For Iowans with questions about COVID-19, a public hotline is available 24/7: just call 2-1-1.
99% of our businesses in Iowa are small businesses. I’ve been in touch with a number of small business owners who are concerned about the immediate, and future, impact COVID-19 could have on them and the Iowans they employ. As a member of the Senate Committee on Small Business and Entrepreneurship, I’m working hard to provide relief to these small businesses in the most effective and efficient way possible.
The Small Business Administration (SBA) has guidance for small businesses as well as loan resources as we navigate this challenging episode. Small businesses are encouraged to do their part to keep their employees, customers, and themselves healthy. Please take advantage of the resources below:
- Paycheck Protection Program
- Economic Injury Disaster Loan Program
- SBA Debt Relief
- SBA Express Bridge Loans
- Guidance for Businesses and Employers
- SBA Products and Resources
- Government Contracting
- Local Assistance
CARES Act Assistance for Small Businesses
Paycheck Protection Program – The CARES Act establishes the Paycheck Protection Program, a $350 billion loan program to help small and mid-sized businesses with cash flow during the COVID-19 crisis. If the business maintains their payroll (or rehires workers) from February 15 to June 30, the portion of the loan used for payroll costs, mortgage interest, rent, and utilities over an 8 week period would be forgiven.
Both the Small Business Administration (SBA) and the Department of the Treasury have released information on this program. I encourage you to visit their websites for additional details, including the program application and a tool to find eligible lenders.
Who is eligible to receive the loans?
- Businesses with 500 or less employees;
- Businesses that meet current Small Business Administration (SBA) size standards;
- Self-employed individuals and “gig economy” workers;
- Certain nonprofits, including 501(c)(3) organizations and 501(c)(19) veteran organizations; and
- Tribal businesses with under 500 employees.
What is the size of the loans?
- The maximum loan size is 250% of the employer’s average monthly payroll, or $10 million (whichever is less).
What can loans be used for?
- Payroll costs (salary, wages, and payment of cash tips up to annual rate of $100,000 per employee);
- Continuation of health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
- Employee salaries, commissions, or similar compensations;
- Payments of interest on mortgage obligations;
- Rent, including rent under lease agreement;
- Utilities; and
How does the loan forgiveness work?
- Borrowers can be eligible for loan forgiveness equal to the amount they spend on payroll, interest on mortgages, rent, and utilities during the 8-week period after the loan’s origination. However, at least 75 percent of the amount forgiven must be for payroll costs.
- The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year, and by any reduction in pay of employee beyond 25% of their prior year compensation. To encourage employers to rehire any employees who have already been laid off, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
Who makes and approves the loans?
- The loans will be 100% backed by the government, but the authority to make and approve loans is delegated to local banks and credit unions.
- Financial institutions that are already approved 7(a) lenders are automatically eligible to participate, and we expect many other financial institutions to become approved soon. Click here to view find eligible lenders in your area.
If I am applying for / received an Economic Injury Disaster Loan, is my small business eligible to participate in the Paycheck Protection Program?
- Borrowers can apply for both an SBA Economic Injury Disaster Loan and the Paycheck Protection Program loan. However, the Paycheck Protection Program loan funds and the Economic Injury Disaster Loan funds cannot be used for the same purpose. The Paycheck Protection Program loan must be used for payroll (minimum of 75% of the funds received) for it to be eligible for a forgivable loan and the remaining is used for different purposes. Borrowers who accept both loan funds should document the uses of the funds appropriately.
I have already received EIDL – Can I apply for PPP?
- Yes, you are still eligible to apply for the Paycheck Protection Program even if you applied for or received an SBA Economic Injury Disaster Loan.
- If your Economic Injury Disaster Loan was not used for payroll costs, it does not affect your eligibility for a Paycheck Protection Program loan.
- If your Economic Injury Disaster Loan was used for payroll costs, your Paycheck Protection Program loan must be used to refinance your Economic Injury Disaster Loan. The Paycheck Protection Program’s maximum loan amount is $10 million with a fixed 1% interest rate and maturity of two years. Economic Injury Disaster Loan assistance provides up to $2 million loan per business and are long-term, low-interest rate at 3.75% for businesses and 2.75% for non-profits and a maturity of up to 30 years.
- Any advance up to $10,000 on the Economic Injury Disaster Loan will be deducted from the loan forgiveness amount of the Paycheck Protection Program loan.
- For example, a borrower may obtain a loan from the Paycheck Protection Program and use those funds to pay for 8 weeks of payroll or employee retention. They may wish to then dedicate their entire EIDL funds towards working capital, notes payable and accounts payable that do not duplicate the funds provided through the Paycheck Protection Program. If the EIDL loan was used for payroll expenses, the borrower must refinance the EIDL loan with the PPP loan which carries a lower interest rate as well as a shorter maturity period.
Do I have to choose one or the other?
- Select the loan program that best meets your individual business needs; however, you are not permitted to hold funds from both programs for the same purpose.
- The PPP loan has different terms from the EIDL loan. The Paycheck Protection Program’s maximum loan amount is $10 million with a fixed 1% interest rate and maturity of two years.
- Economic Injury Disaster Loan assistance provides up to $2 million loan per business and are long-term, low-interest rate at 3.75% for businesses and 2.75% for non-profits and a maturity of up to 30 years
- The application period for PPP loans runs through June 30, 2020, but the EIDL application period runs through December 2020. If you have working capital need beyond what is provided by PPP, you can apply for additional assistance through the EIDL program.
- If you are applying for both, you can accept PPP first – then decide whether to close on your EIDL approved loan. An EIDL approved loan may be closed within 60 days, and the borrower can choose whether to close on the loan. The EIDL application period runs through Dec. 2020.
Other Resources in CARES Act:
- Employee retention credit – In lieu of the Paycheck Protection Program, employers can opt to receive a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. Available to employers with operations that were at least partially suspended because of a shutdown order, or employers who had gross receipts decline at least 50% relative to the same quarter last year. Click here for more information.
- Delay of payment of employer payroll taxes – Allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Deferred tax would be paid in the following two years.
- Emergency EIDL Grants – The bill expands eligibility for entities suffering economic harm due to COVID-19 to access SBA’s Economic Injury Disaster Loans (EIDL), while also giving SBA more flexibility to process and disperse small dollar loans. The bill would allow businesses that apply for an EIDL expedited access to capital through an Emergency Grant—an advance of $10,000 within 3 days to maintain payroll, provide sick leave, & service other debt obligations. Click here for more information.
- Small Business Debt Relief – The bill requires SBA to pay all principal, interest, and fees on all existing SBA loan products, including 7(a), Community Advantage, 504, and Microloan programs, for six months to provide relief to small businesses negatively affected by COVID-19. Click here for more information.
Families First Coronavirus Response Act
The Families First Coronavirus Response Act gives American businesses with fewer than 500 employees funds to provide their employees with paid leave, either for the employee’s own health needs or to care for family members. More information is available on the Department of Labor’s website.
Coronavirus-related Tax Information
President Trump has announced Tax Day is being delayed until July 15. Individuals and businesses can now file their federal tax returns by July 15.
In addition, the Iowa Department of Revenue has extended the filing and payment deadline for several state tax types, including income tax. The change gives small business owners flexibility during a tough time of disruptions and challenges.
The order extends filing and payment deadlines for income, franchise, and moneys and credits taxes until July 31, 2020. Small business owners who need assistance can contact the Iowa Department of Revenue at firstname.lastname@example.org or call 515-281-3114 or 1-800-367-3388.