Policy Spotlight: What the Stimulus Means for Small Businesses (PPP, EIDL)

The Paycheck Protection Program (PPP) returns today for all eligible small business owners! Providing forgivable government-backed loans, the PPP doled out $523 billion to 5.2 million small businesses last year, with Congress including $284 billion in new funding in the stimulus package signed into law on Dec. 27.

We cover below a few key changes to the PPP, the Economic Injury Disaster Loans (EIDL), and the EIDL Advance grants that small business owners should know about. A new online Disaster Loan Assistance Portal with up-to-date info is expected this week; we’ll update this blog post to include the link when it becomes available. [UPDATE: COVID-19 Targeted EIDL Advance funds of up to $10,000 will be available to applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of available program funding. Applicants do not need to take any action at this time. SBA will reach out to those who qualify.]

Small business owners can get more information about their eligibility by contacting their SBA participating lender (for PPP) or the SBA directly (for EIDL) or by talking to a TrustPlus personal finance coach for help. Small businesses in Upper Manhattan or the Bronx in need of a PPP loan can contact Neighborhood Trust Federal Credit Union (NTFCU).

Businesses Eligible for Second PPP Loan

New PPP provisions allow for a business owner to get a second forgivable loan and impose fewer restrictions on how the loan may be used. If your business got a PPP loan then you may apply again as long as you’re not public, you don’t employ more than 300 people, and you’ve exhausted your first PPP loan. You’ll also need to show at least a 25% drop in gross receipts in the first, second or third quarters of 2020 compared to 2019. A typical loan will equal 2.5 times average monthly payroll expenses, as before. However, restaurants and lodging businesses are now eligible for loans equal to 3.5 times. And, loans are now capped at $2 million, down from $10 million.

Streamlined Forgiveness Process for Loans Under $150,000

The bill relaxes requirements to have small loans forgiven (up to $150,000), lets businesses deduct the expenses their PPP loans helped cover, and includes targeted relief to help restaurants and minority-owned businesses.

To have a PPP loan forgiven, businesses that borrowed $150,000 or less need to submit a one-page certification that includes the number of employees the business retained as a result of the loan, an estimate of how much of the loan was spent on payroll and the total loan amount.

60/40 Tax Break on Payroll Expenses, Business Expenses

At least 60% of the PPP money must be used for payroll expenses. And the remaining 40% or less may be used to cover a broader range of business expenses than during initial PPP lending.

The bill clarifies that if the loan is forgiven it will be treated as tax-free to the business, and even though the tax-free loan may have paid for many payroll and operating expenses, a business may still deduct those expenses on their tax return.

For a deeper dive into many of the details with PPP & EIDL, see this Forbes article.

The EIDL Advance provision in the latest stimulus provides eligible small businesses a $10,000 grant that does not have to be paid back. Covered entities may now apply to receive the full $10,000 EIDL Advance grant regardless of whether their application for an EIDL “is or was approved,” they accepted an EIDL loan, or they previously received a PPP loan. Any EIDL grant previously received will be subtracted from the new $10,000 EIDL grant. Generally, a “covered entity’’ is located in a low-income community; has suffered an economic loss of greater than 30 percent; and employs not more than 300 employees. [See UPDATE above. SBA will contact eligible previous recipients and unsuccessful applicants.]

The COVID-19 EIDL was left alone in the latest stimulus and is still open through December 31, 2021. The loan to small businesses and non-profit organizations experiencing a temporary loss of revenue features a 30-year term loan with a 3.75% interest rate, 2.75% for non-profits.

TrustPlus offers personal finance coaching services for free to small businesses and their workers. Find out how you can bring TrustPlus to your business or sign up to speak with a coach today.

For nearly 25 years, our nonprofit social enterprise has been empowering workers to take control of their finances through financial coaching. Now we’re bringing our expertise to employers who want to support their workers’ financial health. www.mytrustplus.org

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TrustPlus is a financial wellness benefit that eases everyday money worries with personal coaching and action-oriented tools and products.

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