COVID-19 Relief Interim SBA Finance Loan Program

In Maine, the Small Business Administration is providing Finance Authority of Maine (FAME) direct loans up to $100,000. These loans have special terms for eligible borrowers who provide proof of a commitment to SBA financing. This FAME loan would be used by the business owner until the SBA loan is funded. The SBA loan would then be used to pay off the loan from FAME.

To be eligible for this program, the business must be Maine-based and must apply for an SBA loan (for COVID-19) and provide FAME with evidence of a commitment of funding from the SBA. The loan is available for a 90-day term and has a fixed interest rate of 2% over the Wall Street Journal Prime Rate. Additionally, the business must have assets available to secure the loan, must pledge the receipt of SBA loan funds paid directly to FAME, and the loan must be guaranteed by the principals of the business. For more information, or to apply for this loan, please visit the FAME website.

COVID-19 Relief Business Direct Loan Program

Through this program, FAME may provide Direct Loans of up to $50,000 with special terms available to Maine-based businesses that are experiencing interruption or hardship due to the coronavirus. To be eligible for this loan, the business must be a Maine-based business experiencing interruption or hardship due to COVID-19 and must demonstrate that other sources of capital have been exhausted.

The loan is available for a 12-month term and has a fixed interest rate of 1% less than the Wall Street Journal Prime Rate. Additionally, the business must have assets available to secure the loan and the loan must be guaranteed by the principals of the business. FAME has set aside $5,000,000 for this program, and the loans are on a first-come, first-served basis. For more information, or to apply for this loan, please visit the FAME website.

FAME Direct Loan

If your business is not selected for a loan under this program, you may be eligible for a FAME Direct Loan in an amount of up to $1,000,000. To be eligible, the business must:

  1. Be Maine-based;
  2. Exhibit reasonable ability to repay the loan; and
  3. Demonstrate that other sources of capital have been exhausted.

The loan is available for a term of a maximum of five years and at a fixed interest rate of 2% over the Wall Street Journal Prime Rate. The loan must also be guaranteed by owners of at least 51% of the business borrower, except for non-profit borrowers and borrowers owned by 20 or more shareholders. For more information, or to apply for this loan, please visit the FAME website.

Eviction Moratorium

As of today, there is no eviction moratorium in place in the State of Maine. While the Maine courts are closed for eviction hearings until at least May 1, the courts are still issuing writs of possession. If you are struggling to make mortgage loan payments, please contact your mortgage lender.

The Coronavirus is causing hardship for many, and you are certainly not alone in this. If you would like further information on any of the above programs, please contact Rudman Winchell’s Corporate Practice Group today. We are standing by and ready to assist you.