The second stimulus plan, the Economic Aid to Hardly Affected Small Businesses, Nonprofits, and Venues Act, has been passed by Congress and is awaiting President signature to become law. While you might hope it will help your small business, you’re probably glazing the fine print too, not sure if you’ll actually be able to take advantage of the new relief.
To help you out, I’ve pulled out some of the key points from this bill to keep in mind as they may be relevant to you and your business – even if you’re a solo preneur or gig worker.
As after the passage of the CARES Act on March 27, 2020, the Finance Department and Small Business Administration (SBA) will issue guidance that may change the implementation of this legislation. So use this as a starting point, but don’t rely on it as the last word or guide for your specific situation.
1. You may be eligible for a second PPP loan
As you recall from the CARES Act earlier this year, small businesses affected by the coronavirus pandemic have had Paycheck Protection Program (PPP) loans available.
These funds have been replenished and even if this is your first time loan, you may still qualify for another PPP loan. (New applicants who qualify are welcome to apply as well.) The key is that if you’ve already received a PPP loan, you must have used your funds or have plans to use them to sign up for more Qualify PPP funds.
However, this round of new PPP loans puts even more emphasis on very small businesses, including those that:
- 300 or fewer employees and
- In one or more quarters of 2020, gross revenues were reduced by at least 25% compared to comparable quarters in the previous year (with some restrictions for seasonal and newer businesses).
What this means for you: Whether or not this is your first time getting a PPP loan, you should consider applying if you think your business qualifies. These loans, like the first round, can be eligible for full forgiveness. And if you didn’t apply for the first time because you didn’t think your company was big enough (maybe you’re a solo preneur with no employees), maybe now is the time to think about it.
2. You can pay less tax
Before this bill, the expenses you paid using funds from PPP could not be deducted from your taxes. The IRS noted that it would be twice as much to get a forgivable loan that wasn’t taxed and then use that tax-free money to pay for the expenses that you deducted from your taxes. Unfortunately, this meant that some companies were facing an ugly tax burden for 2020.
In addition, many companies received a grant (advance payment) from the Economic Injury Disaster Loan (EIDL) program, and the IRS was aware of whether those funds would be taxed. (Typically, small business grants are taxable.)
Fortunately, this legislation addresses both of these problems.
Neither PPP loans granted nor EIDL grants are taxed. And if you’ve used your PPP or EIDL grant to pay for business expenses that are normally deductible, you can make those deductions just like you did last year before Covid-19 turned our world upside down.
What this means for you: Probably less taxes for 2020! Good news for everyone. As always, be sure to track your expenses in an accounting software so that your accountant can easily refer to them as they are filed. This is especially important here as PPP loans and EIDL grants or loans can be examined.
DON’T MISS: How to get your second Stimulus Payment deposited directly into your bank account
3. You can request more money from your first PPP loan
If you are one of the many small businesses that have returned their PPP loan or that applied for less than they were eligible to receive PPP funding the first time around (you may not have noticed that you are considered an employee for payroll purposes, z example), you can now go back and request more funds.
What this means for you: These means are also forgivable. So, if you find that you qualified for more loan funds the first time around, this pillow could be what your business needs in the months to come.
4. You may receive the full EIDL grant of $ 10,000
There was quite a stir earlier this year when the SBA first announced a non-repayable EIDL grant of $ 10,000, and then it fell silent when the SBA raised it to $ 1,000 per employee changed … and then ran out of funds.
The EIDL grant is coming back, and qualifying businesses may receive the full $ 10,000 (minus any grants already received) even if they were previously rejected or banned because funds were depleted.
This time, however, there are stricter qualifications. In addition to the qualifications of the original CARES Act, a company (including sole proprietorships and independent contractors) must have 300 or fewer employees, be in a low-income community, and have suffered greater than 30% economic loss due to Covid -19.
What this means for you: The SBA must publish specific guidelines and a new application process. However, if you do qualify, it means there is no need to pay back $ 10,000! This can go a long way toward surviving the economic turmoil.
5. You may get a simplified lending process for smaller PPP loans
This is another hotly contested topic on Capitol Hill: the PPP award process. Many business owners were hoping for auto-forgiveness for smaller loans, but it didn’t. Instead, thanks to this bill, there will be a new, simplified application for loans of $ 150,000 or less, including loans that have already been granted but not granted.
What this means for you: If you fall into this category, you’ll be happy to know that you don’t have the headache of an extended forgiveness application. The SBA has approximately a month to approve this new form. You then seek forgiveness from the lender who granted you your PPP loan. Don’t you wanna wait You may be able to use the current simplified application forms for forgiveness: 3508EZ or 3508S. Ask your lender for more information.
All in all, the measures passed in this bill mean that help is once again on the way for a number of small businesses. If you qualify, speak to your tax or financial advisor and consider using the help that is offered.
RELATED: New Aid Package Offers Next Round of PPP Financing For Small Businesses
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