New Coved Relief Bill Expands PPP
The new Covid Relief bill includes an additional $284 million for the Paycheck Protection Program (PPP) for small businesses. Recipients of these loans have up to 24 weeks to use the funds, with at least 60% going to cover payroll and the remaining 40% on paying for eligible expenses.
Under this new package, the PPP provides some funds to help minority-owned and women-owned businesses. The first PPP package did not target these groups. In addition, the second PPP package offers a second chance at the funds; companies can apply even if they received a PPP loan in the last program.
A business that received a PPP loan earlier this year can apply for a second forgivable PPP loan if they meet specific criteria:
- The business must employ less than 300 employees
- The company most record a 25% drop in revenue during at least one quarter of 2020 compared to the same time in 2019
- The company cannot apply for more than $2 million
PPP Now Allows Business Deductions
As we mentioned in our earlier post on PPP, the Care’s Act did not allow businesses to deduct expenses paid for with the forgivable loan. The Administration called taking a grant and deducting expense as a double-dipping event.
Under the new PPP loan, a business can deduct eligible expenses (even when they use the loan’s funds to pay the expenses). Eligible non-payroll expenses include:
- Operations expenses (cloud computing, business software, remote-worker software, etc.)
- Supplier costs (payments to suppliers, who provide essential goods)
- Covid-related worker/customer protection expenses (PPE, sneeze-guards, outside dining enclosures, drive-thru expenses, air filtration systems, etc.)
- Property damage related to riots or public disturbances, which occurred in 2020 and not covered by the company’s insurance.
The Deductible Business Lunch is Back
To support the struggling restaurant industry, the package will allow a business to deduct business meal expenses.
Easier Reporting Requirements to Receive Forgiveness for Small PPP Loans
Under the first PPP funding, to receive the PPP loan forgiveness, the regulations required the borrower to apply through the lender who provided the loan. The business owner had to document how the business used the funds. Most lenders required extensive payroll reports from the company’s payroll providers. Lenders had 60 days to review and approve the application.
In October 2020, the US government issued new guidelines for small PPP borrowers. If a business borrowed less than $50,000 under this program, the business could self-certify that it used the money correctly and receive loan forgiveness. The new PPP ups that limit to $150,000. To apply for the loan-forgiveness, companies can submit a form, available at this link. Alternatively, firms can wait for their lenders to update their online portals with the application.
Companies can take an (ERTC) and a PPP loan
Under the CARES act, businesses had to choose to apply for a PPP loan or the employee retention tax credit (ERTC.) With the new stimulus bill, companies can benefit from both programs.
The new Covid Relief bill also expands ERTC in 2021. Companies can now take an ERTC credit for up to $14,000 per employee through June 30, 2021.
EIDL Grants Will Reopen
EIDLs are low-interest loans of up to $2 million that are available to pay for expenses, which the business could have paid if the pandemic did not happen. Allowable EIDL expenses include payroll and other operating expenses.
The 2020 CARES Act included an advance (or grant) of up to $10,000 for anyone who applies for an EIDL. Borrowers did not need to repay this $10,000. Companies could use the advance to keep employees on the payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent, and mortgage payments.
The new law signed in December 2020 designates $20 billion to reopen the $10,000 Economic Injury Disaster Loan (EIDL) grant program. Companies can receive a $10,000 EIDL grant if the business has fewer than 500 employees and it suffered a substantial economic injury due to the COVID-19 pandemic.
The SBA will give preference to businesses that incurred a 30% reduction in revenue during an eight-week period or that operated in a low-income area. Furthermore, unlike under the CARES act, the new December 2020 law allows businesses to receive a PPP loan and an EIDL and still receive PPP loan forgiveness.
Contact us if you would like to discuss how you may be eligible for this new program.