First Report on March 27, 2020 CARES Act Loan Programs and Tax Benefits Available to Pawnbrokers

March 29, 2020

NPA’s Team GRC obtained additional guidance on tax and SBA issues from Venable, a major Washington, D.C. law firm. We will provide additional COVID-19 updates as more information becomes available. 

What New Relief Is AVAILABLE NOW to Pawnbrokers?

SBA Economic Injury Disaster (EIDL) Program loans available only to businesses with 500 or fewer employees in federally declared disaster areas. Loans up to $2 million in working capital assistance for up to 30 years at 3.75% interest. Businesses may make initial draws from SBA on submission of application of $10,000 to be paid by SBA within three days of submission. No collateral required for loans under $25,000. Online details and application forms: https://www.sba.gov/funding-programs/disaster-assistance or call 1-800-659-2955.

Deferred Payment of Employer’s Share of Social Security Payroll Taxes:  Deferral allowed from March 27, 2020 to the end of 2022. Employer must repay 50 % of deferred payment by December 31, 2021 and the other 50% by the end of 2022.

Payroll Tax Credit for Wages and Health Insurance for 50% of Expenses up to $10,000 per Eligible Employee: From March 13, 2020 to December 31, 2020, “eligible” employers with 100 or fewer employees can get refundable tax credits for wages and health insurance up to $10,000 per eligible employee. “Health insurance” does not include IRC Section 3111(b) hospital insurance expenses. To be eligible, businesses must have been fully or partially suspended because of a COVID-19 related shut-down order (for example, partial suspension could mean pawn loan counters open; retail side closed) or have had a reduction in income of more than 50% as compared with the same quarter in the prior year (such as in the same quarter of 2019) to use this special tax credit. Employers with 100+ employees may not claim credit for health insurance expenses.

What New Cares Act Relief SHOULD COME SOON for Pawnbrokers?

New SBA EIDL Programs Coming in 2-3 Weeks (Estimated):  Modified SBA EIDL Program direct loans from SBA up to $2 million for up to 30 years at 3.75% interest. Available to small businesses in all 50 states, Puerto Rico, Guam, and the Northern Mariana Islands. Loans over $200,000 must be personally guaranteed by owner having an interest in the applicant business of more than 20%. Removes requirement that applicants prove they cannot secure credit elsewhere. Special requirements (such as other collateral) may apply for “small dollar loans” (details not yet fully provided by SBA). SBA may approve based on borrower credit score or alternative SBA accepts. Applicants that receive allowed advances will not be required to repay that advance, even if EIDL application is later rejected. 

What Part of the New CARES Act Relief WILL NOT BE AVAILABLE to Pawnbrokers?

New “Paycheck Protection Program Loans” created by the CARES Act Not Open to Pawnbrokers: 

Team GRC confirmed that pawnbrokers are not eligible for the new Paycheck Protection Program because only businesses currently eligible for SBA section 7(a) loans are eligible under the CARES Act. No business that loans money is eligible under SBA section 7(a) so pawnbrokers are not eligible. (If changed in future COVID-19 relief legislation, we will inform members immediately.)

This document is intended only as a summary of the CARES Act provisions described and does not constitute legal advice.  

Please consult your local lawyer for more information. 

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