Helpful tips and guidance for production companies
There are two primary SBA loans and two tax relief programs available for small business owners.
- Economic Injury Disaster Loans (EIDLs)
- SBA Cares Act Paycheck Protection Program Loans (PPPs)
- Employee retention tax credit
- Employer payroll tax deferral
Economic Injury Disaster Loans (EIDL)
Economic Injury Disaster Loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
Qualified businesses directly affected by COVID-19, including:
- A small business, cooperative, Employee Stock Ownership Plan (ESOP) or tribal business with 500 or fewer employees;
- An individual who operates under sole proprietorship, with or without employees, or as an independent contractor; or
- A private non-profit or small agricultural cooperative.
How much can I get?
The maximum loan amount is $2 million dollars.
What are the loan terms?
- 3.75%, or 2.75% for non-profits
- 10 years
- SBA application is needed.
- The Economic Injury Disaster Loan includes a $10,000 emergency relief grant, which is awarded within three days of applying and does not need to be repaid as long as funds are used for qualifying eligible expenses.
Is there loan forgiveness?
No, except for the $10,000 emergency relief grant, which does not need to be repaid as long as funds are used for qualifying eligible expenses.
Do I have to put up collateral or sign a personal guarantee?
- Collateral is required for loans over $25,000.
- A personal guarantee is required for loans above $200,000.
How do I apply?
Visit the SBA website - SBA COVID-19 Disaster Assistance Portal - to apply.
Paycheck Protection Program (PPP)
The Paycheck Protection Program is a Small Business Association (SBA) loan program specifically designed to help small businesses continue to make payroll at their staff’s current pay rate, as well as cover key expenses that keep the lights on (think rent and utilities). Small businesses and sole proprietors can apply for the loans beginning April 3. Independent contractors and self-employed individuals can apply April 10.
- Businesses with 500 or fewer employees (including FTEs (full-time equivalent) and PTEs (part-time equivalent)), in business as of February 15th, 2020. Affiliation rules apply – businesses under common control need to aggregate all entities to determine the number of employees.
- Sole-proprietors, independent contractors and eligible self-employed individuals
- The maximum loan amount is up to $10 million dollars.
- The loan is limited to the lesser of $10,000,000 or 250% of the average monthly payroll costs (up to $100,000) incurred during the 1 year period before the date on which the loan is made or FY 2019.
- 1099 independent contractor payments are not included in employer payroll. Sole proprietor or independent contractors (up to $100,000 annually) can apply independently.
How do I apply? And what do I need for my application?
You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020.
To get started, first, contact the bank you currently have a relationship with and ask if they are participating in the SBA PPP loan program.
If your bank does not participate, you can find eligible lenders by zip code on the SBA.gov website.
The documentation required for the loan application can vary from bank to bank. At a minimum, you will need to provide payroll tax filings and/or copies of payroll tax records from the last 12 months.
For co-employment arrangements, borrowers can submit documents such as payroll records, bank statements, etc. Actual tax documents (such as Forms 941) are not required to be provided to lenders to qualify for the loans.
Once you have decided to apply for the PPP through your bank, contact your payroll provider to request a report of payroll costs from 1/1/2019 - 3/31/2020, and a letter attesting to your payroll expenses.
What are the loan terms?
- The application period opens April 3, 2020 for small businesses and sole proprietorships and April 10, 2020 for independent contractors and self-employed individuals.
- Loans must be obtained before June 30, 2020.
- The interest rate is 1% over a two year term.
Is there loan forgiveness?
The loan can be forgiven in whole or part provided it is used for eligible expenses. No more than 25% of the amount forgiven can be for non-payroll costs.
Eligible expenses include the following incurred during an eight week period after the loan is made:
- Payroll costs (up to $100K/year/employee)
- Rent under a lease in force before 2/15/2020
- Interest on mortgages incurred before 2/15/2020
- Utilities for which service began before 2/15/2020 (e.g. electric, gas, water, transportation, telephone, and internet)
- Interest on debt incurred before 2/15/2020 (not eligible for forgiveness)
The amount of forgiveness will be reduced to the extent the borrower reduces headcount and wages that are not restored by June 30, 2020. The amount of forgiveness is tax-free to the borrower.
Do I have to put up collateral or sign a personal guarantee? No.
Where can I find more information about the PPP?
Employee Retention Tax Credit (ERTC)
There is a refundable payroll tax credit for 50% of qualified wages and health care expenses paid from 3/13/2020 through 12/31/2020. This credit is for employers who continue to pay their workers after 3/13/2020, whether the employee is able to continue doing their job or not.
The credit is not available if the taxpayer obtains a covered loan under the PPP forgivable loan program.
The credit is for employers subject to closure due to COVID-19 whose (i) operations were fully or partially suspended due to a COVID-19 related shut-down order, or (ii) gross receipts declined by more than 50% when compared to the same quarter in the prior year.
This credit applies regardless of the size of the business or the number of employees, but if there are more than 100 FTEs, the credit only applies to the wages of EEs not working. If there are 100 or fewer employees, then this applies to all wages.
How much can I get?
The credit is capped at 50% of the first $10K of wages per employee (including health benefits), so the max credit is $5K per employee for qualified wages.
How can I file for ERTC?
Because this program is facilitated as a tax credit, you must work with your payroll service to utilize it. Payroll service providers will need to amend quarterly payroll tax filings as a result of the amount of the credit being claimed. Your payroll provider may require documentation that proves employees continued to be paid while not working as well as detailed information regarding the applicable caps on wages and health insurance costs.
The IRS requires all documentation related to this credit be kept for four years and your payroll service provider will need to ensure that all credits are fully documented prior to issuing any tax refunds.
How can I get assistance with the ERTC?
In order to ensure compliance and auditable documentation is maintained, we recommend using an outside service for help in quantifying credit being claimed. This could be an outside accounting firm or a tax credit consultant.
Where can I find more information about the Employee Retention Credit?
Employer Payroll Tax Deferral
Employers can defer up to (6.2%) of their SS payroll tax, and 50% of self-employment taxes. This covers taxes due from 3/27/2020 through 12/31/2020. The deferral amount must be repaid in equal installments by 12/31/2021 and 12/31/2022. The statute imposes no interest charge on the deferred amounts.
This deferral is not available if the taxpayer has debt forgiven on a covered loan under the PPP.
This applies to all businesses, regardless of the size of the business or the number of employees.
How can I utilize the Social Security Tax Deferral?
Contact your payroll service provider for instructions on how to implement this credit.
This information in this communication is general in nature, and is not intended, nor should it be construed, as legal, accounting, tax or other professional advice rendered by GreenSlate, LLC. The reader should contact his or her attorney, CPA, or tax professional prior to taking any action based upon this information.