Any Port in a Storm- Federal Programs That Help Hemp and CBD Businesses

Last week, the US Congress approved a $2 trillion emergency relief bill aimed at easing some of the burdens stemming from the financial chaos caused by the coronavirus (COVID-19) pandemic. Among other things, the bill extends $1,200 to most American adults (based on their tax returns) and $500 to American children. Of particular importance to the readers of this blog, the bill creates a $500 billion lending program for businesses, cities, and states. It also establishes a $367 billion employee retention fund for small businesses.

While this bill addresses many of the concerns of individuals and business owners alike, it is also useful to know some of the other options small businesses have during this time of unprecedented uncertainty. This blog post focuses on some options businesses can take advantage of or pursue during these turbulent times.

Coronavirus Tax Relief and the Internal Revenue Service

By now, most people are aware of the fact that on March 21, the Internal Revenue Service (IRS) extended the Federal income tax filing due date from April 15, 2020, to July 15, 2020. In addition to the ability to file Federal income tax returns three months later, taxpayers are also able to defer federal income tax payments due until July 15, 2020. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax. See a copy of this press release by clicking here.

A lesser known fact is the that the IRS established a special section focused on helping individual taxpayers, businesses, and others affected by COVID-19. On March 25, 2020, the IRS announced it is taking a series of actions to assist taxpayers by providing relief on a variety of issues, ranging from easing payment guidelines to postponing compliance actions.

This action, called the IRS People First Initiative, provides immediate relief to people and businesses during this time of uneasiness. This relief includes postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions.

For more information about how the IRS is working with individuals and businesses during this time, you can click here. For information about what individual states are offering tax relief and what type of relief may be available, the American Institute of Certified Public Accountants has put together this comprehensive list.

United States Small Business Administration (SBA) and Economic Injury Disaster Loans

The United States Small Business Administration (SBA) is currently offering designated states and territories low-interest federal disaster loans for working capital for small business suffering substantial economic injury as a result of COVID-19.

Upon request from a state’s or territory’s Governor, the SBA will issue under its own authority an Economic Injury Disaster Loan (EIDL) declaration. For information on eligible areas as well as a link to the application, please click here. Some general information and commonly asked questions are discussed below:

What businesses are eligible to apply?

• Small businesses, agricultural cooperatives and aquaculture businesses;
• Most private non-profit organizations;
• Businesses directly affected by the disaster; and
• Other businesses indirectly related that are likely to be harmed by losses in their community.

Eligibility and Terms

• Applicant businesses must be physically located in a declared state and suffered working capital losses due to the COVID-19 pandemic; this cannot be as a result of an economic downturn or another reason.
• Eligible entities may qualify for loans up to $2M. This money is solely for the purpose of helping you meet your financial obligations and operating expenses that could have been met had the disaster not occurred. Examples of operating expenses include: paying fixed debts, payroll, and accounts payable.
• Loan amounts are based on actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage.
• Interest rates on EIDLs are 3.75% for small businesses without credit available elsewhere, businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
• The terms of these loans will not exceed 30 years.
• Repayment terms are determined by your ability to repay the loan.

What are the collateral requirements?

• EIDLs over $25,000 require collateral;
• Real estate can be used as collateral; and
• SBA will not decline a loan for lack of collateral, but it does require borrowers to pledge what is available.

IMPORTANT NOTE- EIDLs are not available for agricultural enterprises. As defined by the Small Business Act: “agricultural enterprises” means those businesses engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries.”

These are trying times for individuals and business owners alike; thankfully many organizations both on the state and Federal level are doing their part to provide relief wherever possible. As mentioned in this previous post, we here at Kight Law are committed to helping serve you and your small business during this difficult time. For more information regarding the information in this post, or to discuss anything related to the cannabis industry, please do not hesitate to contact us.

March 30, 2020

This post was written by Kight on Cannabis attorney Philip Snow. Kight on Cannabis is a law firm founded by attorney Rod Kight that represents hemp and CBD businesses. You can contact us by clicking here.