1. New round of PPP (forgivable) loans
Here’s very good news. Congress passed $284 billion for another round of Paycheck Protection Program loans.
You can apply for a new PPP (forgivable) loan, whether or not you received one before. This can be your first or second PPP loan. You cannot get more than two.
• Your income – gross receipts – must have declined by 25% or more in any quarter of 2020 compared to 2019. It appears that this loss will need to be measured by quarters, not just a three-month period. Gross receipts are likely to exclude funds from PPP loans or other loans or grants.
• You must have been in business prior to Feb. 15, 2020.
• You must have used, or will use, all of your previous PPP loan if you received one.
• You must have fewer than 300 employees.
• Qualified businesses can be corporations, LLCs, sole proprietors, self-employed, independent contractors.
• No loan can be greater than $2 million.
How much can you get?
• Most businesses: As in the first round of PPP, you can get up to your average monthly payroll in 2019 times 2.5. In other words, if your total 2019 monthly payroll cost averaged $10,000, you can apply for $25,000. Keep in mind that "payroll" expenses include all costs for W-2 employees (not independent contractors), including wages, commissions, bonuses, health insurance, retirement, state and local taxes.
• Accommodation and food service businesses (hotels and restaurants): Recognizing how hard hit these industries have been, Congress upped the amount to 3.5 times average 2019 monthly payroll costs. In other words, if your restaurant's 2019 monthly payroll averaged $10,000, you can now apply for $35,000.
You can get forgiveness for this PPP loan by spending at least 60% on payroll expenses (wages, salaries, retirement, group health insurance, etc.) and a maximum of 40% on other qualifying expenses during an eight or 24 week period. More expenses now qualify (see below).
PPP set aside for certain small businesses:
Because the smallest businesses and those located in low- and moderate-income areas were often shut out of the first round of PPP funding, this bill includes set-asides for small businesses with fewer than 10 employees, those in low/moderate income areas, and funds for small community banks, credit unions and community-based lenders. This will hopefully level the playing field, making it easier for smaller, needier businesses to get these loans.
2. If you've already received PPP funds
New treatment of PPP expenses:
Expenses used for PPP forgiveness are now tax deductible. When Congress passed the CARES Act, lawmakers indicated that PPP funds should not be taxable. However, Treasury Secretary Steve Mnuchin decided businesses could not deduct expenses used to qualify forgiveness – thus making an equivalent amount to PPP funds taxable. This legislation reverses that decision.
Simplified form for forgiveness:
If your PPP loan was for $150,000 or less, there will be a new, simple, one-page form to apply for forgiveness. Your lender should provide you a link to a form soon in the new year.
More expenses qualify for forgiveness:
While you still need to use at least 60% of PPP funds on payroll expenses, qualifying non-payroll expenses are much broader, now including payment for software, cloud services, accounting and human resources, property damage due to civil unrest, personal protective equipment and COVID-19-prevention equipment and, importantly – supplier costs that were contracted or ordered for before you got the loan or costs of perishable goods ordered before or during the life of the loan.
3. Grants for cultural, arts, live events, theaters
Recognizing that most venues offering in-person cultural activities have been shuttered throughout the pandemic, Congress allocated $15 billion in grants (not loans) for certain live events, movie theaters, museums and other cultural providers.
Live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators, or talent representatives who demonstrate at least at 25% reduction in revenues.
$2 billion (of the $15 billion) was set aside for those with 50 full-time employees or fewer, but that set-aside expires after 60 days. So small providers need to act fast!
In the initial 14-day period, grants will be awarded to eligible entities that have faced 90% or greater revenue loss. This may include large movie chains. In the 14-day period following the initial 14-day period, grants will be awarded to eligible entities that have faced 70% or greater revenue loss. After these two periods, grants shall be awarded to all other eligible entities.
Money to be used for:
Grants to be used for specified expenses such as payroll costs, rent, utilities and personal protective equipment.
The amount of grant appears to be up to 45% of your 2019 revenue or 85% of 2019 operating expenses. A first grant can be up to $10 million, and a second grant could be up to 50% of the first grant. In other words, a large movie theater chain could get $15 million in grants.
4. Grants, changes for Economic Injury Disaster Loan
When EIDL (Economic Injury Disaster Loan) grants were passed by Congress, they allowed for a $10,000 "Advance" to be treated as a grant, not a loan. The SBA unilaterally scaled back that grant to only be $1,000 for each employee, counteracting congressional intent. This addresses that issue.
• Businesses in low-income communities that received an EIDL can get a grant equal to the difference of what they received and $10,000.
What you should do immediately
Act fast. What small businesses learned the last round of PPP funding was that if you snooze, you lose. You should be prepared to apply for everything the very first day it becomes available.
- Figure out your income by quarters this year versus 2019. Many small businesses have lousy records, but you're going to have to certify at least a 25% drop in gross revenues.
- Contact potential lenders. Contact local banks, community lending institutions, credit unions. Ask whether they’re going to participate in the next round of PPP lending. Find a couple lending sources, even if you received a PPP loan before.
- Try to connect with an individual lending officer. You’ll have a better chance of getting a PPP loan if you have a relationship with a person.
- Set up business banking. If you don’t already have a business bank account, get one.
- Pay attention. Keep a close out eye for application openings and deadlines. Apply DAY ONE for everything you even potentially qualify for.