A portion of the $2.2 trillion economic stimulus package will help New Jersey businesses retain existing employees after the COVID-19 pandemic caused businesses to close.
Ray Cantor, vice president of government affairs at the New Jersey Business & Industry Association, spoke with NJBIZ about a portion of the nearly 900-page law. Roughly 99.6 percent of New Jersey businesses are small businesses that employ 49.8 percent of New Jersey employees.
One provision included in the package is the Paycheck Protection Loan. The Federal Small Business Association will provide loans totaling $350 billion across the United States for up to $10 million apiece to individual businesses. Small businesses with less than 500 employees are eligible for up to $10 million forgivable loans to use for payroll costs, mortgage interest payments, rent and utilities. Loan payments are deferred for six months. The Small Business Association will start work with New Jersey banks in this capacity starting April 1.
If I let employees go, I lose the ability to get loan forgiveness.
– Ray Cantor, vice president of government affairs, NJBIA
“Employers can use that money to pay for payroll costs, health benefits, and a number of other things,” Cantor said. “You have to be under 500 employees to qualify, although there are exceptions in restaurants and hospitality.”
The law requires that an employer must retain its existing employees or rehire employees who lost jobs due to the COVID-19 pandemic. The law states those employers will be forgiven the amount of money that they spend on their employees’ salaries, mortgage insurance, and health insurance. At that point, the loan becomes a grant.
“The purpose is to encourage employers to maintain and retain their employers on staff,” Cantor said.
“If I let employees go, I lose the ability to get loan forgiveness,” Cantor said. “This is going to help a lot of small businesses. This is good news as it will help employers to remain solvent. This money will help. We are going to try for as long as possible to get by for as long as possible.”
Another provision pertains to a sole proprietor or independent contractor.
These people have closed their businesses or cannot find labor because of the COVID-19 pandemic. The new law allows independent contractors to collect unemployment insurance.
Other parts of the stimulus offer further assistance such as an employee retention credit by which a percentage of the employee tax can be credited against taxes owed, instead of taking a loan. Still other provisions of the package include a deferral of payroll taxes to enable businesses to retain more cash on hand and there is also an accelerated depreciation for doing construction inside one’s building, which allows a business to write off more money on one’s taxes.
“There is also a $500 billion pot of money to help businesses, including airlines,” Cantor said. “About $454 billion is not obligated and will be given out in loan guarantees and other investments by businesses by the Federal Reserve and the Department of Treasury.”