Welcome to the Small Business Rundown. Each day, we bring you stories that impact small business owners and their workforce.
Small Business News Highlights for April 6:
- SBOs worried there’s not enough Paycheck Protection money to go around
- Auto insurers refunding customers as number of accidents plummets
- Renters and tenants across the country call for a freeze on rent
- The CARES Act allows tax-free withdrawal from IRA
“I’ve basically been putting my foot on the gas with my bank. They’re a smaller bank, and my concern is the bigger banks will get all the money. I feel it’s going to run out very quickly.”
While the Federal Reserve announced today that it will backstop the Paycheck Protection program that launched this past Friday, many small business owners worry that the money will run out before their application is processed. Freelancers and independent contractors are especially concerned since they can not even apply until Friday, April 10.
As of this morning, the Small Business Administration had already approved roughly 130,000 loans worth $38 billion.
“This is about fairness. This is about doing it and not waiting to be asked.”
As the number of Americans sheltering in place has spiked, the number of drivers on the road — and, in turn, accidents — has fallen dramatically, too. In an attempt to “do the right thing” 2 different auto insurance companies are sending rebates to their customers.
The number of cars on the road has fallen from anywhere between 35% and 50%. American Family Insurance will be sending out $200 million in rebates, while Allstate plans to refund $600 million since customers are, in effect, not using the product they’re paying for.
Unfortunately, for many small businesses, landlords are not uniformly extending such understanding. While people holding mortgages can obtain relief, many renters and commercial tenants have still had to find a way to pay despite seeing their income dry up.
“If you’re cash-strapped, you can use the money to pay the bills and recontribute later when your financial situation has improved. You can help your adult kids out. You can pay down your HELOC. You can invest the money in the stock market and hope to collect low-taxed long-term gains. Whatever.”
Finally, for SBOs with IRAs who can’t wait for their loan application to be processed, it’s worth checking into a provision in the CARES Act that allows participants to withdraw up to $100,000 from their IRA without paying taxes. As long as the money is re-contributed within 3 years, there’s no tax liability.