EIDL Program Retooled for Still-Struggling Small Businesses

For many small businesses, the grand reopening is still on hold. The rapid spread of the Delta variant of COVID-19 has mired a variety of companies in diminished revenue and serious staffing shortages. In response, the Small Business Administration (SBA) has retooled its Economic Injury Disaster Loan (EIDL) program to offer targeted relief to eligible employers.

A brief history

The EIDL program was in place well before 2020. However, the federal government has ramped up the initiative’s visibility while trying to help small businesses during the pandemic.

With the entire country essentially declared a disaster area, the CARES Act established an enhanced EIDL program for small businesses affected by COVID-19. It offered lower interest rates, longer repayment terms and a streamlined application process.

The American Rescue Plan Act upped the ante, offering eligible companies targeted EIDL advances that are excluded from the gross income of the person who receives the funds. The law stipulates that no deduction or basis increase will be denied, and no tax attribute will be reduced, because of this gross income exclusion.

Latest enhancements

The SBA’s most recent enhancements to the EIDL program offer “a lifeline to millions of small businesses who are still being impacted by the pandemic,” according to SBA Administrator Isabella Casillas Guzman. (Eligible employers include not only small businesses, but also qualifying nonprofits and agricultural companies in all U.S. states and territories.)

First and foremost, the loan cap has increased from $500,000 to $2 million. Eligible small businesses can use these funds for almost any operating expense, including payroll and equipment purchases. Funds can also be applied for certain debt payments. Specifically, the SBA has expanded the allowable use of EIDL funds to prepay commercial debt and pay down federal business debt.

In addition, the agency has implemented a new deferred payment period under which borrowers can wait until two years after loan origination to begin repaying their COVID-related EIDLs.

Application details

If you believe your small business could qualify and benefit from these newly enhanced EIDLs, first identify how much money you need and how soon you need it. The SBA is offering a 30-day “exclusivity window” to approve and disburse loans of $500,000 or less. Approval and disbursement of loans of more than $500,000 will begin after this 30-day period.

The agency has also rolled out a streamlined application process that establishes “more simplified affiliation requirements” modeled after those of the Restaurant Revitalization Fund. The deadline for applications remains December 31, 2021. As is the case with any government loan, it’s better to apply earlier rather than later in case funds run out.

Help with the process

For further details about the new and improved COVID-related EIDL program, go to sba.gov/eidl. And don’t hesitate to contact us. We can help you determine whether your small business qualifies for one of these loans and, if so, assist with completing the application process.

© 2021

Expanding succession planning beyond ownership

Business owners are regularly urged to create and update their succession plans. And rightfully so — in the event of an ownership change, a solid succession plan can help prevent conflicts and preserve the legacy you’ve spent years or decades building.

But if you want to take your succession plan to the next level, consider expanding its scope beyond ownership. Many companies have key employees, perhaps a CFO or an account executive, who play a critical role in the success of the business.

Your succession plan could include any employee who’s considered indispensable and difficult to replace because of experience, industry or technical knowledge, or other characteristics.

Look to the future

The first step is to identify those you consider essential employees. Whose departure would have the most significant consequence for your business and its strategic plan? Then, when you have a list of names, who might succeed them?

Pinpointing successors calls for more than simply reviewing or updating job descriptions. The right candidates must have the capability to carry out your company’s short- and long-term strategic plans and goals, which their job descriptions might not reflect.

Succession planning should take a forward-looking perspective. The current jobholder’s skills, experience and qualifications are only a starting point. What worked for the last 10 or 20 years might not cut it for the next 10 or 20.

Identify your HiPos

When the time comes, many businesses publicize open positions and invite external candidates to apply. However, it’s easier (and often advantageous) to groom internal candidates before the need arises. To do so, you’ll want to identify your “high potential” (HiPo) employees — those with the ambition, motivation and ability to move up substantially in your organization.

Assess your staff using performance evaluations, discussions about career plans and other tools to determine who can assume greater responsibility now, in a year or in several years. And look beyond the executive or management level; you may discover HiPos in lower-ranking positions.

Develop individual action plans

Once you’ve identified potential internal candidates, develop individual plans for each to follow. Consider your business’s needs, as well as each candidate’s personality and learning style.

An action plan should include multiple components. One example is job shadowing. It will give the candidate a good sense of what is involved in the position under consideration. Other components could include leadership roles on special projects, training, and mentoring and coaching.

Share your vision for the person’s future to ensure common goals. You can update action plans as your company’s and employees’ needs evolve.

Account for the job market

Succession planning beyond ownership is more important than ever in a tight job market. Vacancies for key employees are often difficult to fill — especially for demanding, highly skilled and top-tier positions. We’d be happy to help you review your succession plan and identify which positions may have the greatest financial impact on the continued profitability of your business.

© 2021

Consolidation Appropriations Act 2021

As most of you are aware, 2020 has posed some very interesting and complicated business decision requirements, this has not changed for 2021. On December 27, 2020 the Consolidation Appropriations Act 2021 passed as the fourth major relief legislation enacted in response to the coronavirus pandemic. We would like to take this opportunity to present briefly some of the issues that will most certainly, need to be considered by you as business owner and/or manager. It is important to consider all options, as they apply to your individual situation rather than discussed generically.

•      Payroll Protection Plan

o        This has changed considerably with the bill that was signed into law on 12/27/20.

•         Many new items of cost, can now be covered, than were eligible with the original. Additionally, where expenses related to the PPP, could not be used as other support funding, this has been substantially modified. To this degree, it leaves open availing yourself of the Employee Retention Credit, which will offset payroll tax payments.

•         There is now the option that may be available for a second PPP loan for

those that applied in 2020. For those that did not apply in 2020, there is the option to apply for not just one, but two loans, if applied for prior to 3/31/2021. There are some conditions that must be satisfied.

•         The expenses applicable to the PPP loan has now expanded to a broader

expense categories, than was originally stipulated. Items such as covered supplier cost, covered operations expenditure, and covered worker protection expenses, are some of those items.

o        Income and/or expenses that are covered by the first PPP loans were originally not going to be shown on the tax returns. In this manner, forgiven loan amounts would not have been considered to be taxable income. Thus the expenses paid from those funds would not have been deductible on 2020 tax returns. That has been revised. Thus expenses paid by non-taxable income (as result of the loan forgiveness) will now be deductible on the tax returns.

o        Accommodation and Food Services businesses

•         Calculation of allowable payroll expenses is revised and increased over the prior version.

o         Loan may be available to self-employed persons, without a payroll.

•      Employee Retention Credit

o        Originally, this credit could not be claimed if you secured the PPP loan.

However, since COVID lasted longer than expected, and beyond some of the PPP loans, there were uncovered payroll expenses, that might be eligible for this credit. The credit is against payroll tax deposits, and can be either refundable, or a credit to be carried forward to future 941 payroll deposits.

o        This credit has been extended past the 12/31/20 original expiration date until 6/30/20. The credit amount has increased from 50% to 70%, and what was an annual limitation, per employee, has been reduced from yearly limit to quarterly limit. Thus more than doubling the potential credit.

o    Some of the other limitations have been modified, so that amending the 941 payroll deposit report, is an option.

•       Paid Sick and Family Leave Credits

o        This Credit has been expanded through the end of March 2021.

o        Available as a payroll tax credit against the 941 payroll tax deposits, plus partial forgiveness of the employer's portions of payroll taxes.

o        Provided a provision for self-employed individuals to use wages from 2019 versus 2020, which might provide a bigger credit.

o        The credit is for wages paid while the employee is sick from the COVID virus.

o        The Credit is also available for employees that were out because of family members having the COVID virus.

•       Postponement of certain Deferred Payroll Taxes

o        Certain repayment provisions were expanded to 12/31/21

o        Any delayed payments will not be subject to penalties and interest until after the 12/31/21 date.

•       SBA grants

o        There are new grants that have been instituted that apply to organizations, not previously covered under the PPP loans. Details are still being formulated, but the timing of the application is quite near.

As some of these issues are time sensitive, and some require knowledge of payroll tax amendments, we suggest you contact us at your earliest convenience to discuss the situations as it relates to you specifically.