The Small Business Administration’s Covid-19 Economic Injury Disaster Loan program has officially exhausted its funding, but there is still one federal Covid-19 relief option still available for small businesses.
The EIDL program was one of the last remaining loan and grant programs passed by Congress, and many businesses were hoping the program could provide critical funds during a time when they are grappling with soaring inflation and ongoing challenges related to the Covid-19 pandemic.
For businesses that missed out on EIDL funding, experts say the federal Employee Retention Credit could be a lucrative option — although there are several ERC best practices to follow.
Why did the EIDL program end?
The popular Covid-19 relief loan program officially closed to new applications at the end of 2021, but small-business owners who had already received funds were able to request additional amounts in 2022.
Small-business owners who were already working their way through the reconsideration process could also get approved as long as funds were available. But those funds ran out May 5, and the SBA said it would no longer accept additional requests for funds.
Senators are pressing the SBA to transfer additional funds to the program, but it is unclear if SBA has the authority to move money to separate accounts in such a fashion. It is far likelier the agency would prefer to have Congress authorize the agency to move money or allocate more money to the program if Congress wanted more loans processed.
How many businesses missed out on EIDL?
New data obtained by The Playbook found about 18.5% of applicants were approved for the EIDL Covid-19 relief program.
The SBA received more than 21.1 million applications for EIDL and ultimately approved about 3.9 million.
That leaves millions of businesses that sought funding for the Covid-19 relief program but were ultimately unable to receive it. Experts say many of those businesses would be wise to consider their options with the Employee Retention Credit.
What is the Employee Retention Credit?
Initially, the Employee Retention Credit was a quarterly, refundable tax credit based on wages for business owners to retain staff during the Covid-19 pandemic. It was set at 50% of up to $10,000 in qualifying wages per employee for the 2020 calendar year.
The American Rescue Plan Act extended and expanded the ERC to include up to 70% of $10,000 in qualifying wages per employee per quarter in 2021, making it much more lucrative to business owners.
Congress also adjusted the rules so business owners who received money through the popular Paycheck Protection Program also could still benefit from the ERC.
Can I still claim the ERC?
The ERC originally expired at the end of 2021. But the Infrastructure Investment and Jobs Act passed by Congress in November, 2021 instead ended the credit on Oct. 1, 2021, or one quarter earlier than originally planned.
With passage of the infrastructure bill, small-business owners cannot claim the credit for the fourth quarter of 2021. But they can still benefit from it.
The credit carries a statute of limitations of up to three years, which means small-business owners can go back in 2022 or 2023 and claim the credit retroactively for the quarters the credit was available.
What are the requirements for a business to receive the ERC?
Experts say the criteria for receiving the ERC is one reason many businesses haven’t pursued the credit.
Relatively few business owners have taken advantage of the Employee Retention Credit, according to a survey of more than 500 business owners by technology firm Clarus, which helps businesses claim the credit and concluded that only one-third of restaurant owners had taken advantage of the ERC.
The criteria involve whether a business had suffered losses as a result of the Covid-19 pandemic, but it also includes a separate criteria for government actions that forced a business to take losses, such as closures.
Experts told the Business Journals that small-business owners should document everything, in order to make sure they can prove their case if the IRS has questions.
Will the Employee Retention Credit be restored?
Several groups representing small business owners have called on Congress to restore the credit, at least for the fourth quarter of 2021.
It is unclear how much support restoring the tax credit has in Congress, which has struggled for months to gain the support needed to replenish the Restaurant Revitalization Fund or provide any additional grant money for small-business owners across industries that were hit hard by Covid-19.
Additional Covid-19 relief programs also face an uphill battle in Congress. Efforts are ongoing to push legislation through to benefit hard-hit industries, but experts say several obstacles remain.
(Minneapolis- St. Paul Business Journal)