Financial Planning for Small Businesses During COVID-19
ICE alum and entrepreneur Jenny Dorsey (Culinary, '12) shares her findings from navigating taxes, loan forgiveness and family leave.
As an independent contractor and the founder of a nonprofit, I’ve been learning a lot about navigating personal finances and small business ownership among the circumstances of the COVID-19 crisis, reading information across the internet. Here's a Q&A for fellow food business entrepreneurs.
Can I apply to both the EIDL and the PPP?
Yes, you can apply to the EIDL and the PPP, but the funds cannot be used for the same purposes. If you receive the up to $10,000 grant as part of your EIDL, that amount will be deducted from the loan forgiveness amount allowed in the PPP.
If I receive an EIDL grant or have money forgiven in my PPP, is that taxable?
No, typically this counts as taxable income but the government has waived that for now.
Can I claim the Employee Retention Credit and receive a loan under PPP?
No, unfortunately, they are mutually exclusive.
Can I defer my payroll taxes and receive a loan under PPP?
Yes, you can receive a loan under PPP but you cannot receive any loan forgiveness, even if you spend it in the forgivable categories.
How much of the PPP is forgivable?
Up to 100% of the entire loan is forgivable as long as it’s spent on the “forgivable” categories as outlined by the CARES Act. However, at least 75% of this must be payroll costs in order to keep the forgiveness amount intact and your employee count must stay the same (see below).
Can I still receive loan forgiveness under PPP if I’ve had to lay off employees?
Yes, but your amount of loan forgiveness allowed will be reduced if your employee count is reduced. You have until June 30, 2020 to reinstate any employees you may have laid off or furloughed previously.
How much do I have to pay for additional sick and family leave policies?
Under the updated paid sick leave laws, full-time employees can receive up to 80 hours of paid sick leave, part-time employees receive the amount based on the average hours they work during a two-week period. There are monetary caps on how much employees can reach per day and what the total is over the entire period.
Under the updated paid family leave laws, all employees that have been employed at least 30 days and cannot work remotely while caring for children whose schools or care facilities have been closed due to COVID-19 are entitled to up to 10 weeks of paid leave.
You can receive a tax credit for the full amount of the qualified sick leave or family leave, which also includes the payroll taxes associated with that leave.
There are also exceptions for this paid leave for businesses with under 50 employees.
Does my business interruption insurance cover COVID-19?
Unfortunately no, most business interruption insurance policies do not cover COVID-19. However, there is some legislation that has been proposed in New York, New Jersey, Massachusetts and Ohio to require insurance companies to cover businesses retroactively, so you can call your representatives to show your support if you so choose.
Do I have to pay rent, utilities, electric, gas?
Many cities have put stays or moratoriums on evictions for non-payment from residential and commercial tenants. However, you are still liable to pay the rent whenever the rule is lifted and you may be charged interest. (Landlords can also technically pursue legal action if they want to.) If you really cannot afford rent and you are considering not paying this month, make sure to notify your landlord in advance and communicate how you’ve been impacted by COVID-19 so the two of you can figure out a payment plan. (Worth noting: The “force majeure” clause on most leases will not cover COVID-19 as it is not physical damage.)
Many utilities, gas and electric providers have said they will suspend shutoffs due to non-payment and waive late fees. You still owe this money, but you should definitely contact your provider to ask for possible deferrals to manage the cash exiting your business. (Worth noting: If these are automatic debits from your bank account, you may need to un-link your account.)
Is my business tax filing also extended?
No, only federal business income tax has been extended to July 15, 2020 (check to make sure that’s the same date as your state). However, you can call your local tax authority and ask for an extension – most are purportedly open to this right now.
Can I sell gift cards for my business for customers to redeem later?
Yes! However, make sure to read up on escheatment laws that denote the requirements for turning over unclaimed property (e.g. gift cards) to the state after a certain amount of time. Gift cards can become a real financial (and legal) headache if not registered and accounted for properly.
I hope this is helpful! For a deeper dive into the topics above, my nonprofit has more extensive resources, detailed here.