New Stimulus Programs Better for Business
Written by Robert Killen, Director, Lane SBDC
The newest and long-awaited round of pandemic-related stimulus was recently signed into law as the Coronavirus Response and Relief Supplemental Appropriations Act of 2021. Hidden in the middle of the 5593-page document is buried treasure for small business. While the programs might have the same names as they had in the spring, some of the biggest programs are greatly enhanced and worth highlighting.
Paycheck Protection Program (PPP)
The PPP is a forgivable loan intended to be used for payroll and selected operating expenses. These loans are made through your bank or other financial institution and are generally capped at 2.5 times your monthly average 2019 payroll costs, except for food service providers (see *below).
Several notable improvements have been made to the PPP in the new Act:
- Any amount that is forgiven is no longer taxable, as had been previously understood.
- Your EIDL Advance (grant) is no longer subtracted from your forgiveness amount.
- A new simplified forgiveness application for loans under $150,000 is expected to be released on Jan 27, 2021.
- You can get a second PPP loan! Talk with your first loan lender. Qualifications apply.
- *Loans to food service providers (and any business with a NAICS code starting with “72”) are larger! – 3.5 times monthly average 2019 payroll costs.
- Certain 501(c)6 non-profits, including Chambers of Commerce, are now eligible for this program.
This program is currently active for select lenders (as of 1/11/2021)and will officially open to all participating lenders soon. Contact your financial institution if you are interested. If they are not participating, there will be other local institutions or 3rdparty lenders that can help.
Targeted Economic Injury Disaster Loan (EIDL) Advance
The new “Targeted EIDL Advance” is a potentially enormous opportunity for eligible small businesses. Business entities that meet the new criteria will qualify for a full $10,000 EIDL Advance (grant). The eligibility criteria, as we currently understand them, are:
- Gross receipts must have declined by 30% or more in an 8-week period between Mar 2, 2020 and Dec 31, 2021 compared with a comparable 8-week period in the prior year.
- Business is in a low income community. (As I write this on 1/14/2021 it is still uncertain how the SBA will verify this. Clarification is expected soon.)
- Business was in operation prior to January 31, 2020.
- Business has no more than 300 employees.
IMPORTANT: While it has been widely reported that a new application portal will open for eligible businesses that is now uncertain. Monitor this page for information, which will hopefully arrive soon:
Employer Retention Tax Credit (ERTC or ERC)
The ERTC is the more complicated of the stimulus measures. In earlier rounds it was largely ignored for two reasons: (1) It was complicated. (2) You could not participate in both the PPP and ERTC, and the PPP seemed more beneficial for many small businesses.
Much has changed!
- A business can now take advantage of both the PPP and ERTC, so long as they are applying them each to separate payroll costs.
- While the 2020 credit was capped at $5,000/employee for the year, the 2021 credit is up to $7,000/employee per quarter for two quarters (Q1 and Q2). This is potentially a credit of $14,000 per employee in 2021.
- While the 2020 program required a business to have experienced a 50% year over year reduction in gross revenue during a given quarter, the 2021 program only requires a 20% reduction.
In short, the new ERTC (1) is now allowable for PPP participants, (2) provides a much larger credit and (3) is easier to qualify for! If you have payroll that is not being fully covered by your PPP loan, it would be well worth your time to talk with your CPA or payroll service provider about this program.
While some details are still up in the air regarding how these programs will be administered, it is clear that Congress listened to public concerns surrounding the earlier rounds of stimulus and worked to answer many of those concerns. In a year that has yet to give us much to smile about, this newest round of stimulus might be just the thing.
To learn more about these programs and more, contact the LaneSBDC for free and confidential advising – lanesbdc.com
