How News Publishers Can Benefit from Government Loan Programs During COVID-19

News publishers provide an essential public service by reporting the facts and keeping their communities informed during this time of uncertainty. Millions of people around the world get their information about the COVID-19 pandemic from trusted publishers, whose journalists risk their health and well-being for that mission every day. Though online traffic to news sites has spiked during the pandemic, far too many news publishers are still struggling. Thankfully, the recently enacted Coronavirus Aid, Relief and Economic Security (CARES) Act provides some relief for American businesses, including news publishers, during this challenging time.

The Alliance’s Stimulus Updates portal provides multiple resources dealing with the stimulus package, including the Alliance Stimulus Funds Guide, a members-only detailed overview of the CARES Act (member login required), but here is a short summary of the important provisions of the CARES Act.

The Small Business Administration’s (SBA) coronavirus relief programs now include four separate options: the Paycheck Protection Program, the Economic Injury Disaster Loans (EIDL) Emergency Advance, SBA Express Bridge Loans, and SBA Debt Relief (These are all SBA loans.)

The Paycheck Protection Program (PPP) is a completely new program that has been accepting applications since April 3. Similar to Economic Injury Disaster Loans (EIDL), newspaper publishers with less than 1,000 employees are eligible to apply for PPP loans. The loans are granted by SBA-approved lenders and provide a maximum amount of $10 million or 2.5 times the average monthly payroll, whichever is lower. Since this money is meant to incentivize keeping employees on payroll, SBA will forgive loans if all employees are kept on payroll for at least eight weeks and the money is spent on payroll, rent, mortgage interest or utilities. Due to expected high enrollment, SBA estimates that at least 75 percent of the forgiven amount must have been used for payroll.

Meanwhile, the EIDL, is an existing program that allows small businesses to apply for loans of up to $2 million. Under the CARES Act, many of the qualifying requirements have been waived, making it easier for businesses to receive help. While the general small business threshold is 500 or fewer employees, to be eligible for an EIDL loan, newspaper publishers must have 1,000 or fewer employees. In addition, through the EIDL Emergency Advance program, EIDL applicants can get an advance grant of up to $10,000 three days after approval, even if their EIDL loan application is denied, providing a fast way for a business to receive financial assistance. The advance does not need to be repaid. In addition to the advance, borrowers who have been affected by COVID-19 and have an existing relationship with an SBA Express Lender can apply for an Express Bridge Loan to get up to $25,000 quickly while they wait for their EIDL application to be approved.

The Treasury and Federal Reserve loan programs created under the CARES Act are designed to support larger businesses, as well as states and municipalities. In addition to direct loans to distressed businesses, the Treasury must “endeavor to seek the implementation” of a program to support bank and other lending to medium-sized businesses and nonprofits with 500-10,000 employees. While many of the details are still unclear, both of these loan programs come with many more obligations and restrictions than the SBA loans. The exact conditions vary by loan type, but include prohibitions on stock buybacks and dividend payments, requirements on workforce retainment and limitations on executive pay.

With regards to tax code changes, the CARES Act provides for employee retention tax credits. These provisions are designed to incentivize employers that were either fully or partially closed due to the pandemic, or suffered a 50 percent decline in gross receipts compared to the same quarter in 2019, to retain their employees. The provisions provide for a fully refundable tax credit of 50 percent of qualified wages paid to the business’s eligible employees between March 12, 2020 and January 1, 2021.

In addition to these major benefits, the CARES Act includes multiple other provisions designed to help struggling businesses, such as news publishers, including allowing businesses to carry net operating losses from 2018 to 2020 back five years in order to reduce prior years’ income, and removing the taxable income limitation. The Act also delays the payment deadlines of employer payroll taxes, allowing employers to pay 50 percent at the end of 2021 and 50 percent one year after that.

As well as payroll tax extensions, the Act allows employers with single employer pension plans to delay payments due in 2020 to January 1, 2021 (with interest), while also providing that the plan’s status for benefit restrictions as of December 31, 2019, will apply throughout 2020.

As for employees, the Act expands unemployment insurance to include independent workers who might not otherwise qualify for benefits, including independent contractors such as newspaper carriers. The Act also extends the maximum benefit period and provides an additional $600 per week for up to four months. This could impact news publishers’ retention of independent contractors during the period that increased unemployment benefits are available.

These are just some of the provisions in the CARES Act designed to help American businesses. The Alliance’s Stimulus Updates portal provides more information on these and other subjects. We will continue to monitor developments and keep our members informed of any opportunities that can help news publishers survive at this critical time.

This content is for informational purposes only. You should consult your financial experts or lawyers before making any decisions.

 

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