Which COVID-19 Relief Options Are Best for Your Business?

With the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, companies were given additional avenues to pursue in response to the COVID-19 public health emergency. At this point there are three main options for small businesses:


Option 1: LOANS

This includes loans issued under the Paycheck Protection Program (PPP), which was introduced as part of the CARES Act, as well as loans under the U.S. Small Business Administration’s (SBA’s) already established Economic Injury Disaster Loan (EIDL) program. These options can provide desperately needed cashflow to eligible borrowers.


This includes several different tax credits which originate from the Families First Coronavirus Response Act (FFCRA) and the CARES Act, and the option to delay payment of employer payroll taxes. These methods can free up existing cash on hand to allow it to stretch further.


The CARES Act significantly expanded unemployment benefits and eligibility. Although not a benefit for entities themselves, businesses should consider the option of laying off or furloughing employees when determining next steps. By understanding the benefits available to your employees in the event that they are laid off, the company can make the most informed decision about which option would be the best for their business and their employees as a whole.

Each of these options has its own set of eligibility requirements, benefits, and limitations. Below we will discuss the pros, cons, and important considerations for each to help you determine the best fit for your business.



The biggest draw surrounding PPP loans is that the entire balance of the loan is potentially forgivable, and the forgiven amount will not be treated as income to the borrower (in other words, it will not be subject to income tax). That being said, there are many requirements and even more questions surrounding the forgiveness of these loans. Seemingly self-aware of the contradictions and remaining questions, the Interim Final Rule issued by the SBA promises that the SBA will issue additional guidance on loan forgiveness. The SBA’s EIDL program also falls under the loan options and is a good alternative to a PPP loan. It should be noted that both loans have restrictions as to how the loan proceeds can be used. The following provides the details for the PPP loans and EIDLs.

Good fit for:

  • Businesses with 500 or fewer employees. Most businesses applying for the PPP must meet this 500 employee threshold to be eligible. Businesses with greater than 500 employees in certain industries may be eligible if they fall within the SBA’s size standard for number of employees for their industry. (The SBA’s revenue size standards do not apply in this instance.) All full-time, part-time, and other basis employees should be counted in determining eligibility. Businesses with affiliated entities should note that with a few exceptions, companies should be considered together with their affiliated entities for the purpose of determining PPP eligibility.
  • Sole proprietors, independent contractors, and eligible self-employed individuals are eligible for PPP loans, as are 501(c)(3) and 501(c)(19) nonprofit organizations. As such, PPP loans may be a good fit for these individuals and organizations.
  • For companies that need cash immediately. The SBA’s EIDL program has been modified by the CARES Act to allow for an unconditionally forgivable advance of up to $10,000 to be administered to businesses applying for EIDLs. The EIDL program is already established, which means these loans will likely have a smoother time processing than the PPP loans. Further, the CARES Act calls for the EIDL advance to be disbursed within three days of applying for the loan.

Not a good fit for:

  • Businesses that were not in operation as of February 15, 2020. This is an eligibility requirement of the PPP.
  • Companies that only hire independent contractors. As independent contractors are eligible to apply for their own loans, they are not eligible to be included in calculations for loans for eligible businesses. Companies with employees and independent contractors can still apply, but they should not consider their independent contractors when determining PPP loan amounts.
  • Companies that are ineligible for regular SBA 7(a) loans are also generally ineligible. This includes most businesses engaged in lending, most passive businesses, businesses located in a foreign country, businesses engaged in legal gambling activities, and businesses that restrict patronage, among others. The full list of ineligible businesses can be found on page 104 of the SBA’s Lender and Development Company Loan Programs, Standard Operating Procedure.
  • Companies that do not plan to maintain their prior level of employees and compensation. The forgivable portion of the loan is determined based on how the loan proceeds are spent in the eight-week period following loan origination. The forgivable amount is then reduced if the Company was unable to maintain their number of full-time equivalent employees or if they reduced compensation by more than a specified amount. The calculations surrounding these reductions are very specific, and the SBA has not yet issued further guidance. As such Companies with concerns that they would be unable to maintain their current level of employees and compensation in the eight-week period following the loan should be aware that they are at higher risk for not having the PPP loan be fully forgivable.


The FFCRA and the CARES Act both offer tax credits to eligible employers. The tax credits originating from the FFCRA only refund qualified sick leave and expanded FMLA wages (including allocable qualified health plan expense) paid to employees. The FFCRA credits are meant to reimburse employers who are now required to pay such leave as a result of the FFCRA. On the other hand, the Employee Retention Credit originating from the CARES Act provides employers with credit based on a portion of regular wages. Finally, the CARES Act also included the option for employers to delay payment of their employer payroll taxes. Details of each option are discussed below.

FFCRA Tax Credits

As mentioned previously, these tax credits refund employers for required sick and FMLA wages. Businesses and tax-exempt organizations with fewer than 500 employees and qualified wages paid between April 1, 2020 and December 31, 2020 are generally eligible; however, businesses that claim the Small Business Exemption (fewer than 50 employees) are ineligible. The credit refunds 100% of qualified wages. Those claiming this credit should know that required sick leave and FMLA wages cannot be considered when determining payroll costs for a PPP loan.

Employee Retention Credit

The Employee Retention Credit is equal to 50% of qualified wages, with a maximum tax credit amount of $5,000, credit per employee. By default, the maximum amount of eligible wages considered for each employee is $10,000. The definition of qualified wages depends on the number of employees a company has. For companies with more than 100 employees, qualified wages are those that are paid to an employee during the period that the employee is not providing services for the company. Conversely, for companies with 100 or fewer employees qualified wages are those paid to any employee during any period of economic hardship. In order to be eligible for this credit, a Company must fully or partially suspend operations during 2020 due to orders from an appropriate governmental authority or must experience a significant decline in gross receipts during the calendar quarter in which the credit is claimed. Employers seeking this credit are ineligible if they receive a PPP loan.

Delayed Payment of Employer Payroll Taxes

Under this option, qualified wages are those which are subject to social security tax for the period of March 27, 2020 through December 31, 2020. The amounts which will eventually need to be repaid are due 50% on December 31, 2021 and 50% on December 31, 2022. All employers and self-employed individuals are eligible for this loan, except for those that have received a PPP loan for which all or a part was forgiven.

Good fit for:

  • Employers that are otherwise ineligible for the PPP. The eligibility requirements for the different tax options are generally less than those required to participate in the PPP, although each tax option has its own set of requirements. Employers that can’t apply for a PPP loan should investigate the tax options.
  • Companies with sufficient cash reserves. The benefit from the tax credits and the delay in paying employer payroll taxes is that cash which had previously been earmarked for taxes can be put to other use, at least for the time being. The FFCRA and Employee Retention tax credits generally are claimed and recognized when a company files their quarterly 941. Companies that need to recognize the benefit sooner can do so by reducing their federal employment tax deposits. In other cases, eligible employers without sufficient federal employment tax deposits set aside can file a Form 7200, Advance Payment of Employer Credits Due to COVID-19, to claim an advance refund for the full amount of the anticipated credit.

Not a good fit for:

  • Businesses that have received a PPP loan. As noted above, receipt of a PPP loan affects eligibility for all previously mentioned tax options. Businesses that have received a PPP loan can delay their payment of employer payroll taxes up until the date that the PPP loan is forgiven (partially or wholly).


The CARES Act changes to unemployment benefits are significant. Although laying off  or furloughing employees may be the last thing you want to do, it’s important to consider all options available to determine which would be best for both the company and its employees. The CARES Act introduced Federal Pandemic Unemployment Compensation (FPUC), which increases unemployment benefits offered by the state by $600 a week for all people who claim unemployment. The CARES Act also greatly expanded who is eligible for unemployment. Typically, being laid off implies a permanent separation from employment, while being furloughed implies a temporary situation in which benefits are generally retained. In both instances however, employees would be eligible for unemployment benefits.

Good fit for:

  • Businesses that are ineligible for other types of aid. If a business is unable to obtain relief from other sources, it may be in everyone’s best interest to layoff or furlough employees. The employees should be eligible to receive unemployment benefits, including the extra $600 a week, and the Company would be able to significantly reduce their payroll costs for the time being. Likewise, if a self-employed individual is unable to obtain a PPP loan, unemployment benefits should offer some relief.
  • Companies that are having their employees reduce their hours. Employees who have had their hours reduced as a direct result of the COVID-19 health emergency are eligible for the expanded unemployment benefits. This is a change from regular unemployment that should be utilized. Please note however, that companies that have received a PPP loan should avoid reducing employees’ hours as doing so will result in a decrease of the forgivable amount of their PPP loan.
  • Businesses that employ individuals making less than approximately $4,100 per month. (This estimate was calculated based on Maryland unemployment, as maximum unemployment benefits vary by state.) Because of the extra $600 in FPUC, many individuals may find their unemployment benefits under the CARES Act may exceed their regular wages. This is particularly true for low-income workers. For example, an individual making $10 an hour would have regular wages of $400 during a 40-hour work week. In contrast, the $600 of FPUC Act unemployment benefits is equal to $15 an hour for a 40-hour work week, and is received on top of an individual’s regular unemployment benefits.

Not a good fit for:

  • Companies that can have their employees telework with pay. If a company’s employees can work remotely and still get paid, such people are not out of work and cannot apply for unemployment.
  • Companies whose employees are receiving paid sick leave or other paid benefits. Employees who are out of work but are still receiving full pay are not eligible for unemployment.

An important step in any decision making process is understanding all options. Once you’ve analyzed the options and determined the key needs of your business, reach out to your bank and/or accounting professional to get assistance with developing a personalized plan. Even though no significant decision should be rushed into, there certainly are incentives to moving quickly through this process. In particular, the PPP currently has limited funding of $349 billion, although there have been discussions of an additional funding. Nonetheless, the SBA anticipates that demand for this program will be high so those interested are encouraged to act promptly. Due to the high demand, most banks are only servicing existing customers with PPP loans. During this unprecedented time, make sure to utilize all available resources so that the company can be in the best possible shape to move forward after the COVID-19 public health emergency.

Questions? Contact us at covid19relief@hertzbach.com