Congress Agrees on $900 Billion Coronavirus Relief Bill – What’s In It for Small Business
On December 27, 2020, the Consolidated Appropriations Act, 2021 (HR 133) was signed into law by President Trump. This $2.3 trillion spending bill combines a $1.4 trillion Omnibus appropriations bill for the 2021 fiscal year and $900 billion for COVID-19 relief in the United States
The Coronavirus Response and Relief Supplemental Appropriations Act, 2021 is the long-awaited sequel to the CARES Act, which was passed in March of 2020. This bill extends and modifies the Paycheck Protection Program, which was widely criticized for its convoluted application process and its misuse by large companies. It also provides grants for shuttered venue operators, extends the Debt Relief Program and modifies other lending programs to aid small businesses impacted by COVID-19.
The following is a summary of $319 set aside to aid small businesses:
Extension of the Debt Relief Program
Under the CARES Act Debt Relief Program, the Small Business Administration (SBA) covers all loan payments, including principal, interest, and fees of new and existing SBA loans for six months. Under the new bill, this program resumes the payment of principal and interest (P&I) on small business loans guaranteed by the SBA under the 7(a), 504 and microloan programs, established under the CARES Act.
SBA Covers an Additional 3 Months of P&I. All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.
Program Extended for Loans Approved Feb 1st – Sept 30th 2021. SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.
Hard Hit Borrowers Receive an Additional 5 Months. After the three-month period, borrowers considered to be underserved—the smallest or hardest-hit by the pandemic—will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month.
Paycheck Protection Plan Funding and Expansions
- Extension of Original PPP Loan Program. Persons and entities that have failed to obtain a PPP loan prior to August 8, 2020 may once again apply. $284 billion has been set aside for first and second loans to small business borrowers given through the Paycheck Protection Program.
- Selection of Covered Period. Allows the borrower to elect a covered period for forgiveness ending at the point of the borrower’s choosing between 8 and 24 weeks after origination. Each borrower must use the full amount of the PPP loan proceeds on eligible expenses during its chosen covered period to be eligible for full loan forgiveness.
- Simplifies Forgiveness Process. For loans of up to $150,000, applicable borrowers will be eligible for loan forgiveness if the borrower signs and submits a one page certification to the lender that states: 1) the number of employees they were able to retain because of the PPP loan, the estimated amount spent on eligible payroll costs and total PPP loan value and; 2) attest that it accurately provides the required certification and complies with applicable PPP requirements.
- PPP Deductibility. Congress will now also allow PPP borrowers to take tax deductions for covered business expenses. The Act expands the categories of forgivable business-related expenses, such as: software, human resources and accounting needs; certain property damage costs; supplier costs essential to a business’ operations; and covered worker expenditures.
- Economic Injury Disaster Loans Advances. Borrowers that received both a PPP loan and an EIDL advance will not be required to subtract the EIDL advance from their PPP forgiveness calculation.
- Changes to Eligibility for PPP Loans. The bill expands PPP eligibility to nonprofits, including destination marketing organizations, and local newspapers, TV and radio broadcasters. The new bill prohibiting SEC-registered companies from obtaining a PPP loan.
- Second Draw PPP Eligibility Small businesses may receive a second PPP loan if they have fewer than 300 employees and can prove that their revenue has fallen by 25%. The maximum amount for a second draw will be $2 million. Publicly traded companies will be barred from participating.
- A Second Draw PPP loan may only be made to an eligible business that: 1) has previously received an Original PPP loan; and 2) has used 100% of the proceeds of the Original PPP loan before the Second Draw PPP loan proceeds are disbursed.
Expansion of Employee Retention Tax Credit
The new bill extends and expands the Employee Retention Tax Credit through July 1, 2021. The bill increases the refundable payroll tax credit from a maximum of $5,000 to $14,000 by changing the calculation from 50 percent of wages paid up to $10,000 to 70 percent of wages paid up to $10,000 for any quarter. The bill clarifies that businesses will now be able to take the Employee Retention Tax Credit and participate in the PPP.
New EIDL Grants and Continued SBA Debt Relief
The new bill adds $20 billion for new EIDL grants (economic injury disaster loan program) for businesses in low-income communities, $3.5 billion for continued Small Business Administration (SBA) debt relief payments, and $2 billion for enhancements to SBA lending.
Grants for theaters and other live venues
This deal also includes $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions. The initial grant can total up to $10 million per eligible business. A second grant, worth half the amount of the first, may also be available. The money will be for specified expenses such as payroll costs, rent, utilities and personal protective equipment.
An article by BizBuySell, click here for the original article.