April 1, 2020

The Small Business Guide to US COVID-19 Assistance

Delay filing and paying taxes, get tax credit, and compare PPP and EIDL loans from the CARES act.

by @maguay

Founding editor @capiche. Writer. Amateur photographer. Information architect. Older work: @zapier, @AppStorm. Personal blog: @techinch.
maguay's avatar

It’s perhaps the most difficult time to run a small business or startup in years, decades even. Even if your family and team aren’t directly affected by COVID-19, there’s a high chance your sales and cash reserves are down and your team members need more time off work to care for family. Fundraising will be difficult and deals will be harder to close, at best.

The good news is there’s help, for every business—especially for those hit hardest.

The confusing part is that it’s a patchwork of help, in delayed tax filing, credit, loans, and more. Your startup might qualify for one or all of them. So here’s an overview of the core programs to help US-based small businesses during the COVID-19 crisis.

Note: This content is provided as a general resource—refer to the original source documents from the US Internal Revenue Service and other US government resources, and consult with your legal and accounting counsel before making any decision regarding these or other financial and tax considerations.

Delay filing and paying taxes until July 15.

for everyone, via IR-2020-58

The easiest COVID-19 relief to use is to wait to file taxes until July 15th. It applies to everyone, even if your business isn’t directly affected.

Tax day for Americans and US-based businesses is traditionally April 15—but in 2020, the deadline to file your 2019 taxes has been delayed until July 15th, 2020. Just file your taxes later; no need to apply for an extension this year.

You can additionally delay paying taxes to conserve cash now—though you’ll still owe the same total amount on July 15th. From the IRS:

“Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.”

More info on 2020 Tax Deadline: irs.gov/coronavirus

Delay paying Social Security Payroll Tax until the end of 2022.

for every business, via Sec. 2202 of the CARES act

Another way companies can keep more cash on hand today is to delay paying payroll tax—the portion of Social Security tax paid by employers—until the end of 2021 and 2022. This also is something any business can use.

Your company will still owe the same amount of payroll tax, and will still deduct income tax from employees’ pay and submit it as normal. But your company can wait to pay payroll tax you would otherwise pay from now until the end of 2020.

The first half of the payroll tax from 2020 will instead be due on December 31st, 2021, and the second half will be due on December 31, 2022. That gives your company a bit more cash to use now—and over two years to get it paid back, almost as an interest-free loan.

More info: CARES act, section 2202 (US Congress)

Get tax credit for paid sick leave and child care leave.

for all businesses with under 500 employees, via IR-2020-57

If your team needs time off due to COVID-19, including for quarantine, sick leave, or child care, your company can get tax credit for their paid leave. This applies to every company with under 500 employees.

There are a few credits available:

  • Paid sick leave (100% pay credit for 2 weeks): If employees are quarantined and cannot work or have COVID-19 symptoms, they can get up to 80 hours of paid sick leave (up to a cap of 10 days, $511 per day, and $5,110 total), and employers can get 100% credit for their pay and any health insurance costs during that time.
  • Child care or COVID-19 care leave (2/3rd pay credit for 2 weeks): If employees need to care for a child whose school is closed due to COVID-19, or if they need to care for someone who has COVID-19, they can also get up to 80 hours or 10 days of pay, and the employer can get a credit for two-thirds of their pay (up to $200 per day and $2000 total).

The credit works by having your company essentially send less to the IRS you would otherwise. Instead of sending the full amount of withheld taxes from payroll along with your company’s payroll taxes, you would first deduct the amount you should get back from the paid leave credit, and only pay the remainder. If your business should get more credit than you would otherwise pay, you can file for an advance payment to receive the full credit amount.

More info: Paid leave tax credits (IRS)

Get 50% of wages as tax credit with Employee Retention Credit

for shut down businesses with 100 or fewer employees, via IR-2020-62

Another tax credit that immediately keeps cash in your business is the Employee Retention Credit. It’s designed to help companies that are temporarily closed or had revenue drop by more than half still keep their team employed.

In short, your company can get half of wages you pay to employees during the crisis, up to $5,000 per employee, as credit.

Here’s how it works. If your business has 100 or fewer employees, and has been either either shut down by government order or with less than half of the sales you had this quarter last year, then you can claim 50% of the wages you pay employees from March 12 through the end of 2020 as tax credit, up to $10,000 in total wages per employee (for a max credit of $5,000 per employee). Or, if your business has over 100 employees and you continued paying employees while they were not working during the crisis, your business may be eligible as well.

As with paid leave, you can immediately keep the credit from taxes you’d otherwise send to the IRS, or can claim a refund if those don’t cover the credit.

More info: Employee Retention Credit (IRS)

Get a forgivable loan of up to 2 months average payroll with Paycheck Protection Program (PPP)

for all businesses with 500 or fewer employees, via U.S. Small Business Administration loan

If your business needs cash to meet payroll, the most directly impactful program may be the Paycheck Protection Program (PPP), from the US Small Business Administration.

PPP lets companies with 500 or fewer employees apply for a loan for the total value of 2 months of average payroll from 2019, plus an additional 25%, up to a total of $10 million or $100,000 per employee, with an interest rate of 0.5%.

Additionally, the loan may be turned into a grant. According to the SBA, “The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities.” Just make sure at least 75% of the loan is used towards payroll costs paid during the 8 weeks after receiving the loan, and that you keep your same number of employees hired at their original pay rates.

Companies can apply for the loan through participating banks and credit unions, without a personal guarantee, starting on April 3. You won’t need to make payments for 6 months, though the full loan will be due within 2 years if you don’t meet the requirements for loan forgiveness.

More info: Paycheck Protection Program site (SBA) and PDF Datasheet (US Treasury)

Get a loan of up to $2 million with SBA COVID-19 Economic Injury Disaster Loan (EIDL)

for all businesses with 500 or fewer employees, via U.S. Small Business Administration disaster assistance

If you need a loan to cover other bills and have 500 or fewer employees, the EIDL program also offers loans directly from the Small Business Administration of up to $2 million to “pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact”.

This is a real loan that won’t be forgiven, though at an interest rate of 3.75% with payment up to 30 years depending on your business needs. You can get both PPP and EIDL loans, though only if they’re used for different purposes (so perhaps PPP to cover payroll, EIDL for other expenses).

The best part of the EIDL is that businesses can additionally pay for a loan advance of up to $10,000 that will not have to be repaid, available within 3 days of application. That part is free; “this loan advance will not have to be repaid,” according to the SBA.

More info:  Disaster Assistance in Response to the Coronavirus (SBA) . Apply: covid19relief.sba.gov

Get state and city-specific grants and loans.

The federal government isn’t the only option. Depending on where your business is based, there may be loan and grant options from your city or state.

New York City is offering up to $75,000 loans to small businesses, with zero interest. California is offering up to $1 million loans for small businesses, while individual cities are offering various amounts including $5-20,000 loans in LA. Seattle is offering grants of up to $10,000 to affected businesses.

Check with your local and state government websites to see what’s available in your area, or check this spreadsheet put together by the Gusto for details on dozens of local assistance programs.

Save on software.

Grants and loans help most directly with a cash infusion into your company, but cutting costs can help as well. You could cut out software that isn’t critical to your work, or reduce seats to pay only for what’s needed. Or, many popular SaaS products are offering free extended trials or additional features to help teams out during this time. If you need a new tool or are considering unsubscribing from something, it’s worth checking first to see if they have any discounts available.

Here are some of the best offers right now:

  • 1Password: Free 6 month trial for 1Password Business.
  • Adobe: Adobe’s often offered 2 months free if you ask to cancel your plan. That’s now an official part of their cancelation process, so if you go to cancel Creative Cloud now you can get 2 months free if you keep your subscription.
  • Affinity: 50% off all apps and 90 day free trial.
  • Ahrefs: 15 days free on Standard plan, for existing customers. Login and click on in-app notification to receive credit.
  • Atlassian: All of their small tier plans are now free, so teams of up to 10 can use Jira and Confluence, teams of 5 can use Bitbucket, and teams of 3 can use Jira service desk for free.
  • AWS: Credit and support for teams working to diagnose, detect, and research COVID-19.
  • Calendly: Free Zoom and GoToMeeting integrations through June, and free premium plans to those working directly on COVID-19.
  • Cloudflare: Free teams plan for small businesses for 6 months.
  • Gusto: Existing customers are emailed an offer to defer payments for 3 months.
  • Google Meet: Free advanced Hangouts Meet features with all paid G Suite accounts, for 250 participants per call or 100,000 livestream viewers and recording calls to Google Drive.
  • HubSpot: Reduced Starter plan price from $112.50 to $50/month, and removing marketing email send limits.
  • Loom: No recording limits and 50% discount until July.
  • MainStreet: Helps startups find grants and tax credit that can help, including new PPP and other CARES act credits.
  • Microsoft Teams: Now included in every Office 365 or Microsoft 365 plan, including personal and family plans.
  • Mural: Free 90 day trial for all new users.
  • Netlify: Free Pro team plan for 6 months if you’re building apps and sites to help track and fight COVID-19.
  • Quip: Free Starter plan for unlimited users until September 30.
  • Shopify: Free 90 day trial, and gift card support included on all plans.
  • Slack: Free paid plan and consultation for teams working on COVID-19 research or response.
  • Yac: Free pro plan for 3 months.
  • Zapier: 3 month Starter plan free for private companies with 10 or fewer employees who are “impacted by social distancing in an outsized way” and are existing customers, with application.

Additionally, if your company is eligible for any of the dozens of startup software discounts, it’s worth applying for those right now, too.

Find any other discounts? Share them in the discussion below and we’ll keep this article updated with the best ways to save during this time:

Question
Have you renegotiated your pricing for any SaaS in light of COVID-19 and the shaky market?
Answer
NBNite's avatar
8 points

Yes - listed below in order of companies that were most proactive about helping out:

1) Gusto - as a small business, we received an email last week asking if it would help to differ payments by 3 months. We'd still have to pay the total at the end of the deferment, but holding on to cash in this environment is super important.

2) Zapier - They emails users to submit a survey to apply for their Small Business Assistance Program. For companies with < 10 employees and directly impacted by this crisis, you could apply (1 account per company) to get 3 free months of their Starter plan. Incredibly helpful and amazingly proactive!

3) Hubspot - Our contract was finishing up at the end of Q1 and we were able to get significantly discounted rates (normally available only for multi-year contracts) on a quarterly plan with a 30-day pay period.

Still waiting to hear back on a few others but for the most part, it seems like the larger saas providers have stepped up to help in some regard to help small businesses weather this storm.

Answer
jcfuller's avatar
4 points

Yes, we've done that. Especially one the slow-creep ones. Services like DataDog, Atlassian and others that let you easily just creep your costs up. But renegotiating things like DataDog also took engineering resources to cut certain things and change the way API calls were being made, etc. so it's no small feat. But it is a substantial savings (And right now that might mean another month of runway.) Most are looking very closely at churn metrics, and one tactic I would encourage, if it makes sense for you, is to ask for flexibility versus a change in terms -- for most of our applications, we know we'll still use them, but we might have headcount fluctuations. So we've had success in moving to true-up/down or flexible licensing with a renegotiation term in 12 months to give us room to flex hard in the short term, and work our way back in the long term. As always, YMMV.

Answer
osbennn's avatar
4 points

I have not!

But I've been wondering about how long-term, loyal, paying users feel about all of the free access offers that SaaS companies are making. It's a great brand posturing move on the part of the software company, and it's a great acquisition opportunity, but what about the core user base?

Glad to see elsewhere on this thread that many are making sure to (even proactively, in some cases) extend these benefits to the older cohorts.

Additional Resources:

Header photo by Annie Spratt via Unsplash

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