A. Manufacturers of all types and sizes are likely able to leverage some aspect of the economic stimulus packages passed by the federal government.
For smaller manufacturers, two disaster loan programs—the Paycheck Protection Program (PPP) and the Emergency Economic Injury Disaster Loans (EIDL) program—are available to them via the Small Business Administration (SBA). The federal government also released a second round of funding aimed at assisting small businesses in April. For smaller manufacturers facing financial strain as a result of COVID-19, these forgivable loans can help offset a variety of costs. The PPP provides funds to pay up to eight weeks of payroll costs, including benefits. EIDL loans can be used to cover any necessary financial obligations. Manufacturers can apply for loans under both SBA programs as long as they aren’t used to cover the same expenses.
To qualify for a loan under either program, your company must employ 500 workers or fewer (both full-time and part-time), or you must meet the industry size standard set forth by the SBA.
Midsize and larger manufacturers may also be eligible for low-interest loans under the $500 billion economic stabilization plan included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This includes $46 billion specifically allocated for air carriers and businesses deemed critical to national security—which is likely to include “critical manufacturers” as defined by the DHS. Unlike the SBA programs, these loans must be paid back and come with public disclosure requirements.
Additionally, the Employee Retention Credit (a 50% credit on qualifying wages paid to employees on March 13 through December 31, 2020) is available for employers who do not take advantage of the PPP and either:
- Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel or group meetings (for commercial, social, religious or other purposes) due to COVID-19; or
- Experience a significant decline in gross receipts during the calendar quarter.
All employers are eligible to defer their social security tax liability due March 27 through the earlier of PPP loan forgiveness, if applicable, or December 31, 2020.
As previously mentioned, the CARES Act also includes a number of tax savings opportunities, including AMT credits, Net Operating Loss carryovers/carrybacks and tax-deductible charitable contributions.
Most recently, the Fed unveiled a new $600 billion Main Street Lending program available to small and midsized businesses with up to 15,000 employees or up to $5 billion in 2019 annual revenues. Principal and interest payments on these four-year loans can be deferred for the first year.
Multinational manufacturers should also look at what additional opportunities may be available in the countries in which they operate.
For more on how manufacturers can take advantage of the CARES Act, read our insight, here.