The following is a guest post by Jacob Dayan of Community Tax
The views and opinions expressed in this article are only those of the author and are not endorsed by Credit.com.
It’s no big secret that small businesses have been hit hard by the economic impact of the coronavirus. In a recent industry study, over 100,000 restaurants closed temporarily or permanently six months after the pandemic. The losses accumulated over the past year have created uncertainty about when and how things will return to normal. The National Restaurant Association found that over eight million restaurant workers had lost their positions. Operators have been forced to lay off workers and, on average, 83% of restaurant staff have been laid off.
Pursuant to Section 2301, the employee loyalty credit of the Coronavirus, Aid, Aid, and Economic Security Act (CARES), eligible employers can receive credit that helps small businesses survive and offers payrolls to workers. The loan gives each employee a wage of up to $ 10,000. And it includes covered health insurance expenses from January 1, 2021 through June 30, 2021. Businesses can get discounts on federal deposits. Or they can ask for an advance on the tax credit for the amount that the deposit reductions do not provide.
Is the Plan Effective?
In short, no. On the surface, this plan seems to offer the kind of rest and support small businesses need to get back on their feet. On closer inspection, however, it is clear that eligibility is not as straightforward as it should be. For example, tax-exempt organizations can only get the credit if their business opened in 2020 and government restrictions have forced them to cease operations in response to COVID-19.
After all, they must have seen a sharp drop in gross receipts. While government restrictions certainly affected the closings of many small businesses, that enforcement wasn’t the only reason companies decided to close last year.
What also has restaurants closed?
Fear of exposure and general public discomfort that emerged in response to the coronavirus, as well as concerns about inadvertently failing to adhere to strict business operating protocols. This apparently resulted in many small businesses closing down. Closing it was much easier than trying to meet the guidelines in many ways.
Food is difficult to prepare, handle, and serve using social distancing guidelines, and many restaurants did not see it convenient to do business during this time. Although they are equally affected by the virus, they are not qualified candidates for the loan. This is because their reasons for the business impact of the virus and their decision-making were different from the requirements set out in the law.
What about the workers?
The same lack of credit applies to employees of companies with more than 100 employees in 2019. Unless you were an employee who was laid off this year due to declines in sales or closings, you are not entitled to wage relief. Companies with fewer than 100 employees are entitled to insurance coverage, regardless of whether the employee has been laid off or is still working for the employer.
Individual circumstances are not taken into account as they relate to the impact of the coronavirus and the impact on small businesses. There are many reasons that go well beyond those listed in the eligibility requirements and cause entrepreneurs and employees to more than deserve this loan.
Who actually benefited from it?
It appears that ultimately only those companies that were easily formed or franchises of larger companies benefited from this support. Family businesses and independently run businesses that cannot keep enough employees must miss this opportunity to get business going again. Perhaps it is an attempt to beautify and distribute less sought after businesses that have influenced this loan plan. Or maybe the government hasn’t thought this through enough. In either case, small businesses continue to struggle and it is up to them to come up with recovery solutions.
How can things get better?
Those looking to help small businesses get back on track may consider ways of encouraging others to “buy local products” to get small businesses back on track. This is a trend that is often advocated in large cities, where small local restaurants survive because they serve so many people. Actively suggesting that the public buy local produce can make or break the success of these smaller businesses. Relying on people to get through at the public level is the best way to survive in these challenging times as long as they can do it safely while following appropriate public health guidelines.
How can workers be helped?
In addition to local encouragement, employees can motivate former employees to get back to work. And they can welcome new candidates interested in potential vacancies. Just as novice photographers charge little to no fees when starting their portfolio, small businesses can advertise that there is room for growth in their businesses.
One of the silver linings that came out of the coronavirus was the accepted need for people to come together. There is now a greater willingness from the community to get involved and help restore what has been lost in the pandemic. And that suggests these unconventional ways of rebuilding small businesses can be very effective. It would be great if all small businesses got the recognition they deserve. Everyone deserves compensation after this crisis. Unfortunately, this is not the way of the world. And just like with the virus, we will adapt to these changes.
Small businesses are underrated gems of local communities. The way forward is to leave room for employees to see the benefit of staying in a troubled company long enough for real career growth and promotion to take shape. To do this, however, the company needs access to resources in order to stay afloat. Hopefully in the future there will be a smarter plan to help small businesses – and especially employees – stay afloat during a massive economic downturn.
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