By Steven Davidson
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More than three months into the economic shutdown, many businesses are still being forced to remain closed. This is especially true for small, nonessential businesses in states that have either been experiencing a spike in Coronavirus cases due to reopening or have not even begun this process at all. The spikes from states choosing to reopen is likely to scare some states out of letting small businesses resume operations while those reporting case increases may be forced to take a step back. The government had implemented the CARES Act in late March to help fight the financial hit on many Americans and their businesses, but the backlog of applicants and possibility of rejection have left some small businesses struggling. For a larger explanation of the current PPP’s downfalls, click HERE.
Luckily, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act as a follow up to the CARES Act. It provides another $3 trillion to help workers on the front lines, more money for stimulus checks, and financial help to businesses. The question is, what exactly does this act do for small businesses and their owners? There are many ways it plans to help small business owners, which will be discussed below. For a full list of the programs being offered by the HEROES Act, click HERE.
Stimulus Check Number 2
The CARES Act provided people with a stimulus check for up to $1,200 to help them combat the financial burden caused by the pandemic, but nearly everyone believed this to be inadequate. The HEROES Act looks to increase the amount given to households by accounting for parties that were excluded in the first round of payments, like dependents over 18. It has been estimated that a household could receive upwards of $6,000.
CBS states that low and middle-income households would be the main ones to receive the checks, with higher income classes only receiving checks if they have qualified dependents. Like the CARES Act, the high income cutoff is $98,000 a year for single taxpayers and $199,000 for married couples. Children will be broadened to include 17 and 18 year olds, who were excluded in the previous round of funding, with each one eligible for payments of $1,200 each for up to three children. Parents will also be happy to hear college students claimed as dependents will be counted into this as well. In addition, immigrants married to American citizens that do not have a social security number will be included in this round of funding.
Though business owners will benefit from the increase in the amount available from this check, there are a few negatives it does not address. Much like the CARES Act, this is only a one- time payment and may still not be enough to keep business owners afloat for very long. This is even more blatant, considering the original checks were spent so quickly by lower and middle class Americans. Much of the funding is also dependent on the number of people claimed under the filers taxes, so owners without children to claim will receive less than those who can. Small business owners should try to claim as many dependents as they can in order to get the most from the check. The bill has yet to be passed, so information on how this will be processed is not yet available. However, it will likely be similar to the CARES Act system.
Fund for Essential Workers
The HEROES Act provides a substantial portion of the funds to help pay essential workers for all their hard work on the front lines. Around $200 billion is being allocated to give essential workers a form of hazard pay. Hazard pay is essentially a higher rate of pay for jobs in which workers are exposed to higher risks of injury or death. During the pandemic, many agree essential workers have been put at a much higher risk of catching the Coronavirus, so it seems fair that they would be compensated in some way for their efforts. Both Republicans and Democrats echo this sentiment, so the future of this funding seems promising.
This would only be beneficial for essential small businesses, but these owners can greatly benefit from this provision. For one, owners who play a hands-on role in their businesses can potentially claim part of this hazard pay for themselves. Another benefit is that owners of these businesses can entice potential employees with a boost in their pay, so they can either expand or retain their workforce while the pandemic still rages on.
Debt.org details that the current plan is for $13 per hour of work performed from January 27, 2020 until 60 days after the last day of a Covid-19 public health emergency. The website also provides a list of the industries that qualify, so visit their site to see if your business qualifies. Some of these jobs include laundry services, waste disposal, and transportation as well as food services.
Further Expansion of the Paycheck Protection Program, Emergency Injury Disaster Loan Program, and other SBA Programs
The Paycheck Protection Program (PPP) and Emergency Injury Disaster Loan Program (EIDL) were both attempts to help small businesses through times of diminished revenue. Unfortunately, this was not the result. Large corporations took advantage of the PPP and left small businesses out, while the EIDL was left almost completely drained within a month and forced to take only agricultural applications. The HEROES Act has addressed these problems and focused future efforts on those who need it most.
PPP loans will be restructured in the following ways:
● A portion of the funds will be allocated to specifically target small and underserved communities, including minority and economically disadvantaged owners
● 25% of the funds will go to small businesses with 10 or fewer employees
● 25% of the funds will go to non-profits, with at least half of this going to those under the 500 employee threshold
● Returned amounts will be redistributed through loans to small businesses with 10 or fewer employees
● Creates a 5 year minimum maturity on the loan
● PPP loans cannot be calculated on a compound basis
● Allows borrowers deemed ineligible due to criminal history greater access to the loans
● Eliminates the 75/25% rule for funds allocation to qualify for forgiveness
This is especially helpful for businesses with low employee costs but still have
other costly obligations
The Act also addresses the EIDL program by providing another $10 billion in funding.
Beyond the stimulation of these programs, the HEROES Act looks to strengthen many of the Small Business Administration's economic recovery programs to provide small businesses even more options for funding. The act would waive fees for SBA 7(a) and 504 loan programs and expand the annual lending limit on 7(a) programs from $30 to $75 billion. Here are a few more changes to their programs:
● Increases guarantee on 7(a) loans 90%
● 504 loans have a 90% guarantee on loans up to $350,000 and 75% for any greater loans
● Enhances 504 refinance programs to help small businesses with expensive fixed assets
● Adds $75 million to the SBA microloan program and increases the maximum loan amount from $6 million to $10 million; also adds 2 years to repay
● Enhances the cybersecurity of the SBA
For the full list of proposed changes, click HERE.
Extends Unemployment
The Coronavirus has rapidly increased the levels of unemployment in the American job market, causing many to take advantage of the current programs available for those out of work. Currently, the CARES Act provision on unemployment will expire in July, keeping those who are currently relying on it to survive scared for the future. The HEROES Act looks to expand the benefits until January, 2021. For sole proprietors and independent contractors, this would allow them a sigh of relief as we wait for a return to normal life. Unemployment is currently paying up to $600 a week, giving many adequate income to keep themselves sustained until their regular revenue returns. Please keep in mind this has not been passed yet, so do not rely on unemployment to be extended past July until further notice.
Housing Assistance
Business owners who have been at risk of losing either their personal residence or business lease can look forward to the possible $175 billion being allocated to help make monthly payments on mortgages or rent. The funds can be used by those needing money to make monthly rent and mortgage payments as well as utility costs and other housing related expenses.
Resources for Elections
This is not a direct way the HEROES Act is helping small businesses earn money, but it is empowering them to still be able to make a change with their votes. The act would answer a lot of questions Americans had about how the upcoming election would be possible without corruption or causing another mass outbreak. By providing new resources to ensure safe and secure elections, providing an accurate census, and funding the Postal Service, there is some hope that the elections can be done without endangering the health of millions of Americans. Small business owners who want to elect officials they believe will help them in the future can hopefully still keep that right preserved in a safe way.
Things to Consider on the HEROES Act
This bill may provide relief for small business owners, but there are still a few downfalls of the program that could put owners at risk. Forbes states there are a few glaring problems. The HEROES Act does not contain automatic stabilizers, or provisions that cause spending to rise or fall automatically based on the current state of the economy. Instead, flat budgets are allocated to certain places, just like all the other relief programs. The problem with this is the programs being expanded, like state aid and unemployment, could be extended unnecessarily were the economy and nation overall to return to normal. Unemployment expansion especially could be harmful because it incentivizes people to stay on the program rather than return to work, which could be devastating for businesses looking to reopen and in need of a full workforce.
So far, the HEROES Act has not been put to vote by the Senate, which means people will not see any of these relief options yet. According to FCW, Senate majority leader Mitch McConnell disagrees with the bill in its current form, calling it a “seasonal catalog of left-wing oddities.” It is likely the act will be modified to make both parties happy since it currently does not seem to sit well with most of the Republican representatives. Hopefully, they reach a resolution soon, but this will most certainly mean there will be modifications to the current proposal, so be sure to stay updated on its future.
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