If President Trump signs the latest Covid-19 bill in its current form – no guarantee given his erratic tweet – it could usher in hundreds of billions of billions of new aid to small businesses and individuals.
The $ 900 billion package expands a number of crisis-era small business programs, such as the Disaster Loan Program for Economic Injury, which provides working capital for businesses in trouble, as well as the Employee Retention Tax Credit, a 70 percent tax break each on the first US $ 10,000 – Dollars in quarterly wages (for up to $ 14,000 per employee).
Above all, the law also opens the program to protect paychecks. The Small Business Refundable Loan Program will be available to both first-time PPP recipients and those who have already received a PPP loan but experienced significant lost revenue in 2020. The new law expands the list of eligible expenses further forgiveness and among other things restores the deductibility of PPP expenses.
While it is unclear whether the bill will become law in its current form, the rules for small businesses are unlikely to change. Because of this, there are six things you need to do now to get more help:
1. Determine your eligibility.
Eligible business owners will again have access to approximately $ 284.5 billion through the PPP. It is open to companies that either haven’t received an initial PPP or have already received one, but have also suffered significant revenue losses due to the pandemic or have closed and need more help. For this second drawing, eligible business owners must demonstrate a 25 percent decline in sales in each quarter of 2020 compared to 2019. The second drawing is limited to companies with 300 employees or less.
First-time PPP recipients won’t be tied to the same lost revenue qualification, and the size standard would fall back on previous law that allowed companies with 500 or fewer employees to apply, says Neil Bradley, U.S. Chamber of Commerce chief policy officer . However, he adds that all PPP loans will be capped at $ 2 million. Borrowers for either type of loan can expect to fill out a new loan application which can help clear up the remaining questions.
2. Do the numbers.
Just like the original PPP, which was first approved by the Cares Act in March, the PPP2 loan size is a product of your average monthly wage bill for 2019 times 2.5. Both first-time beneficiaries and those applying for an additional PPP loan will need to do this calculation. All loans are capped at $ 2 million. The original PPP loans were capped at $ 10 million.
An industry-specific allocation for restaurants and hotels allows them to apply for forgivable loans based on 3.5 times their monthly wage bill of up to $ 2 million. Seasonal companies would base their calculation on their average monthly wage bill for a period of 12 weeks between February 15, 2019 and February 15, 2020.
3. Organize your books.
While this is always a good idea, Ami Kassar, the founder and CEO of MultiFunding, an Ambler, Pennsylvania-based small business loan advisor, notes that this time around, lenders and the small business administration in particular may want to see evidence of your desire for losses . In the first round of the economy, companies only had to certify that they needed the money because of economic uncertainties. A few months later, he finds that the rules have changed and that borrowers have been asked to demonstrate the need for the loan if they borrowed one for more than $ 2 million.
The new invoice takes this into account. All borrowers are asked to keep the employment documents relevant to their application for four years and the other documents for three years. However, individuals with loans less than $ 150,000 are specifically not required to provide supporting documents or certifications previously described for loans under this amount. “For them, it generally works like blanket forgiveness,” says Bradley, referring to a call by some lawmakers to allow automatic lending below a certain amount.
4. Visit your PPP allocation application again.
You may also want to recheck the award calculation for your first PPP. The majority of PPP beneficiaries have likely used their loan proceeds to be fully forgiven – that is, they spent 60 percent of their loan on wages and salaries including service costs, while the remaining 40 percent went on fundable expenses such as mortgage interest and some Additional costs. But some didn’t. Those who have received PPP loans that they do not expect full forgiveness should read into the now comprehensive list of expenses covered by the new law. In this round, anything from “supplier costs” – such as the cost of goods sold or logistics costs – to personal protective equipment and investments in plant modifications such as retrofitting an HVAC system could become eligible costs.
There is one major caveat. The law prohibits borrowers who have applied for forgiveness and received a decision before the law came into effect from applying for forgiveness again.
Bradley also notes that the window of forgiveness also widens. As a result, you may want to include additional recovered costs in your calculation. September 30, 2021 is listed as the end date of the grant period.
5. Recalculate the business expense deductions.
The new bill clarifies an important open question under the Cares Act: Are expenses paid for with allocated PPP funds tax-deductible? That law says yes, according to Bill Smith, executive director of the National Tax Office of CBIZ MHM in Bethesda, Maryland. He notes that the change in law directly contradicts a ruling by the IRS confirming twice that PPP expenses are not tax deductible. “Why should you take a deduction when you have free money? Secretary Mnuchin said it was Tax 101,” says Smith. But he adds, that was the original intent of the Cares Act, and this new bill codifies it. Because of this, you may want to re-examine your year-end tax plan and consider revising your estimated tax payments and / or bonuses.
6. Call your lender.
Stephen Brincks, professor of finance at San Diego State University, suggests that if the PPP2 is nowhere near as popular as the first round of the PPP – if the funds run out in two weeks, you should contact your lender quickly are. “If you were able to work with your financial institution or bank for the first time to process the application,” he says, “I would get in touch with you right away and say,” OK, can you help me get this money to get the second time? around? “He goes on to note that the funds could flow quickly as the $ 284.5 billion program is less rich than the first round that offered $ 349 billion to businesses, and it was for certain nonprofits and others Types of companies that weren’t included in the Cares Act One more question, if you got a PPP in the first round but didn’t get it before the program ended, is your application priority?
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