The CARES Act: What practices should know
The Coronavirus Aid, Relief and Economic Security (CARES) Act, passed March 27, is an attempt to provide relief to not only individual Americans and large corporations, but also to small businesses that are struggling from coronavirus-related economic woes.
The CARES Act provides $377 billion for small business relief. Veterinary practices can take advantage of the new law by applying for some of the loan programs ASAP.
Veterinary practices that qualify as “small businesses” under the new act must have fewer than 500 employees. The bill could potentially benefit veterinary practices in several ways. Note: This is general information and if you decide to look into any of these programs further, you will need to check with your bank or accountant.
Paycheck Protection Program
Qualifying veterinary practices will be able to apply for loans of up to $10 million, based on average monthly expenses. These loans will be provided through banks that work with the Small Business Administration (SBA) and are designed mainly to be used to cover employee paychecks from Feb. 15 through June 30, 2020.
If the practice pays its employees their normal paychecks for those eight weeks, the loan will be forgiven. This means that even if a practice’s revenue takes a major hit due to the coronavirus pandemic, it can continue to pay staff their regular wages for at least eight weeks. The loan cannot be used to cover paychecks of over $100,000 per month.
Loans will also be forgiven if money borrowed is used to cover mortgage interest (not including actual mortgage payments), rent, or utility payments during the eight-week period.
However, if you reduce your workforce, or reduce staff salaries during this time, the amount forgiven will be affected.
Economic Injury Disaster Loan Emergency Advance
Need a quick $10,000?
Veterinary practices can apply for an Economic Injury Disaster Loan (EIDL) to cover expenses during the pandemic. EIDLs are low-interest loans of up to $2 million that can be used to cover payroll and other operating expenses that are negatively affected by the disaster. Now, when applying for this type of loan, you can request an emergency advance of up to $10,000 to help cover immediate operating costs.
To get the advance, you will need to apply for the EIDL loan, but you won’t need to repay the advance even if denied the actual loan. However, if you do get this advance, it may reduce the amount forgiven in the Paycheck Protection Program loan. The SBA says the advance can be available within three days of a successful application.
You can start your application right now by clicking here.
Employee Retention Tax Credit
If you needed another incentive to keep everyone on your payroll, the CARES Act includes the Employee Retention Tax Credit.
If your practice’s operations were fully or partially suspended due to a government directive (not likely since most veterinary practices have been deemed “essential businesses”), or if your gross receipts declined by more than 50% when compared to the same quarter last year, you are eligible for a refundable tax credit.
The credit is equal to 50% of qualified wages that you pay to employees, including healthcare costs. As with all of these new changes, there are lots and lots of fine print and details that come into play.
More information on these tax changes can be found here.
Photo credit: © iStock/Michael Tatman