Here’s What The Second Stimulus Is Offering Small Businesses

The second COVID-19 stimulus package was passed into law Sunday night when President Trump signed the piece of bipartisan legislation.

The package releases $900 billion in emergency relief funds, including funds for vaccine distribution, an extension of enhanced unemployment benefits, and $600 stimulus checks for many Americans. The legislation also includes a second round of financial relief for struggling small companies.

The Committee on Small Business, headed by Congresswoman Nydia Velázquez, earmarked nearly $285 billion in the package for loans to small businesses under the Paycheck Protection Program (PPP). The so-called PPP loans, which are designed to be forgivable when recipients prove they’ve used the majority of the funds to maintain payroll, infused small businesses with sorely needed capital in the spring.

And now, with the pandemic raging on across the United States, effectively locking down several regions of the country, they’re just as critical. First-time borrowers are encouraged to apply, and companies that were granted PPP funds in the spring that meet the criteria for the new loans (more on that below) will be able to apply for a second loan—the bill refers to this as a “second draw.”

More good news: Some of the glaring problems baked into the first PPP loans have been fixed—including the one that allowed very large businesses, including publicly traded coal company Hallador Energy, to procure millions through the program.

The new program bars publicly traded companies from applying, and caps loans at $2 million for small businesses with multiple locations. It’s an appropriate fix for a sloppy loophole: The Associated Press found that roughly 94 publicly traded companies received $365 million in small business loans through the first stimulus.

Recipients of a second loan must have fewer than 300 employees, and have experienced at least a 25% dip in sales from a year earlier in at least one quarter. The program also appropriates $12 billion specifically for minority-owned businesses.

For the loans to be forgivable, businesses will need to show that at least 60% of funds were spent on payroll costs. Those costs can include certain group life, disability, vision, and dental insurance payments, whereas the CARES Act only included “group health care benefits.”

The remainder of the funds can be used for a wide range of expenditures, jewelry world CPA Steven M. Merdinger explained in an email to JCK. Those include “rent and mortgage interest, certain utilities, certain operations expenditures, property damage repair costs, supplier costs, and expenditures for worker protection from the COVID-19 virus,” he says.

Under the new program, it will also be easier for those borrowing $150,000 and under to apply for forgiveness—companies will just need to fill in a one-page form (Merdinger compares it to the 3508EZ form currently applicable to PPP loans of $50,000 and below) attesting that they’ve complied with PPP requirements and have written in limited expense data, with no supporting documentation needed (but, Merdinger says, supporting documentation should be retained).

The stimulus bill also contains tax-related provisions, including a temporary (through Dec. 31, 2022) enhanced tax deduction of 100% (as opposed to 50%) for certain business meals; an increase in the total amount of charitable contributions for 2021 from $300 to $600 on a joint return; an extension, through March 2021, of the refundable tax credits available for paid sick and family leave; a reduction of the adjusted gross income floor for medical expenses to 7.5% (down from 10%); extended eligibility to make certain disaster-related early withdrawals from tax-qualified retirement plans (up to $100,000) without the 10% early withdrawal penalty for up to 180 days following enactment of the legislation.

Read the entire proposal on the new PPP loans from the Committee on Small Business, now signed into law as part of the overall stimulus package, here.

(Photo courtesy of the Small Business Association)

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JCK Magazine Editor