Small Business Owners May Receive Loan or Payroll Relief, but Not Both

When it comes to coronavirus relief, owners of small businesses will be forced to choose between loans or a payroll tax deferment — each with its upsides and failings.

Several elements factor into business owners’ needs in the short and long term during the current pandemic, according to Business Insider. The federal stimulus loan is available to businesses with 500 or fewer employees. The loan will allow owners to continue to employ and pay workers through the coronavirus crisis. However, the loans are restricted to two-and-a-half months of payroll and can’t be used for employees earning more than $100,000. 

The other option, the payroll-tax deferment, is open to all businesses and can be put into action as soon as the bill is signed. The deferment acts like an extension on a tax filing deadline. The small businesses will still owe the payroll taxes, but it won’t have to file them for the rest of 2020. Employees will still have their share taken from their own checks.

“If you’re cash constrained, the easiest thing to do is not pay the payroll taxes right away. But economically, getting the big loan sounds like a much better way to go, if you can qualify,” Bruce Sacerdote, an economics professor at Dartmouth College, told Business Insider.