3 Takeaways about the CARES Act for your business
If you’re feeling untethered and don’t know what’s going on with the CARES Act, join the club. The Act was signed into law on March 27th and said we want to make x, y, and z possible. But it doesn’t say how. Now, it’s fallen to the SBA, IRS, US Treasury, banks, accountants, tax attorneys, and small businesses to figure out the administration of getting x, y, and z done.
So when clients turn to me and ask very valid and important questions about the PPP or EIDL or the expansion of unemployment (some of the key features of the Act) I’m left shrugging and saying “we don’t know yet” or “it depends.”
The situation is moving quickly and by the time you’re reading this piece what is known and unknown could be vastly different than the time of writing (April 15th).
Here’s what we do know:
1. The banks have the final say on the PPP. You apply for this forgivable (when certain conditions are met) loan to cover payroll costs through your bank. So regardless of what I, your accountant, the SBA, etc says about the information and requirements to apply, the final say goes to your bank. They are the ones calling the shots about documents required, dates to use for that data, how to prove funds are spent on allowable costs, what is actually forgiven, and more. For specific, nuanced questions about the PPP your best bet is contacting your bank.
2. If you’re self-employed and applying for unemployment, you’re probably getting screwed right now. I am so sorry if you’re in this group because you got the short end of a crappy stick right now. This is because the CARES Act expanded unemployment to include self-employed individuals (including sole proprietors and single member LLCs), however, the state agencies are literally not setup to accept applications from you. Many states (including California where the majority of my clients are based) don’t have the ability to accept self-employed unemployment claims and aren’t sending out money yet. Which doesn’t help when you need money now. The slight silver lining is that you are eligible for the PPP and depending on your state, it may be quicker to apply for the PPP than wait for your state to get its act together for self-employed unemployment claims. Important note: while you can apply for both PPP and unemployment you can only accept one – no double dipping on funding!
3. None of the experts agree about how quickly you should act. There are generally two camps. 1) this is a first come, first served, get your application in yesterday camp. And the 2) there will be plenty of money to go around and even if this first round of funding runs out, it’s almost certain to be re-funded camp. Regardless of which camp you land in, the administrative reality is that banks, SBA, and unemployment offices have a huge number of applications and are doing their best to get through them – but it’s not going to be an immediate delivery (sorry Amazon Prime addicts). Take a deep breath, believe you will be okay (because you will be), and proceed forward in an orderly manner; mass hysteria be dammed.
This by no means an exhaustive explanation of the CARES Act and the nuance of how all the moving parts interact. For a good breakdown of your options Kelli Loo, CPA has a great article here.
I’m Morgaine Trine - the Financial Strategist and Bookkeeper at Honestly Bookkeeping, a firm dedicated to helping creative entrepreneurs create long-term wealth and build sustainable businesses.
The goal of any business isn’t to make money. It’s to support the life, dreams, and goals we each have as an individual. That just happens to take money. And since it does, I’m here to help you bring in the cash, manage it well, and make informed decisions with your finances.
When not behind the computer screen, I'm reading a book or traveling somewhere new. Probably both.
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