December 28, 2020
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Relief at last
After months of waiting, a new economic stimulus package has been released, and it includes funding for a number of initiatives aimed to help small business owners, like:
- $284 billion in additional funding for the Paycheck Protection Program (PPP)
- $20 billion in new funding for EIDL grants
- $10 billion for childcare centers to reopen
- $12 billion to support community lenders like CDFIs and MDIs
- Expansion of the employee retention tax credit (ERTC)
- Extended paid sick and family leave through March 30, 2021
Gusto’s legal experts broke down the full 5,593-page bill. Here’s a closer look at the relief employers can expect:
New and improved Paycheck Protection Program (PPP)
The PPP lending program is being brought back to life with a few notable changes that make it attractive for new borrowers:
- $35 billion set aside for those who have not yet borrowed;
- the ability to elect a covered period of any length between 8 and 24 weeks after origination; and
- our personal favorite: deductibility for PPP expenditures.
That’s right. The loan amount AND associated expenses are now tax-free. That means PPP borrowers now have the advantage of deducting their PPP expenditures so they don’t inflate their income come tax season.
Streamlined and expanded PPP forgiveness
The bill simplifies the forgiveness application process for loans of $150,000 or less. Among the improvements:
- Borrowers will fill out just a one-page online application
- Forgiveness amounts will NOT be reduced if headcount or wages are lowered
- Expenses eligible for forgiveness have been expanded for second round PPP applicants
Read more about PPP forgiveness.
Second draw PPP loans
If you’ve already gotten and fully spent or allocated your PPP loan, you can apply for a second loan, also known as a second-draw PPP loan, of up to $2 million, IF you:
- Employ 300 or fewer employees;
- Can demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter.
You can only receive one PPP second-draw loan, and the covered period will extend through March 31, 2021.
Read more about second-draw PPP loan eligibility.
EIDL, and other funding programs
An additional $20 billion has been added to the Economic Injury Disaster Loan (EIDL) Advance program for businesses in low-income communities. This provides $10,000 cash grants to applicants in low-income communities that did not secure grants earlier this year because funding ran out.
Read more about applying for an EIDL.
Tax credits
The Families First Coronavirus Response Act (FFCRA)’s refundable payroll tax credits for emergency paid sick and family leave have been extended through the end of March 2021.
The Employee Retention Tax Credit (ERTC) has been extended through June 30, 2021, and the credit rate has been increased from 50% to 70% of qualified wages. Bonus: You can now qualify for these credits even if you got a PPP loan.
Read more about the new updates to tax credits.
Employee relief
Your team will also benefit from the following:
- $600 stimulus checks for adults and their dependents
- Additional $300 unemployment benefits for 11 weeks through March 14, 2021
- Extended Pandemic Unemployment Assistance (PUA) through April 5, 2021
- An extra 15% in SNAP benefits
- Additional 401(k) withdrawals without penalty for 60 days
As more develops happen, we’ll keep you updated at the COVID-19 Small Business Resource Hub.
Want more small business news and resources? Check out past editions in our archive.
