A second round of stimulus support â administered in response to the unprecedented COVID-19 pandemic â has recently been passed, meaning much-needed funding is on its way to individuals and businesses who need it the most.Â
The $900 billion stimulus package â the majority of which is currently being disbursed â aims to provide urgent relief to American individuals, families, and businesses that have been hardest hit by the economic crisis brought about by the COVID-19 pandemic.
One thing stands out about the stimulus: There’s universal acknowledgement that small businesses as well as others have borne the brunt of the pandemic.Â
This second round of funding seems to signal that Congress is acknowledging this outsized burden, especially in the aftermath of criticism surrounding the lax funding restrictions in last year’s Paycheck Protection Program (PPP).
Multiple updates have been made to the original CARES Act to better support small businesses, including:
Relaxed loan forgiveness guidelines More restrictions on small business loan qualifications Easier application processes and moreÂ
Let Simply Business help you take a look at a few of the new provisions in this bill, including how it may help small businesses like yours. Remember, these provisions may change as the legislation is being implemented, so be sure to check with your financial adviser or the Small Business Administration (SBA) website for continued updated guidance and support.
You Could Apply for Another PPP Loan
The updated stimulus package has replenished PPP funds, meaning you may be able to apply for a loan (even if you received a PPP loan from the first round of funding).
If you were the recipient of a PPP loan in 2020, you’re likely eligible to apply for additional funding if you can show that you’ve already used your loan funds.Â
The eligibility requirements for the second PPP loan seem to be more stringent than the first iteration; this is to ensure that loan recipients are those small businesses in greatest need of emergency relief.
Important note: Depending on the loan amount you apply for (usually anything over $20K), the SBA may ask you to provide proof of business insurance in order to be eligible.Â
That’s because your lender may ask you to provide collateral as security for your loan; as a result, a business insurance policy may be required to protect that collateral throughout the life of your loan.Â
Small Business Funding is More Targeted
One of the criticisms of the first round of COVID-19 aid was that funds allocated for small businesses actually went to larger businesses and chains.Â
In order to help prevent larger companies from accessing small business aid, the new bill defines “small businesses” as companies with fewer than 300 employees.Â
Additionally, small businesses will have to prove their eligibility by showing a minimum 25% reduction in gross receipts in one or more quarters in 2020 as compared with 2019.Â
Combining these two eligibility requirements may help ensure that otherwise healthy businesses are unable to access funding designed for harder-hit industries and small businesses.
You Could Get More Funding from Your First PPP Loan
If you applied for a PPP loan from the initial CARES Act, you may have been unable to get all the funding you were eligible for.Â
This new round of funding aims to address that issue by allowing small businesses to request more funding potentially without applying for a new PPP loan.Â
Remember, these loans may be made forgivable, so if you need more funding, reach out to your lender to get additional money via your first PPP loan application. It could make all the difference in getting your business through the remaining months of the pandemic.
PPP Funds May Be Used on Additional Expenses
PPP funds â once limited to payroll expenditures â now may be able to be used to pay for a variety of newly approved business expenses, such as:
Business operation software, such as inventory management software, payment processing software and more. Supplier expenses that result from vital business operations. Costs incurred as a result of keeping your small business compliant with state-based COVID-19 requirements (such as masks, sanitizers, plexiglass dividers, etc.) Property damage expenses that resulted from demonstrations during 2020.
For example, if your business’s storefront was damaged during one of last summer’s demonstrations and you paid your business insurance deductible to get it repaired/replaced, you may now be able to use your PPP funds to pay that deductible.
The one caveat here is that business owners should pay attention to how they’re disbursing those PPP funds. As it stands now, the stimulus bill requires that business owners use 60% of received PPP funds for payroll, with the remaining 40% to be used on business operating expenses.
As a reminder, you can typically use your PPP funds on approved payroll costs, such as:
Gross wages CommissionsÂ Tips Severance pay Vacation, family leave and medical leave pay Employer contributions to health insurance plans and retirement plans And more
PPP funds used for payroll and other compensation expenses are still restricted to a maximum of $100K on an annualized basis per employee.
PPP Loan Forgiveness Form Now Available for $150,000 Loans
During the first round of stimulus funding, 3508EZ forgiveness application forms for PPP loans were available only to those small businesses that had gotten loans of $50,000 or less.
Considering the lengthy duration of the ongoing pandemic, small businesses have been clamoring for additional aid to help see them through the winter months. To help streamline access to that aid, Congress has made it easier for businesses to apply for up to $150,000 in loan forgiveness.
The new EZ form â available here â will be a simplified one-pager that requires just three pieces of information to complete:
The number of employees your small business was able to retain with the PPP funds. The estimated total amount of PPP funds spent on payroll costs. The total loan amount.
If you want to apply for PPP loan forgiveness, contact your lender for more updates or to access the revised 3508EZ form.Â
You May Have a Smaller Tax Bill
PPP funds are now designated tax-exempt, which should reduce your tax bill if you were a recipient of the original loan.Â
This new provision clears up any confusion created by the original CARES Act, in which PPP funds were intended to reduce expenses but were still interpreted as taxable income.Â
Additionally, expenses paid with the original PPP loan and/or the latest round of PPP funding are fully tax-deductible.
The EIDL Grant Is Back
The Economic Injury Disaster Loan (EIDL) was initially rolled out as part of the original CARES Act, offering $10,000 grants to eligible small businesses that weren’t required to be paid back. The grants were snapped up fast, leaving many business owners struggling to find new forms of emergency relief.
The new stimulus bill will add more funding to the EIDL program, with the $10K grants back on the table. Small businesses are encouraged to apply, even if they were turned down the first time or couldn’t get a grant because the funds ran out.
To help prevent the funds from running out so quickly, qualifying for the EIDL grant will be a bit harder, with eligibility requirements including:
A demonstrable loss of greater than 30% of revenue as a result of COVID-19 Location in a low-income community 300 or fewer employees
Restaurants Get a Little Extra Help
It’s no surprise that restaurants offering indoor dining have been hardest hit by the pandemic. The new stimulus package acknowledges the unique challenges of the restaurant industry by allowing restaurants to borrow 3.5 times their monthly payroll (based on 2019 numbers).
This is higher than the lending limit for other types of small businesses, which is set at 2.5 times their payroll.
A New Round of Stimulus Checks Is Coming
Finally, a round of $600 stimulus checks are on their way to eligible people. These stimulus checks are being sent to individuals who earned up to $75,000 and couples who earned up to $150,000 (based on reported adjusted gross income on 2019 tax returns).Â
Current discussions indicate that additional checks may be sent out as part of a new economic stimulus plan introduced by the Biden administration. President-Elect Biden has called the most recent stimulus package a “down payment” and vows to push for more funding for vaccine distribution, reopening schools, struggling small businesses, and more.
Legislators have proposed $2,000 checks per eligible adult; however, the definitive amount remains unclear and any new funding may not be seen until early spring 2021.
About Simply Business
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