In 2008, an estimated 1,000,000 small businesses were forced to shut down. In 2020, in the wake of the COVID-19 Pandemic, this number could hit a new high. Small business has always been considered the backbone of the American economy. Hardworking, salt of the Earth people trying to make a life for themselves are viewed as avatars of the American Dream. However, they are also the ones hit the hardest in times of economic downturn.
Often, small businesses have a much lower cashflow than their corporate counterparts. As the money comes in, the money goes out, usually to pay employees, vendors, rent, or other business expenses. In the case of the Pandemic, non-essential businesses are forced to shut down in order to curb potential infection. While companies controlled by bigger corporations are able to weather this more sustainably, small, independently-owned businesses are not always so lucky.
Small businesses usually operate on a “no work, no money” kind of model. The health of the company is almost entirely dependent on whether or not there is consistent cashflow created by sales or services provided to customers. With shelter-in-place orders issued and restrictions put on the number of people allowed in a close space, small businesses are forced to limit their operations until the orders are lifted. With this comes staffing reductions due to a lack of cash needed to pay employees, limited products or services offered, or, in more dire circumstances, closure of the business entirely.
But there is a solution available for small businesses in the Pandemic.
The CARES Act provides small businesses with the resources they need to maintain their payroll, hire back employees that have been laid off, and cover applicable overhead. Within this plan, there is the Paycheck Protection Plan that guarantees small business owners the funds to maintain eight weeks of payroll costs, including benefits. Owners can also use this money to pay rent, mortgages, or utilities.
Perhaps the biggest selling point of the Paycheck Protection Plan is that all funds provided to small businesses are forgiven when used for payroll costs, rent or mortgage payments, and utilities as long as at least 75% of funds are allocated to these areas. Loan payments will also be deferred for six months. No collateral or personal guarantees are required, and neither government nor lenders will charge businesses any fees. All small businesses are eligible to apply as well.
All of this information can seem pretty overwhelming. It’s an overwhelming time, and there’s no way around it. Echo Tax Management is here to help because we know that we’re in this together. We have several resources available on our website to help you understand what the next best step for you and your business is. Our Founder and CEO even created a video and PDF specifically for the Paycheck Protection Plan so you can know exactly what the plan means to you and how you can benefit from it.