Though the full financial impact of COVID-19 is yet to be determined, many San Diego businesses have had to close their doors to help slow the spread of the virus. This has led to tremendous losses in revenue, unprecedented unemployment and steep wage cuts. No business has been unaffected by COVID-19, and that data indicates that we are entering into an economic recession.
In response to this crisis, the local, state and federal government have created initiatives to help small businesses survive the COVID-19 pandemic by restoring lost revenue with low interest loans and other forms of financial relief. It is still too early to tell what impact these measures will have on our local economy, but businesses and their employees stand to benefit from these programs.
At Laureti & Associates, we work with San Diego businesses of all sizes and at all stages. If your business needs assistance navigating the COVID-19 pandemic, our office remains open and we are here to take your call.
Coronavirus Aid, Relief, and Economic Security (CARES) Act (Phase 3)
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress on March 27th, 2020. The $2 trillion economic relief package was intended to provide direct economic assistance for workers, families, and small businesses, and preserve jobs.
For individuals and families, the CARES Act provides households of up to $1,200 per adult for individuals whose income was less than $99,000 ( or $198,000 for joint filers) and $500 per child under 17 years old – or up to $3,400 for a family of four.
In addition to individual economic relief, the CARES Act includes provisions for America small businesses through the Payroll Protection Program and Economic Injury Disaster Loans.
Economic Injury Disaster Loans
Small business owners in San Diego are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. The loan provides assistance to businesses that are experiencing a temporary loss of revenue caused by COVID-19. Loan funds will be made available to business that successfully apply for the advance and will not have to be repaid.
Economic Injury Disaster Loans are for small businesses with fewer than 500 employees, including sole proprietorships, independent contractors and self-employed persons. Private non-profit organizations or 501(c)(19) veterans organizations affected by COVID-19 are also eligible to apply.
For more information about the Economic Injury Disaster Loan, visit the SBA’s website HERE:
Paycheck Protection Program
Another critical provision under the CARES Act is the Paycheck Protection Program, or PPP. This program has authorized up to $349 billion in forgivable loans for small businesses so that they will be able to pay their employees during the COVID-19 crisis.
PPP loan amounts will be forgiven as long as:
Small businesses can borrow up to 2.5 times their average monthly payroll from the previous year through the Paycheck Protection Program. Payroll costs are capped at $100,000 on an annualized basis for each employee.
Small businesses and sole proprietorships started applying for loans on Friday, April 3, and independent contractors and self-employed individuals were eligible to apply on April 10.
In order to get full loan forgiveness under the program, businesses need to maintain pre-COVID-19 levels of full-time employees. Companies are able to lay off staff while they have the SBA loan, but forgiveness of the loan will be reduced in the event they have reduced full-time staff or salaries. Small businesses have until June 30, 2020, to restore full-time employment and salary levels for any changes made between Feb. 15, 2020, and April 26, 2020” for forgiveness of the loan.
The PPP loans were given on a first-come, first-served basis and already the funds have been depleted. Federal lawmakers indicated that they are close to approving a spending bill that will give the Payroll Protection Program a major boost, proving more opportunities for small businesses to benefit from this program.
In addition to various forms of financial relief, there is a wealth of informational resources and guidance available to San Diego businesses to help them prepare, respond and survive the COVID-19 pandemic. There are a myriad of employment, regulatory and compliance challenges that businesses will have to overcome in addition to financial burdens.
These issues may include:
Although stay-at-home orders have caused some local businesses to shut their doors to the public, there are many businesses that are considered essential and remain open to the public. There are even more businesses that continue to operate remotely. As we work to slow the spread of the virus, businesses will continue to confront novel and challenging issues affecting their day-to-day operations.
Another issue that affects businesses, business owners and employees is housing. Regardless if individuals and business owners are paying down a mortgage or trying to make their monthly rental payments, no one is unaffected by COVID-19.
In order to provide relief to consumers and businesses, Governor Gavin Newsom’s issued Executive Order N-37-20, which authorizes:
These protections are in effect through May 31, 2020, unless extended by Governor Newsom.
In addition, The California Department of Business Oversight (DBO) received support from some national banks and nearly 200 state-chartered banks, credit unions, and mortgage lenders and servicers for temporary delays in mortgage payments, foreclosure sales and evictions for homeowners who are experiencing economic effects from COVID-19.
For some Californians, participating financial institutions will offer residential mortgage payment forbearances of up to 90 days. Participating financial institutions also will waive or refund mortgage-related late fees and other fees including early CD withdrawals. Lastly, participating financial institutions have agreed to delay any foreclosure sales or evictions, and will not share late or missed payments with credit reporting agencies for consumers taking advantage of this COVID-19-related relief, meaning that their credit scores will not be impacted. This relief is currently only available for residential mortgages.
Even after the local economy opens back up for business, it won’t be business as usual. Many of the regulatory and compliance issues that businesses face now will likely continue as lawmakers and business owners make plans for a safe return to work.
Laureti & Associates, A.P.C. is here to help. We realize that this is a confusing and frustrating time for many businesses. If you have any questions about how this virus affects your business, we encourage you to call our office today.
If you have questions, need the advice of a trusted counselor, or simply do not know where to turn, our team is here to help. Contact us today to schedule a free consultation.
If you are unable to visit us in our office downtown during the week, we are more than happy to meet you at your home or in our office over the weekend. Hablamos espanol.