Sen. Schatz COVID-19 Small Business Guide

HONOLULU – U.S. Senator Brian Schatz (D-Hawai‘i) today released a resource guide to help
Hawai‘i small businesses better understand how to access federal loans and new programs
established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The
bipartisan $2 trillion CARES Act is the largest aid package in American history and was signed
into law on Friday.

“This new law will help Hawai‘i small businesses meet their payroll and provide people
with paychecks for up to eight weeks,” said Senator Schatz, a member of the Senate
Appropriations Committee. “As more federal help becomes available, we’ll continue to work
to provide more information about how Hawai‘i families and businesses can access these
new resources.”

The CARES Act provides relief for small businesses that have trouble covering payroll and
operating expenses because of the COVID-19 pandemic. The new law creates a Small Business
Administration (SBA) loan program, called the “Paycheck Protection Program” (PPP), that
expands benefits and eligibility for SBA disaster loans, covers payments on existing SBA loans,
and creates new tax credits to help cover the cost of paid leave and payroll.


SBA Paycheck Protection Program

The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10
million to cover payroll and other operating expenses. Up to 8 weeks of payroll, mortgage
interest, rent, and utility costs can be forgiven. Payments on principal and interest are deferred
for one year. 

SBA Economic Injury Disaster Loans

The CARES Act creates a new emergency grant of $10,000 for small businesses that apply for
an SBA economic injury disaster loan (EIDL). EIDLs are loans up to $2 million with interest
rates of 3.75% for businesses and 2.75% for nonprofits, and principal and interest payments
deferred up to 4 years. The EIDL loans may be used to pay for expenses that could have been
met had the disaster not happened, including payroll and other operating expenses. The EIDL
grant does not need to be repaid even if the applicant is denied an EIDL. A small business may
apply for an EIDL grant and a Paycheck Protection loan. The EIDL grant will be subtracted from
the amount of the Paycheck Protection loan that is forgivable. More information on this program
is available here.


Debt Relief for New and Existing SBA Borrowers

For small businesses that already have an SBA loan (such as a 7(a), 504, or microloan) or take
one out within 6 months after the CARES Act is enacted, the SBA will pay all loan costs for
borrowers, including principal, interest, and fees, for six-months. SBA borrowers may also seek
an extension of the duration of their loan and delay certain reporting requirements. More
information on this program is available here.


Relief for Small Business Government Contractors

If you are a government contractor, there are a number of ways that Congress has provided relief
and protection for your business. Agencies will be able to modify terms and conditions of a
contract and to reimburse contractors at a billing rate of up to 40 hours per week of any paid
leave, including sick leave. The contractors eligible are those whose employees or subcontractors
cannot perform work on site and cannot telework due to federal facilities closing because of
COVID-19. If you need additional assistance, please reach out to your local Small Business
Development Center, Women’s Business Center, SCORE chapter, or SBA District Office. You
should also work with your agency’s contracting officer, as well as the agency’s Office of Small
and Disadvantaged Business Utilization (OSDBU).


Employee Retention Tax Credit

The CARES Act creates a refundable payroll tax credit for businesses, large and small, that
retain their employees during the COVID-19 crisis. Employers are eligible if they have been
fully or partially suspended as a result of a government order, or they experience a 50%
reduction in quarterly receipts as a result of the crisis. For employers with 100 or fewer full-time
employees, they may claim a credit for wages paid to all of their employees, up to $10,000 a
person. For employers with more than 100 employees, they may claim a credit for those
employees who are furloughed or face reduced hours as a result of the employer’s closure or
economic hardship. The Department of the Treasury is authorized to advance payment of the
employee retention tax credit. This tax credit is not available if the employer takes an SBA
paycheck protection loan.


Payroll Tax Delay

The CARES Act allows employers to delay paying the employer-portion of payroll taxes through
the end of 2020. The deferred amount is due in two installments - 50% is due before December
31, 2021, and the other 50% is due before December 31, 2022. Deferral is not available if the
employer takes an SBA paycheck protection loan. More information is available here.
Advance Payment of Tax Credits for Paid Leave

The CARES Act allows the Treasury to send advance payments of tax credits available to
employers that are required to provide up to 12 weeks of coronavirus-related paid leave to their
employees.


Business Tax Relief

The CARES Act provides other forms of tax relief for businesses, including loosening
requirements for net operating losses, and limitations on business interest deductions. The
CARES Act also permanently fixes the qualified improvement property (QIP) error in the 2017
tax law, so that QIP investments are entitled to 100% recovery over 15 years. Distillers are
exempt from excise taxes on undenatured alcohol for the purpose of producing hand sanitizer.
More information is available here.


Delay for Single Employer Pension Plans

Single employer pension plans are allowed to delay quarterly contributions for 2020 until the end
of the year. Employers may also use 2019 funded status for the purposes of determining fundingbased
limits on plan benefits for the plan years that include 2020.

For more information about SBA loan programs, please visit the Small Business Administration
website. More information about small business programs in the CARES Act and other resources
for small businesses can be found on the U.S. Senate Committee on Small Business and
Entrepreneurship website.

If you need additional assistance, please reach out to your local Small Business Development
Center, Women’s Business Center, SCORE chapter, or SBA District Office.
For more information about tax issues, please check the IRS’s website at
www.irs.gov/coronavirus.

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