Businesses across all industries are facing financial challenges they never saw coming in 2020, and this includes law firms.
With the coronavirus pandemic keeping people inside their homes and changing their immediate priorities, many law firms may be seeing fluctuations in their usual call volumes and client acquisition numbers, which can disrupt cash flow either now or in the near future.
Fortunately, there are now multiple forms of relief available for small businesses, which include legal practices.
President Trump has just signed into law a historic $2 trillion stimulus package in hopes of keeping the US economy afloat during these challenging times. Small businesses are enormous benefactors of this emergency aid legislation, with nearly $350 billion earmarked for loans to businesses with fewer than 500 employees.
To help you better understand what types of relief your firm could potentially benefit from through the stimulus package, here’s what you need to know about the small-business loans that are now available, as well as other sources of potential relief.
Small-business loans through the Paycheck Protection Program
The stimulus package has made small-business loans available, under the Paycheck Protection Program, to help provide financial stability to small and midsize businesses and keep their employees from being laid off.
Eligible businesses can receive up to 2.5X times the average monthly payroll costs incurred during the year prior to the loan date (up to $10 million), according to information shared by the US Chamber of Commerce.
Businesses that are eligible for the program include:
- A small businesses with fewer than 500 employees (either full-time or part-time)
- A small business that would otherwise meet the SBA’s size standard
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
- Additional business classifications, as described here
To be eligible, the business must have been operating before February 15th, 2020, and it must have had employees for whom they paid salaries and payroll taxes, or paid independent contractors.
Borrowers must also attest the following:
- The current economic climate makes the loan necessary to keep their business in operation.
- The loan will be used to maintain payroll, or to make mortgage, lease, or utility payments.
- The borrower does not already have an application pending for another loan for similar purposes and a similar amount, nor have they already received such a loan.
If you take out a loan through the Paycheck Protection Program for your law firm, you may be able to have your loan forgiven if you are able to keep up your current payroll during the COVID-19 crisis and restore it afterward.
You can read more about the small-business loans that are available through the Paycheck Protection Program here.
Payroll tax relief for employers
In addition to small-business loans, the stimulus package also provides much needed payroll tax relief for businesses that employ workers throughout the coronavirus crisis.
The tax incentives include:
- A 50% refundable payroll tax credit on worker wages, which encourages businesses to retain their employees
- A deferment in employer payroll taxes for Social Security until 2021 and 2022
These tax benefits can give your firm much needed flexibility in your cash flow, making it easier for you to pay your staff and cover your business expenses while you are receiving less revenue.
The support your firm needs
The information in this article is meant to provide a quick glimpse of what type of relief might be available to your law firm through the COVID-19 stimulus package. We encourage you to conduct further research to see what if your practice is eligible for this type of support, as well as what other forms of relief you could benefit from at this time.
Our team at Scorpion is closely monitoring the news surrounding the coronavirus outbreak and evaluating how this impacts law firms throughout the nation. For more insights that can help guide your firm’s business and marketing decisions at this time, be sure to check out our COVID-19 resource page for attorneys. You can also contact us directly if you have any questions.