December 22, 2020
More than one-third of the new $900 billion coronavirus relief package, which was approved by Congress this week, will go towards small businesses. This relief can’t come soon enough for the countless small businesses still operating in survival mode.
The Coronavirus Response and Relief Supplemental Appropriations Act provides a total of $325 billion, including $284 billion in PPP loans, for small businesses. Digging further, what do we know about the new support for small business?
Second round. Small businesses ravaged by COVID-19 can now get another PPP loan, even if they have already received one. Allowing PPP loans for both new and repeat eligible borrowers extends a still-needed lifeline for many. Round two focuses on smaller businesses, less than 300 employees, and businesses that saw revenue drop by 25% or more. According to an October NFIB survey, 3 of every 4 small businesses would apply or consider applying for a second PPP loan. Half anticipate needed additional financial support over the next 12 months.
Other changes: Round two PPP loans are capped at $2 million versus $10 million in the original round. However, businesses in the hardest-hit accommodation and food services industries are now eligible for loans up to 3 ½ times their average monthly payroll, versus 2 ½ for other industries. Seasonal employers, new entities and businesses with more than one physical location will also see more support.
Tax deductions for expenses covered by PPP loans are now permissible, preventing unexpected tax bills for businesses least able to absorb those costs.
Forgivable expenses now also include supplier costs, operations expenditures and equipment needed to protect workers from COVID-19.
What stays? Again, loan amounts will be based on the company’s payroll. As the program was designed to keep paychecks flowing, borrowers must still spend at least 60% of the funds on payroll in order to receive full forgiveness.
Boosts for low-income and minority communities. The bill allocates billions in additional funding for businesses in low income and minority communities, which have been disproportionally affected by the pandemic.
The bill also extends the New Markets Tax Credit program for another five years, boosting the per-year allocation to $5 billion. This program has been instrumental in mobilizing private investment capital into underserved communities.
What’s next? While we are hopeful the new measures will provide even more relief, we know businesses may have plenty of questions about eligibility or what the new measures mean for forgiveness. Check back with us as we continue to break down what this means for your business.
