Update 01/15/2021: The PPP will reopen for community financial institutions to begin making first-draw loans Monday January 11, and second-draw loans on Wednesday, January 13. The program will open to all participating lenders on Tuesday, January 19.
After months of debate, federal lawmakers were finally able to settle on a massive $900 billion stimulus bill, the Consolidated Appropriations Act. The Act includes several provisions to aid small businesses, including $284 to replenish and relaunch the Paycheck Protection Program.
Here's what's included in the new stimulus package for small businesses.
Businesses that did not apply for a PPP loan before have a second chance at financial relief. The new funding is available through March 31, 2021, or until funds are exhausted. For the most part, first-time borrowers will follow the same guidelines and eligibility outlined in the original program.
Your business is eligible for a first draw loan if:
First draw loans are equal to the lesser of:
The replenished program will allow businesses who received a PPP loan in 2020 to apply for the second round of funding if they meet specific criteria.
Your business is eligible for a second draw loan if:
Second draw loans are equal to the lesser of:
The most appealing aspect of a PPP loan is that it is 100% forgiven if you use the money according to the guidelines. And while you are still required to spend 60% on payroll costs and 40% on eligible expenses, the expenses considered eligible have expanded slightly.
Under the new loan terms, eligible non-payroll expenses include:
There has been a lot of confusion around contradicting information we received from Congress and the IRS regarding PPP loans' tax implications. The new bill clarifies taxability and the deduction of expenses paid with PPP funds.
Tax implications effective as of March 27, 2020 (when the CARES was enacted):
The new bill includes a streamlined forgiveness application for anyone borrowing less than $150,000 (in addition to the current simplified application for loans under $50k). The application has not yet been released but will be a one-pager requiring the borrower to sign and certify a description of:
The SBA and Treasury announced Friday, January 8, that the new PPP will begin reopening the week of January 11. To make the program more accessible, community financial institutions exclusively can make first-draw PPP loans starting Monday, January 11, and second-draw loans on Wednesday, January 13.
The PPP will open to all participating lenders soon after that (date TBD) and remain open through March 31, 2021.
Whether you are a first or second-time borrower, the best way to start is by calling banks or lenders in your area to see who is participating in the program.
To access borrower and forgiveness applications currently published, visit the SBA's dedicated PPP page.
You can read the full the guidance released by the SBA at the links below:
The PPP is by far the most attractive option for financial relief included in the Act, but it is not the only option. There are a number of other provisions included in the bill to assist small businesses with the financial hardship of COVID-19 (that seems to be never-ending).
Here are some of the financial aid programs available in 2021.
Economic Injury Disaster Loans (EIDL) are low-interest loans designed to help small business through economic hardships, like a pandemic. The CARES Act modified the program to include a $10,000 cash advance that is essentially treated as a grant that does not require repayment, and as expected, the funds ran dry quickly. But, the Consolidated Appropriations Act adds $20 billion to replenish the grant program specifically for low-income communities who could not secure grants.
The max cash advance amount remains at $10,000 under the new Act. And, small businesses in these communities that received less than a $10,000 grant can apply to receive the difference between the amount they received and $10,000.
You do not have to be approved for the EIDL loan or accept it to receive the $10,000 grant, but you do have to apply for the loan to get the grant. If you are approved and accept a loan, the cash advance is included in the total amount. So, if you qualify for a $100,000 loan, you will receive $10,000 as an emergency cash advance (grant) that you do not have to repay.
We highly recommend you apply for any EIDL amount quickly! The funds will go fast, as these are $10,000 grants (not loans) that do not have the be repaid.
The new bill also lifts the requirement to reduce your PPP forgiveness by the amount of your EIDL cash advance. Now, small businesses are able to receive and hold onto their full PPP forgiveness and EIDL grant.
Unlike the PPP, the EIDL has a much more streamlined application process. You can apply for an EIDL loan directly through the SBA website (quickest method) or in person at Disaster Recovery Center.
The new bill also replenishes a handful of other SBA loan programs to help out small businesses. Some of the updates include:
Poorly executed relief programs at the beginning of the pandemic exposed major gaps in access to financial aid for businesses owned by people of color and businesses in low-income areas. The new bill sets aside $12 billion for CDFIs and MDIs to serve businesses in low-income, minority, and rural communities specifically.
To find CDFIs or MDIs in your area, use the CDFI locator tool to get started.
$15 billion of the new bill has been set aside for grants to businesses in the entertainment industry with a portion ($2 billion) specifically allocated for businesses with fewer than 50 full-time employees.
Entertainment businesses eligible for grants include: