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Alerts and Updates

Economic Assistance for California Residents and Businesses During COVID-19

April 20, 2020

Economic Assistance for California Residents and Businesses During COVID-19

April 20, 2020

Read below

In response to the COVID-19 pandemic, federal, state and local governments, through both legislative and executive action, have enacted or ordered a broad array of financial measures to mitigate the adverse economic effects experienced by businesses and nonprofit entities.

This Alert will identify and explain the economic programs established by the federal government and the state of California to help ameliorate the financial effects of COVID-19.

Federal Economic Aid Programs

Economic Injury Disaster Loans and Loan Advances

Small business owners with fewer than 500 employees currently experiencing a temporary loss of revenue due to COVID-19 are eligible to apply for Economic Injury Disaster Loans (EIDL) to pay immediate expenses such as payroll, bills/accounts payable and fixed debts. Details of the program are discussed in our previous Alerts.

Loan amounts are up to $2 million, with loan advances of up to $10,000. The loan advance shall be awarded within three days of application. The advance can be utilized to keep employees on payroll, to pay for sick leave, meet increased production costs or pay business obligations. The loan advance does not have to be repaid.

Note: As of April 16, 2020, the Small Business Administration (SBA) is currently unable to accept new applications. 

Businesses in certain industries may still qualify even if they have more than 500 employees, if they meet the SBA’s size standards.

Paycheck Protection Program

The SBA is offering a low-interest, no fee loan of up to $10 million for small businesses, nonprofits and sole proprietors to help retain employees and aid cash flow through the Paycheck Protection Program (PPP). Previous Alerts discuss the program, its FAQ guide and the interim final rule.

The SBA will forgive the loan if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, insurance, paid sick or medical leave, mortgage interest or utilities. The applying entity must have fewer than 500 employees. Loan repayments will be deferred for six months.

Applicants can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that has agreed to participate.

The Paycheck Protection Program is available through June 30, 2020.

Note: PPP funds have run out, but Congress discussing adding more money into the program.

Express Bridge Loan Pilot Program

As businesses await proceeds from the EIDL program, the SBA is offering temporary financial assistance of up to $25,000 through the Express Bridge Loan pilot program.

The applicant must have a preexisting relationship with an SBA Express Lender. The borrower can utilize the loan while it is applying for the EIDL loan. However, the loan must be repaid in full or in part by the proceeds from the EIDL loan.

State of California Tax Assistance

Tax Return Extension

The April 15 deadline for California personal income tax returns has been extended to July 15, 2020, with an extension due date of October 15, 2020. The deadlines for corporation tax returns, originally due between March 16 and June 15, 2020 (depending on entity type), have been extended to July 15, 2020, with extension due dates between October 15, 2020, and November 16, 2020 (depending on entity type). 

Notably, already scheduled e-file payments will not be automatically rescheduled to the new deadlines and must be canceled at least two business days prior to the original payment deadlines. 

Small Business Relief Payment Plans for Sales and Use Tax

Effective April 2, 2020, small business taxpayers (those with less than $5 million in taxable annual sales) can take advantage of a 12-month, interest-free payment plan for up to $50,000 of sales and use tax liability.

State of California Economic Programs

California Infrastructure and Economic Development Bank (IBank) Finance Programs

The state of California is allocating $50 million to the Small Business Finance Center at California’s IBank to mitigate barriers to capital for small businesses (1 to 750 employees) that may not otherwise qualify for federal funds. The $50 million allocation will be used to recapitalize the IBank Small Business Loan Guarantee Program.

California Capital Access Program (CalCAP)

Small businesses (1-500 employees) have access to CalCAP, a loan loss reserve program which may provide up to 100 percent coverage on losses as a result of certain loan defaults. Borrowers are limited to a maximum of $2.5 million enrolled over a three-year period. 

California Pandemic Unemployment Assistance (PUA) Call Center

Beginning April 28, 2020, California’s Employment Development Department will launch a call center that will act as a one-stop shop for individuals, the self-employed and independent contractors applying for unemployment insurance and state and federal PUA.   

Supplemental Paid Sick Leave Benefits for Food Sector Workers

Food sector workers (including, but limited to, those working in grocery stores, fast food chains and delivery drivers) impacted by COVID-19 will be given two weeks of supplemental paid sick leave if they are subject to a quarantine or isolation order or medical directive. 

Financial Support for Immigrant Workers

The state of California is allocating $75 million in statewide Disaster Relief Assistance funding to provide financial support for immigrant workers affected by COVID-19.

Support for Child Care Services for Essential Workers

The state of California released $100 million to support child care services and providers who are serving essential infrastructure workers, vulnerable populations and their children impacted by COVID-19.

California Local Government COVID-19 Economic Resources

In additional to the federal and state government, various local governments throughout California are offering programs and resources to individuals and businesses impacted by COVID-19. Major cities with programs include Los Angeles (city and county), San Diego and San Francisco.

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help organizations plan for, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

For More Information

If you have any questions about this Alert, please contact Dominica C. Anderson Tyson E. Hafen, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.