Federal, state, and local relief for COVID-19 offer ample opportunities for small businesses and startups during this financial and health crisis. On a federal level, three core stimulus packages have been signed into law: Family First Coronavirus Response Act, Coronavirus Preparedness and Response Supplemental Appropriations Act, and Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Additionally, various states are approving coronavirus relief programs, such as Ohio’s ShareWork program.
Most notably, the Paycheck Protection Program is a $349B stimulus package allocating loans up to $10M for small businesses. However, regulators have not yet addressed pressing issues such as the “affiliation” rule which may disqualify a large number of venture-backed startups. Regardless, a number of low-interest loans and tax credits are available to employers as outlined below. While these programs are now law, regulators have not yet offered guidance and interpretations to these laws. As we await the regulations, small businesses and startups should begin familiarizing themselves with these new programs.
- Paycheck Protection Program (PPP): The PPP establishes a $349B allocatoin to provide relief to companies negatively impacted by COVID-19. Small business, which is generally companies with less than 500 employees, may be eligible for a loan up to $10M. This program has a loan forgiveness provision where the loan essentially converts from to a grant if the borrower maintains employment and payroll levels. This is a massive opportunity for small businesses and startups to receive 8 weeks-worth of payroll expenses for free.
- Emergency Economic Injury Disaster Loan (EIDL) Program: The Emergency EIDL program allows small businesses to apply for emergency loans in response to COVID-19 where an advance of $10,000 on the loan may be given.
- Employee Retention Credit: Employers may be eligible for a refundable payroll tax credit for 50% of wages paid by the employers to employees during the COVID-19 crisis. Those eligible for this program have suspended operations due to the coronavirus, or had a decline of 50%+ in gross revenue compared to the same quarter in the prior year.
Families First Coronavirus Response Act
- Paid Sick Leave: Employers are required to offer up to two weeks of paid sick leave at the employee’s regular rate of pay if the employee is required to enter quarantine due to COVID-19. The employer must also offer two weeks of paid sick leave at 2/3 the employee’s pay to take care of a child due to school closure or take care of another family member relating to COVID-19 illness.
- Employer Tax Credit: A 100% refundable tax credit is available for small businesses to provide two weeks of paid sick leave and up to 12 weeks of paid family and medical leave for employees affected by COVID-19 through December 31, 2020.
Coronavirus Preparedness and Response Supplemental Appropriations Act
- SBA Disaster Loan Program: The Coronavirus Preparedness and Response Supplemental Appropriation Act allocated funding for federal agencies’ response to the COVID-19 outbreak, and it specifically provides funding for the Small Business Administration disaster loan programs. Small businesses may receive a loan up to $2M through this program. This was expanded upon in the CARES Act through the EIDL program provision discussed above in #2.
Ohio COVID-19 Resources
- Employee Retention: SharedWork Ohio enables employees to remain employed and during reduced business activity due to shut down surrounding the coronavirus. The Ohio Department of Job and Family Services provides eligible individuals unemployment insurance benefits proportionate to their reduced hours.
- Rent and Mortgage Pause: Governor DeWine requests suspension of rent and mortgage payments for 90 days via an executive order. The order is not mandatory but operates as a plea requesting landlords offer flexibility to tenants during the shelter-in-place.
This post is provided for general information purposes and is not legal advice. As always, if you have any questions about this post or how it might impact your business, contact one of our attorneys.