COVID-19 Economic Relief Opportunities for Small Tax Prep Businesses

covid 19 small business loan for tax prep business

The information in this article was last updated on April 6, 2020. This article relates to the tax laws enacted during the COVID-19 pandemic. These laws may have expired or reverted to their original state. For more information, please see the CARES Act.

If you own a small tax preparation business, you may have experienced some of the impacts of COVID-19 firsthand. Since the government announced a federal state of emergency, small businesses can request loan assistance to help with the financial burden of the outbreak.   

What kinds of loan can I get for my tax prep business?  

The SBA is currently offering four different loan programs to assist small businesses with the impacts of the COVID-19 outbreak.  

Economic Injury Disaster Loan Emergency Advance (EIDL) 

The first type of loan from the SBA will provide up to $10,000 of economic relief to small businesses that are experiencing difficulties due to the COVID-19 outbreak.  

Does my tax prep company qualify as a small business?   

If you have less than 500 employees and less than $35 million in annual revenue, you probably own a small business, according to the SBA.   

Will my tax prep businesses qualify for the EIDL?   

If you own a small business with a physical location or office in the United States, you are eligible. You must be able to prove that your business has experienced a loss in revenue that makes you unable to cover business expenses. If you have already suffered an economic injury, you may claim it after January 31, 2020. If you anticipate that you will experience an economic injury in the future, you can also apply for the loan based on projected loss.   

How much can I borrow for my tax prep business?   

You can borrow up to $10,000 for your small tax prep business due to the COVID-19 outbreak.   

Will the SBA check my credit?   

Yes, but your tax business’s credit does not have to be perfect to qualify for the loan.  

Do I have to file my 2019 taxes returns to apply for the EIDL?   

No, you do not need to have filed your 2019 tax return before applying for the loan. You will need to submit Form 4506T to provide your historical tax returns to the SBA, though.  

How long will it take to apply for the EIDL?  

It takes about 2-3 weeks for the application to be reviewed. If you decide to accept the loan, it will take about three days to be funded.  

Can I apply now?   

Yes. You can apply here. Your lender may begin processing your application as soon as April 3, 2020. You will have about 60 days to decide whether or not to accept the loan offer if you qualify.  

How do I apply?   

You can either apply online or by mailing in a paper form. The SBA recommends that you apply online because it is faster. It will also allow you to receive status updates.   

Use the following steps to apply for the loan  

  • Verification – The SBA will need to verify your information, which will include a review of your credit, an estimate of the total loss your business experienced, and determining your eligibility.  
  • Decision – You will receive a notice of whether you have been approved or denied roughly 2-3 weeks after you apply.  
  • Disbursement – Your funds will be disbursed roughly three days after you accept the loan.  

When will I begin repaying the EIDL?   

This loan will not have to be repaid.  

SBA Express Bridge Loans  

This type of SBA loan enables small businesses who have a relationship with an SBA Express Lender to qualify for up to $25,000. If you are waiting for your application for an Economic Injury Disaster Loan to be approved, apply for a Bridge Loan to cover your business in the short term if you have an urgent need for cash. 

How much is the Bridge loan? 

This loan can be up to $25,000. 

Will I have to repay the Bridge Loan? 

The Bridge Loan will be repaid in full or in part by the proceeds from the EIDL loan. You may not be required to repay the full amount. 

Paycheck Protection Program (PPP)  

This SBA loan helps businesses keep their staff employed during the COVID-19 outbreak. The PPP is designed to give you an incentive as a small business owner to keep your employees on payroll. 

What are the incentives to following the PPP? 

The SBA will forgive your business loans if you keep all your employees on payroll for eight weeks. The SBA will also give you the opportunity to re-hire your employees if you laid them off before applying for the loan. At least 75% of the forgiven amount must be used for payroll.  

Does my tax prep business qualify for the PPP? 

If you have less than 500 employees in your small business you will likely meet the qualifications for the size of your business. If you have more employees but meet the SBA’s size standards for your specific industry you may still qualify. 

You must also be economically impacted by the COVID-19 outbreak. 

How do I apply for the PPP? 

Apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, or Farm Credit System institution that is participating in the program. Ask your local lender if they are participating in the program. 

How soon can my PPP application be processed? 

Your lender may begin processing your application as soon as April 3, 2020.  

How long will the PPP program be available? 

The PPP will be available through June 30, 2020.  

SBA Debt Relief  

The SBA is providing a financial reprieve to small businesses with debt during the COVID-19 outbreak.  

The SBA will automatically pay the principal, interest, and fees of current 7(a) loans for six months. The SBA will also automatically pay the principal, interest, and fees of new 7(a) loans issued before September 27, 2020.