Small Business Support Included in Stimulus Package

December 28, 2020 | By Tara Palacios

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Small Business Support – Paycheck Protection Program

Included as part of the $900 billion package is the continuation of the Paycheck Protection Program (PPP), a forgivable loan program for small businesses. Initially the PPP program was forgivable if the funds were used for eligible expenses such payroll and other covered expenses such as rent and mortgage payments. The recent stimulus adds additional eligible expenses to the Paycheck Protection Program in which businesses are able to use the funds that are forgivable. These additional expenses include:

  • Covered operations expenditures such as technology, human resource expenses and accounting needs
  • Covered property damage costs such as costs related to property damage from public disturbances
  • Covered supplier costs such as expenditures to a supplier
  • Covered worker protection expenditures such as personal protective equipment and adaptive investments to help comply with safety guidelines.

The recent stimulus creates a second loan from the Paycheck Protection Program called “PPP Second Draw” loan for smaller and harder-hit businesses with a maximum amount of $2 million. Additional eligibility applies in order to receive a PPP Second Draw which eligibility must employ no more than 300 employees and must have used or will use the full amount of their first PPP loan.

Borrowers of a second PPP loan would also be eligible for loan forgiveness so long as the funds are used for eligible expenses. Eligible entities must be businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives. For both PPP programs, the 60/40 cost allocation between payroll and non-payroll costs will continue to apply in order to receive full forgiveness.

Loan Amounts

Generally, borrowers may receive a loan amount of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year. No loan can be greater than $2 million. Businesses within the accommodations and food services industry may receive loans of up to 3.5 times their average monthly payroll costs. Furthermore, new entities may receive loans up to 2.5 times the sum of their average monthly payroll costs.

Lender Eligibility

Lenders who were initially approved to make PPP loans under the initial rollout, may make covered loans under the same terms and conditions. Businesses interested in applying for a PPP Loan or PPP Second Draw should contact a local 7(a) lender such as a bank, credit union or a CDFI (Community Development Financial Institution). Finally, for loans under $150,000 the stimulus creates a simplified application process.

PPP Expanded Eligibility

The recent stimulus package expands eligibility to include 501(c)(6) organizations and Destination Marketing Organizations. All previous eligible organizations are once again eligible.

From the office of Senator Warner a snapshot of items small businesses are currently eligible for in the Stimulus Law:

  • Reopens the Paycheck Protection Program: The bill reopens the Paycheck Protection Program through March 31, 2021.
  • Creates a second round of PPP loans: The bill allows businesses with less than 300 employees and a revenue loss of at least 25% to apply for a second PPP loan.
  • Clarifies the tax treatment of PPP loans: The bill clarifies that forgiven PPP loans are excluded from gross income. It also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a forgiven PPP loan.
  • Expands use of PPP funds to include new expenses: The bill makes personal protective equipment and supplier costs eligible for forgiveness.
  • Simplifies forgiveness for PPP loans under $150,000: The bill requires borrowers with loans up to $150,000 to submit a one-page certification with only essential information to their lenders and preserve documentation in case the SBA audits the loan.
  • Expands PPP eligibility: The bill expands PPP eligibility to small nonprofits, including 501(c)(6)s, destination marketing organizations, and housing cooperatives with 300 or fewer employees. A 501(c)(6) is not eligible if it is heavily engaged in lobbying.
  • Establishes set-asides for micro and minority-owned businesses: The bill creates two set-asides for small business borrowers with 10 or fewer employees and businesses located in Low to Moderate Income areas for loans up to $250,000: $15 billion set-aside for initial PPP loans and $25 billion set-aside for second PPP loans.
  • Grants to venue operators: Similar to Senator Warner’s Save our Stages Act, the bill creates a $15 billion grant program within SBA to offer grants to eligible live venue operators, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, and talent representatives.
  • SBA Debt Relief: The bill extends debt relief from principal and interest for SBA borrowers with traditional loan products (e.g., 7(a), 504, and Microloans) for an additional 3 months.

Additional Resources

The full text of the bill is available on line, as is a section-by-section summary of the small business measures in the bill.

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