The Covid-19 relief loan for the retail industry is a welcome lifeline for struggling retailers.
The Covid-19 outbreak continues to sweep the country, causing devastating damage to our economy and leaving very few businesses standing. One sector especially hit was the retail industry.
On March 27, 2020, after a week of some intense negotiations on Capitol Hill, both the House and the Senate passed a $2 trillion stimulus package to help sustain the faltering US economy.
But how will that help retailers and how can they take advantage of the assistance? Keep reading below.
The CARES Act
The Coronavirus Aid, Relief and Economic Security Act or (CARES) Act has a broad range of benefits which include: one-off checks for individuals and families, tax measures and loans to help keep small and large businesses open and employees on payrolls, in spite of closed shops and depleted sales.
The National Retail Federation’s President and CEO, Matthew Shay, applauded the move, saying:
“Companies that were investing, growing and contributing to a vibrant economy just a few weeks ago have been thrust into survival mode through no fault of their own. They need a bridge to get through this turbulent time and back to the business of job creation and economic prosperity for their workers and the customers they serve.”
Many of the CARES Act provisions will bring retailers much needed benefit, whether it is directly or indirectly.
- Both retailers and restaurants that initiated remodeling projects during the years 2018 and 2019 will receive almost $15 billion in “almost immediate” tax refunds as the legislation fixed a “retail glitch” that occurred due to a 2017 tax reform law. Due to the mistake, companies that were affected overpaid on their federal taxes for the past couple of years. Since the fix, companies can now file amended tax returns and get their refunds. The IRS is available for guidance for this and other “tax provisions.”
- The “Net operating loss carryback” has been reinstated for the tax years of 2018-2020. This essentially means that any companies that have suffered a loss can “carry back” the loss to the more profitable years up to five years prior and get their refunds faster.
- The Employee Retention Tax Credit helps employers to keep their workforce by issuing a credit, “against payroll tax liability of 50 percent of qualified wages for businesses that have been partially or fully suspended as a result of a government order or that have experienced a 50 percent reduction in gross receipts.”
- The collection of all federal payroll taxes is deferred until 2021. The first half or 50% will be due at that time, while the second half, or 50% will be due in 2022.
- The deductions for any interest paid on business loans has now been “expanded.”
- A Paycheck Protection Program of $350 billion will offer “forgivable loans of up to 250 percent of payroll for small businesses with 500 or fewer employees”. This will be available through the Small Business Administration or (SBA).
- The Federal Reserve is set to receive $500 billion in order to support “credit facilities” to carry forth “direct and indirect lending”. The Fed is aiming to offer an excess of $4.5 trillion in overall support.
It will be difficult to assess the overall catastrophic damage the Covid-19 pandemic has had on our economy. For now, the government’s monumental initiative to put money back into individual and businesses’ pockets is one way that the economy can keep from flat-lining. It was also a much-needed lifeline to help prevent the retail sector from experiencing a perilous downward spiral.Get Started Now