20 Mar COVID19 Resources for North Carolina Small Businesses
Updated April 8, 2020
- The Coronavirus Aid, Relief, and Economic Stability Act (“CARES Act”) recently created the Paycheck Protection Program (“PPP”), a $349 billion loan initiative designed to provide small businesses another avenue of financial support during the COVID19 crisis. To be eligible for the program, a company must be considered a small business. Generally, companies with 500 or fewer employees are characterized as small businesses. This includes tribal companies, veterans’ organizations, nonprofit organizations that comply with the SBA’s affiliation standards, independent contractors, gig-economy workers, self-employed individuals, and sole proprietors. The employee limit can change if the company falls into an industry with a Small Business Association (“SBA”) employee-based size standard. Additionally, hospitality companies operating under the North American Industry Classification System code 72 and independently owned franchises approved by the SBA can apply the 500 employee standard to each location of the company.
- The PPP provides loans of 2.5 times monthly payroll expenses, including salaries, wages, benefits, sick leave, rents, interests on mortgages, and taxes. The PPP loan terms are very favorable for small businesses, including a 1% fixed interest rate, payment deferments for 6 months, and a two year maturation period. Small businesses can also seek loan forgiveness for 100% of the funds used on payroll expenses if the company maintains its full-time staff and does not decrease employee salaries below 25%. Small businesses can apply for the program through private SBA approved lenders, federally insured credit unions, participating Farm Credit System Institutions, or federally insured depository institutions. To apply, small businesses will need to fill out and submit the PPP Borrower Application Form with an approved lender.
As of March 23, 2020 — 7:26 AM
It goes without saying that the spread of COVID-19 has disrupted every aspect of our daily lives in a way that none of us has ever experienced. The public health response has been social distancing to limit individual exposure to the virus to both protect ourselves and allow hospitals to care for those who will get sick. But that has meant devastating harm to small retail and service businesses that were suddenly forced to close and placed workers in those businesses, already living paycheck-to-paycheck, on the verge of financial ruin.
Available information about resources for small businesses is scattershot, but we have tried to gather a few of them here. Information is changing constantly, so please do not rely exclusively on this information or treat it as legal advice; try to confirm or update this elsewhere. Please email me if you are aware of others that should be added to the list. We will try to keep this updated as the crisis continues.
There are emergency loans, tax relief, and interest breaks, from both the public and private sectors that are designed to help float businesses until the virus has been contained and life returns to normal.
Loan Programs for Small Businesses
New loan programs, and modifications to existing programs are an effort to mitigate economic harm caused by COVID-19. These loan programs are designed to help businesses cover working costs while the economy is temporarily on hold.
- The United States Small Business Administration (“SBA”) recently extended the Economic Injury Disaster Loan Program to include economic harm caused by COVID-19. The SBA just approved Governor Cooper’s request to be included in the program, and now small businesses in North Carolina can apply to receive loans to address the effects of COVID-19. These disaster assistance loans offer small business up to 2 million dollars, with a low-interest rate of 3.75%, and a repayment term of up to 30 years.
- Beyond COVID-19 specific assistance, the SBA also offers favorable loansto small businesses designed to help companies that have issues with access to capital. The SBA website contains a lender match program to connect small businesses with the right lender. All SBA loans contain favorable repayment terms that seek to empower small businesses to thrive. If your business is facing access to capital issues, consider contacting the SBA for either disaster assistance or other small business loans which can cover working costs until the spread of the virus has been contained.
Beyond direct financial assistance, the federal government has been working to decrease the burden of the pandemic on small businesses through tax relief.
- The filing deadline for individual taxes has been extended to July 15.
- The IRS officially extended the deadlinefor payment for individuals or companies that will owe money on their 2019 taxes to July 15th. On March 18, 2020, the Treasury Department and the IRS finally issued Notice 2020-17 late Wednesday afternoon, providing guidance on how Affected Taxpayers may defer tax payments due to the coronavirus (COVID-19).
- Beyond the deadline extension, the IRS also instituted a deferment program, where individuals can defer 1 million dollars of tax liability and corporations can defer up to 10 million. This applies to: Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020 for the 2019 tax year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for the 2020 taxable year.
- The North Carolina Department of Revenue has also extended the deadline for filing to July 15.
- However, NC taxes that are not paid by April 15 will accrue interest. Senator Jeff Jackson has said: “Like the federal government, we are moving the due date for state taxes to July 15. However, right now the interest on what you may owe will still start accruing on April 15. Why? Because legally we can’t use an executive order to change the interest accrual piece. We need a new state law for that and that can’t happen without the General Assembly meeting. Which brings us to another point…”
- Finally, the latest relief package passed by Congress contains tax breaks for companies based on payment of sick leave. The new law mandates that employers provide sick leave to employees based on how COVID-19 affects that employee. Some workers can receive up to 12 weeks of paid leave. In exchange for this paid sick leave and insurance premiums, employers will receive tax breaks equal to the amount paid to employees over the course of the pandemic. In planning your company’s survival strategy for the next few months, don’t forget to consider the positive impact of the tax relief provided for by the federal government.
Credit cards and loans
- Many of the major credit card companies have stated they will waive credit card paymentsfor the month of march and the responding interest rates.
- Other credit card companies, such as Citi Bank, have stated they will work with customers to increase credit linesin order to cover immediate expenses.
- Several banks are also trying to ease financial pressure on their customers by removing monthly fees, overdraft fees, and allowing some loans to go into forbearance. Forbearanceis when the lender stops requiring loan payments, but interest still accrues. When analyzing the financial future of your business, be sure to contact your credit card company or financial lender to see if you qualify for any of the discussed programs or can receive any other assistance. Overall private financial institutions have publicly demonstrated a commitment to work with borrowers during this trying time.
Additional Relief Packages
Beyond the resources described, Congress is currently working on a third relief package that will be specifically drafted to support small businesses. The latest economic rescue plan seems slowed down by partisan bickering, but Congress continues to work to reach a compromise.
Work from Home Resources
While economic assistance and federal aid may provide small businesses with crucial support, it is equally important to try to keep your business operating through work-from-home procedures. While not all businesses or employees can implement work-from-home policies, companies should capitalize on available free resources to keep operation as normal as possible.
Several free resources already existed to help medium and small businesses utilize remote employees. Additionally, since the spread of COVID-19, other companies are now offering subscription-based resources for free to further support work-from-home collaboration. Companies such as Microsoft, Google, and Cisco, are offering video conferencing and file-sharing services for free. Other free digital products, such as Airtable, can be used to coordinate and collaborate workflows from a variety of industries and services. Slack, an instant communication and file sharing platform, also provides a free tool that can be used by employers to keep remote operations running as smoothly and efficiently as possible. Please keep these free resources in mind when planning your response to COVID-19.
Some small businesses might also find support during the COVID-19 pandemic by tapping into business interruption insurance. Business interruption insurance is commercial insurance designed to help businesses cover losses when their operations are interrupted by unforeseen disasters. Many company insurance bundles come with business interruption insurance included. Some policies specifically exclude communicable diseases from qualifying for coverage and will only compensate for losses from natural disasters that physically harm a business. Some articles have presented unique arguments for why specific impacts of COVID-19 might qualify under business interruption insurance. If COVID-19’s impact on your business qualifies under your business interruption insurance, you could file a claim for the harm COVID-19 has caused your company. Be sure to take some time to read through your insurance policies to determine if your business is covered by business interruption insurance and if your current situation qualifies for a claim.
Subchapter V Bankruptcy
The bankruptcy code regarding small businesses was amended in February of this year in an effort to increase the success of small businesses who face Chapter 11 bankruptcy. While it is final resort for companies experiencing extreme financial hardship caused by COVID-19, the new Subchapter V of the bankruptcy code could help a small business survive. Though bankruptcy might sound like a scary and extreme course of action, Subchapter V bankruptcy is designed to protect the debtor’s interests and save small businesses. Subchapter V is a recently added subsection of Chapter 11 bankruptcy. Chapter 11 bankruptcy differs from other forms of bankruptcy because it allows the debtor to restructure its debts and find an equitable and practical repayment plan. Subchapter V contains several new provisions that make restructuring unbearable debts smarter, faster, and cheaper and allows the debtor to keep control over the business and the bankruptcy process in general. Upon completion of the 3-5 year repayment plan, the debtor will get to keep his business. As more information about the spread of the virus becomes available, and we better understand how long the economy will be impacted, Subchapter V bankruptcy may become a viable option to save your business.
We will try to update this list as we can, so keep checking in. Our own office fully operating on a remote basis, so feel free to call or email about any of this.