Three Big Ways Small Businesses Can Benefit From New Covid Relief Bill

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Covid relief package adopted by Congress earlier this week, it allocated an additional $ 284.45 billion in loans to qualifying businesses.

The bill, which President Trump has yet to sign, now allows a business owner to get a second PPP loan with forgiveness and places fewer restrictions on how the loan can be used. It also relaxes the forgiveness requirements for small loans. And this allows businesses to deduct the expenses their PPP loans have paid.

In addition, this time there are special provisions designed specifically to help minority-owned restaurants and businesses.

“Christmas has come early for small businesses,” said Chris Hurn, founder of Fountainhead, a non-bank lender that provides loans guaranteed by the Small Business Administration.

Here are some of the keys changes to the PPP loan program:

Companies can now take out a second PPP loan

Businesses that got a PPP loan when the program went into effect now can apply for a ‘second lottery’, as long as they are not a state-owned enterprise, employ no more than 300 people, who ‘They have used or will fully use their first PPP loan, and can show a decrease of at least 25% in gross receipts in the first, second or third quarter of this year compared to the same quarter in 2019.

Struggling Americans call stimulus bill too little, too late

Specific amounts are set aside for community development financial institutions – which typically lend to minority-owned businesses in underserved communities – and for companies with less than 10 employees, as well as those in low-income areas.

Most qualifying businesses can get a loan equal to 2.5 times the average monthly salary expense, as before. But restaurants and accommodation companies can now apply for loans equal to 3.5 times.

No loan can exceed $ 2 million, compared to the original $ 10 million.

Simplified cancellation process for loans under $ 150,000

To get a PPP loan canceled, businesses that have borrowed $ 150,000 or less will simply need to submit a one-page certificate stating the number of employees the business has retained as a result of the loan, an estimate of the portion of the loan spent. on the payroll and the total loan amount. Borrowers must also certify that the information is correct and that they complied with the loan conditions.

In order for any PPP loan to be fully canceled, at least 60% of the money must be used for salary expenses. And the remaining 40% or less can be used to cover an even wider range of business expenses than was the case in early PPP loan cycles.

Beyond mortgage interest, rent and utility payments, loans, for example, can now be used to cover the costs of personal protective equipment and other expenses incurred to comply with Covid restrictions, as well as certain operations, property damage and costs providers.

Huge tax reduction on business expenses

Businesses normally deduct their payroll and operating expenses from their gross income.

But for companies that get PPP loans, these expenses are largely funded by the loan.

The latest Covid relief package clarifies that if the loan is canceled, it will be treated as tax-exempt for the business.

These small businesses might not be successful without more incentives

And it further clarifies that even though the tax-free loan may have paid off many salary and operating expenses, a business can still deduct those expenses on its tax return.

Fiscal policy experts here frown on the decision of lawmakers because it is seen as a “classic double dip” in the taxpayer’s pocket.

“Companies that have obtained PPP grants want to deduct these costs as regular business expenses. But taxpayers have already paid these expenses once through the PPP program. Why should they pay them again? Well, because business lobbyists are very good at what they do, “Howard Gleckman, senior member of the Tax Policy Center, wrote in the TaxVox blog.

But for small businesses just trying to stay alive during the pandemic, this is a huge source of relief as their revenues have been hit so hard and any real recovery for them may be a long time in coming. as Covid restrictions and consumer fear persist.

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