U.S. manufacturers have been severely impacted by the COVID-19 pandemic. According to the Texas Manufacturing Outlook Survey, Texas factory activity sharply declined once the pandemic ramped up in March. Supply chains are disrupted, causing manufacturers to seek alternate suppliers. Industry events like the AeroDef Manufacturing conference, scheduled for March in Fort Worth, had to be canceled.
On a positive note, some manufacturers have been able to repurpose their operations to make personal protection equipment (PPE) for healthcare workers or other products needed to address the pandemic. For example, a Dallas furniture company is sewing face masks, and some Texas distilleries are producing hand sanitizers. However, those who were forced to temporarily shut down and perhaps furlough workers are struggling to keep afloat.
The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief to U.S. businesses through loan forgiveness programs, tax credits and other measures. When funding for small business assistance was rapidly depleted, Congress reauthorized funding for the following programs.
Paycheck Protection Program
The Paycheck Protection Program (PPP) provided nearly $350 billion to small business owners in the form of forgivable loans. The funds were depleted in less than two weeks. Now, as part of an interim $484 billion coronavirus funding bill, Congress approved another $320 billion to replenish PPP funds. Many small businesses that were unable to get loans from banks turned to their community banks. Included in the new funding is $60 billion allocated to small lenders and community-based financial institutions, with $30 billion set aside to assist community development financial institutions and credit unions. This will help alleviate competition with larger banks. There is a backlog of loan applications, and the additional funding is expected to go quickly.
Related Recorded Webinar: A Cost-Benefit Approach to PPP Loan Forgiveness
Emergency Injury Disaster Loan Program
Congress also added $50 billion to the $10 million Emergency Injury Disaster Loan (EIDL) program, which was depleted when the Small Business Administration (SBA) received loan requests for more than $400 billion. Businesses were able to apply for $10,000 in forgivable loans as an advance working capital loan. Given the great demand, the loan amount was decreased to a maximum of $1,000 per employee. EIDL loans are only available to businesses without credit elsewhere, such as existing lines of credit.
Those who were able to quickly complete the application process during the first round of funding were able to tap into these federal funds. The ability of businesses to secure the funding will depend on their understanding of the application process, which often calls for the help of business advisors, including bankers and accountants.
Additional Federal Programs
Payroll Tax Deferral
Through Employer Payroll Tax Deferral , manufacturers of any size can defer payment of the employer portion of Social Security taxes, which is 6.2% of wages, that is otherwise owed for wages paid March 12, 2020, through December 31, 2020. The deferral is an interest-free loan, with the first 50% due and payable on December 31, 2021, and the balance deferred until December 31, 2022. Note: Employers can defer these costs even if they have taken out a PPP loan, through the date the loan is forgiven.
Low-Interest Loan Program
The CARES Act created a $450 billion fund to provide low-interest loans to distressed businesses affected by the COVID-19 crisis with 500 to 10,000 employees. This loan is meant to incentivize employers to keep employees in their jobs during the crisis and to keep jobs in the U.S.
Additional Manufacturing Measures
- The CARES Act included $50 million in grants for companies that promote an effective private industry response to the pandemic, including the production of supplies, employee training and realignment of facilities to accommodate production.
- The Act addressed the decrease in output from foreign manufacturers by creating a task force to eliminate redundancies in the U.S. medical supply chain. The goal is to encourage more manufacturers to produce medical equipment and PPE.
- The Act provides $8 billion for cargo airlines and $3 billion for airline contactors to keep workers and maintain lower shipping rates. The funding includes payroll support, loan guarantees and loan programs that will help manufacturers ship products at affordable rates throughout the pandemic.
Texas COVID-19 Business Assistance
- TMAC Supply Chain If your supply chain has been disrupted, TMAC offers assistance with finding supplier and reshoring. Contact TMAC for more information.
- Texas Workforce Commission The TWC is working with federal, state and local government officials to help manage the pandemic. See the following Texas Employer FAQ for COVID-19 guidance.
- Texas AssitHER Emergency Grant Administered by the Texas Woman’s University, the grant program provides Texas-based women-owned businesses $10,000 to navigate COVID-19 hardships. Funds can be used for technology upgrades or other items needed to change or adapt the business model.
COVID-19 Resources and Planning Services
GPP will continue to keep you posted through our COVID-19 Business Assistance and Resource Center. If your manufacturing business needs loan assistance during this challenging time, our COVID-19 Business Advisory and Planning Services Group is ready to assist. We have had great success in helping clients get loans from several select banks.
For immediate questions or help applying for a loan, email CARETEAM@GPPcpa.com or call GPP at 972-818-5300.
Note: This content is accurate as of the date published above and is subject to change, as definitions change. Please seek professional advice before acting on any matter contained in this article.