The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains a business relief provision known as the employee retention credit, a refundable payroll tax credit for “qualified wages” paid to retained employees between March 13 and December 31, 2020.1

As a reminder, employers whose business has been financially impacted by COVID-19 can take advantage of the Employee Retention Credit, a refundable tax credit designed to encourage businesses to keep employees on their payroll. The credit is worth 50 percent of up to $10,000 in wages paid by an employer. Employers that are eligible for the credit for the first and second quarters of 2020, can apply for the credit when they file their second-quarter filing of Form 941, Employer’s Quarterly Federal Tax Return, which is due July 31st.

Available to all employers regardless of size, including tax-exempt organizations with only two exceptions: State and local governments and small businesses that make small business loans. Qualifying wages are based on the average number of a business’s employees in 2019 and are divided into employers with fewer than 100 employees and employers with more than 100 employees.

When employers report their qualified wages on Form 941, they can reduce their required deposits of payroll taxes withheld from employees’ wages by the amount of the credit. Eligible employers also may use the employee retention credit with other relief including payroll tax deferral and can also request an advance of the employee retention credit by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19. Please call our (561) 995-0064 office with any questions.

Whether you’re a startup in the early stages of a business, a growing company looking to fund new initiatives, or your business needs capital to bridge a gap in cash flow. Some businesses might turn to an investor, but for most small business owners, it will likely be securing a small business loan.

What to Do Before You Apply for a Loan

1. Start with a business plan
2. Prepare financial statements
3. Clearly state the purpose and amount of the loan
4. Look into your personal credit history
5. Know your capacity for collateral
6. Understand what the loan will cost you in the end
7. Research your borrowing options

The key is to understand your bank wants, and how to properly approach them, can mean the difference between getting a loan for expansion or scrambling to find cash from other sources.

Each Banking Institution is Different
A bank will typically not make business loans to any size business unless a checking account or money market account is maintained at that institution. Ultimately your task is to find a business-oriented bank that will provide the financial assistance, expertise, and services your business requires now and is likely to require in the future.

Banks differ in the types of financing they make available, interest rates charged, willingness to accept risk, staff expertise, services offered, and in their attitude toward small business loans. Selection of a bank is essentially limited to your choices from the local community. Typically, banks outside of your area of business are not as anxious to make loans to your firm because of the higher costs of checking credit and of collecting the loan in the event of default.

Build Rapport
Bankers are essentially conservative lenders with an overriding concern for minimizing risk. Logic dictates that this is best accomplished by limiting loans to businesses they know and trust. One way to build rapport and establish trust is to take out small loans, repay them on schedule, and meet all requirements of the loan agreement in both letter and spirit. By doing so, you gain the banker’s trust and loyalty, and he or she will consider your business a valued customer and make it easier for you to obtain future financing.

Provide the Information Your Banker Needs to Lend You Money

A sound loan proposal should contain information:

• Exactly how much money is required?
• What is the specific purpose of the loan?
• What is the exact source of repayment for the loan?
• What evidence is available to substantiate the assumptions that the expected source of repayment is reliable?
• What alternative source of repayment is available if management’s plans fail?
• What business or personal assets, or both, are available to collateralize the loan?
• What evidence is available to substantiate the competence and ability of the management team?

Gather your documents:

Depending on the lender, you’ll need to submit a combination of the following documents with your application:

• Business and personal tax returns.
• Business and personal bank statements.
• Business financial statements.
• Business legal documents (e.g., articles of incorporation, commercial lease, franchise agreement).

If you need assistance deciding which bank best suits your needs and provides the greatest value for your business operation, contact us today!