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Tips for Maximizing COVID-Related Loan Benefits and Forgiveness

This article originally appeared on the Rochester Business Journal with our own Denise Neamon as a contributor located here.

Three Tips to Help Small Businesses Navigate the Post-Pandemic Climate

It’s no secret that the pandemic has caused disruption to the economic climate, dramatically shifting how business is conducted. On top of existing priorities like day-to-day operations, staffing and management, business owners also have the added layer of navigating COVID-19 related loan benefits and forgiveness programs. With new and ever-changing government programs, guidelines and laws, small businesses are feeling the pressure.

As the regulatory landscape continues to fluctuate, small businesses are constantly looking for resources on the many funding opportunities that are available to them. Various initiatives such as the Economic Injury Disaster Loan (EIDL), the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) are available to provide relief to small businesses facing economic challenges due to COVID-19.

What to Know: COVID-19 Federal Small Business Stimulus Aid Programs
Between March 2020 and March 2021, Congress passed multiple massive pieces of legislation to assist businesses in surviving the pandemic and alleviate some of the economic impacts many are currently facing. These relief programs included forgivable loans, direct payments, tax credits, grants, expanded unemployment benefits and more. During this time, so many federal aid programs and policy changes have passed that it proved challenging for small businesses to keep track of them all and understand which programs they were eligible for. Staying informed about the many updates to new and existing loan benefits and forgiveness options can make all the difference to businesses hoping to return to “normal” in the coming months.

The Break Down: Available Loan Benefits and Forgiveness Programs
COVID-19 Economic Injury Disaster Loan (EIDL)

If you are a small business, nonprofit organization of any size, or a U.S. agricultural business with 500 or fewer employees that has suffered substantial economic injury as a result of the COVID-19 pandemic the COVID-19 EIDL provides the funds for necessary capital and support of normal operating expenses to help small businesses impacted by COVID 19 until normal operations resume. This loan can provide up to $500,000 of financial assistance. To be eligible for the EIDL, the SBA must determine whether or not a business is unable to obtain assistance or credit elsewhere.

How can the funds be used? According to SBA guidance funds can be used for rent, fixed debts payments, payroll, accounts payable, and bills that could have been paid had the disaster not occurred. Terms of repayment included 3.75% APR fixed for businesses, 2.75% fixed for nonprofits and businesses have up to 30 years to repay with no prepayment penalty. There is also a deferment of payments based on when the loan was secured.

Paycheck Protection Program (PPP) and PPP Loan Forgiveness

The Paycheck Protection Program (PPP) is a loan program administered by the federal SBA and has provided COVID-19 relief funding to small businesses during the pandemic. The PPP loan was designed to provide a direct incentive for small businesses to keep their workers on the payroll. There were two rounds of PPP loans, and many businesses are beginning to receive money from the second wave now. As businesses start to spend these funds, they must keep in mind the rules and guidelines on eligible spending. To maximize this fund, businesses should ensure that 60% of allocated funds are focused on payroll while the remaining 40% can be used for rent, business mortgage interest, utilities, covered operations and worker protection expenditures, and property damage and supplier costs. While the PPP ended on May 31, 2021, existing borrowers may be eligible for PPP loan forgiveness.

Employee Retention Credit (ERC)
The Employee Retention Credit is a refundable tax credit against certain employment taxes. Your business may be eligible to claim the Employee Retention Credit (ERC) for 2021 and amend to claim for 2020 as well.

Businesses around the country have been slow to evaluate eligibility, or quick to assume they are ineligible, for the ERC. The result: a significant amount of money is still being paid to the federal government when it could go to the companies that need it the most.

Even if you qualified for the Paycheck Protection Program (PPP) First or Second Draw, your company may qualify for the ERC. However, qualifying requires a complex analysis. If you have not done this analysis it is something you should consider taking another look at.

Tips and Resources to Navigate Federal Loan Programs
As federal loan and aid programs continue to update and expand over broad timelines, it can feel overwhelming for small business leaders to stay on top of this information. These three tips can help small businesses maximize the many COVID-related loan benefits and forgiveness programs that are currently available.

  1. Know Where and How to Use Resources: Keeping current and regularly checking websites, such as www.sba.gov, can keep businesses informed of new and useful legislation. The SBA continually updates this website when new addendums are made to existing programs and offers useful FAQs to easily navigate pressing questions.
  2. Partner and Consult with an Advisor: While small businesses can utilize many of these funding programs, it’s important to know when and how to use them and if they are eligible. Financial advisors can offer the guidance and step-by-step support needed to ensure businesses are following the necessary guidelines and have proper documents available before applying. They can also help find where businesses can earn even more support, which can help businesses save both the time and money needed to keep operations moving.
  3. Forge Ahead: Until you hear back about loan benefits and forgiveness, it’s important to keep moving forward. There are various ways to go about receiving forgiveness and, if needed, deferring the loan is possible. Talking to an expert can help a business discover their options.

These tips and resources can offer guidance to small businesses and give leaders the confidence they need to navigate the various federal loan and forgiveness programs available. Relief programs are bringing businesses one step closer to returning to “normalcy” and are giving balance back to business activities in the post-pandemic climate.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship