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How Your Bike Shop Can Make Use of the Federal Coronavirus Relief Act (CARES)

On Friday, March 27th President Trump signed a $2 trillion COVID-19 stimulus package (“CARES”) into law that gives small businesses guaranteed access to relief sources ranging from deferred taxes to forgivable loans intended to cover payroll expenses, paid sick leave, and other benefits.

Below, we cover the essential details on what this means for your business, options available to you, and how you should move forward to claim your piece of that $2 trillion in essential aid.


Understand the relief options available to you

The various provisions in CARES vary from adjustments you can make with your taxes to brand new loan programs focused on maintaining your workforce. Below, we’ve provided an overview of each, starting with the provisions that will help generate cash the fastest and then covering the most impactful options you can take advantage of.


Use two new tax provisions to quickly and reliably generate cash

  1. Delayed payment of employers’ portion of social security taxes: An employer’s portion of Social Security taxes otherwise due from the Enactment Date through December 31, 2020 is deferred. This equals 6.2 percent of payroll. Half of the deferred amounts are due by December 31, 2021; the balance is due December 31, 2022. (Section 2302)

    What to do now: Contact your tax advisor.
  2. Net operating losses of the business can be carried back against prior years’ taxable income, potentially generating an immediate tax refund from the IRS: File 2019 tax returns ASAP. Businesses that incurred a Net Operating Loss for federal income tax purposes in 2018, 2019, or 2020 can carry that loss back for five years, offsetting any taxable income reported in the prior years, and claim a quick refund of income taxes paid in prior years. (Section 2303) 

    What to do now: Contact your tax advisor.

Use the Paycheck Protection Program to cover payroll costs and retain employees with a forgivable loan

Update (4/2/20)The Small Business Administration has announced that it will begin accepting applications from lenders to businesses beginning April 3, 2020. The application is available from participating lenders. The PPP program is first come, first served. Whether you are closed, open, or online-only: Take action now to position yourself at the starting line for when we get through this. Unsure if your bank is an eligible lender? Please see the FAQs below.

For small businesses, including bike shops, the most important feature of The Coronavirus Aid, Relief, and Economic Security Act (CARES) is the Paycheck Protection Program (PPP). By providing $350 billion, it aims to fund approximately 6 weeks of payroll for small businesses in the U.S. Out of every provision in CARE, the PPP will make the biggest impact for independent businesses

What to do now: Contact your bank

How much am I eligible for?

Up to $10 million or  2.5x your average monthly payroll*

*from 2019

FAQ’s about the Payroll Protection Plan

How long are these loans available?

Loans are available through June 30, 2020.

Who’s eligible?

The CARES act waives a variety of restrictions to make applying for these benefits faster and easier for businesses with fewer than 500 employees. Not only does it temporarily guarantee 100% of loans, it also grants eligibility to sole proprietorships and independent contractors.

If I get an Economic Injury Disaster Loan (EDIL), can I get a PPP Loan?

You can refinance an EIDL into a PPP loan to take advantage of loan forgiveness options. Any advance amount received from the EIDL would be subtracted from the amount forgiven by the PPP loan.

What does the loan cover?

Retaining workers, maintaining payroll, and making mortgage, rent, or utility payments. For this matter, ‘payroll costs’ is defined rather broadly. This can include wages, salaries, commission (or similar compensation), payment of cash tips, payment for family, medical, sick leave, or vacation, as well as payment for health care benefits, insurance, retirements, and state and local taxes. Note: there are some limitations for employees with salaries over $100,000 and those based outside the U.S.

Does this include independent contractors?

Yes, the bill includes provisions for “the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period”.

What if I employ seasonal workers?

For seasonal workers, the loan amount is 250% of average monthly payroll costs from February 15, 2019, to June 30, 2019. You can also choose March 1, 2019 as your start date. 

Is any collateral or guarantee required?

No, and interest will not exceed 4%.

Will I need to make payments?

Principal and interest payments are deferred for a period of six months to one year, and typical SBA loan fees are waived. Additionally, when the loan is forgiven, it will not be included in a business’s taxable income.

What if I already applied for another loan?

 If your business has obtained an Economic Disaster Injury Loan, you cannot obtain a loan under the Paycheck Protection Program for the same purpose.


How will PPP loan forgiveness work?

  • Eligibility: Businesses that receive a loan through the Paycheck Protection Program are eligible for forgiveness

  • Forgiveness amount: The forgiveness amount can’t exceed the principal of the loan but may equal your payroll, rent, and utility costs during the 8 weeks following the loan’s origination date

  • Determining partial or full forgiveness: The amount you are forgiven can reduce if you reduce headcount or wages. To avoid reducing your amount of potential loan forgiveness, headcount or wage reductions made between February 15, 2020 and April 26, 2020 must be reversed and returned to pre-decline levels by June 30, 2020 


Use the expanded SBA EIDL Loan Program for longer-term loans, with favorable borrowing terms and fewer restrictions on fund usage

The CARES Act also adds an additional $10 billion to the SBA’s EIDL program, while expanding eligibility and waiving many requirements, including required personal guarantees for loans below $200,000. An advance of up to $10,000 is also available while awaiting final approval, which – according to the SBA – would be forgiven if spent on ‘maintaining payroll and other operating expenses’.

How much am I eligible for?

Up to $2,000,000

With an advance of up to $10,000 while awaiting final approval

Are there forgiveness options for EIDL loans?

No. While CARES does not add loan forgiveness provisions to EIDL loans, if you have already applied for or received EIDLs due to the COVID-19 pandemic, you can seek to refinance EIDL loans under the PPP to take advantage of its loan forgiveness provisions. Remember: EIDL loans are based on your company’s actual economic injury – as determined by the SBA. They may be used for payroll and other costs, as well as to cover increased costs due to supply chain interruption, to pay obligations your business can’t meet, and for other uses. PPP loans must be used to retain workers, maintain payroll, and make mortgage, lease, and utility payments. 

What to do now: Contact the SBA or your bank

Looking for more resources to help your business adapt?

  • Free resources for small businesses adjusting to COVID-19

    From staying productive to staying sane: these free resources are being offered from leading companies to help small businesses like yours stay strong.

  • How to cut costs and boost cash flow with your member benefits

    Learn how member businesses are using their member cost cutting benefits to cuts to a wide variety of everyday expenses

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