Congress has passed and President Trump has signed several laws intended to help small businesses with cashflow and liquidity issues caused by COVID-19.
NFIB experts have analyzed the federal lending programs established in response to COVID-19 to discover how our members may benefit from them. The laws contain many provisions that are specifically designed to help small business. The most important include:
Small businesses, nonprofit organizations of any size, or U.S. agricultural businesses with 500 or fewer employees that have suffered substantial economic injury as a result of the COVID-19 pandemic can apply for an Economic Injury Disaster Loan (EIDL) through December 31, 2021.
The federal COVID-19 recovery package signed into law on December 27, 2020 includes an additional $20 billion for EIDL Advance Grants, reopening the program to new applicants whose businesses have suffered a decrease in gross receipts of 30% and are located in low-income census tracts (similar to the New Markets Tax Credit).
The SBA has indicated that the Economic Injury Disaster Loan (EIDL) Advance Grants application will be available by January 17, 2021. NFIB summarized the details of the EIDL program’s re-opening here.
The latest recovery legislation also allows eligible small businesses to receive additional funding if their first EIDL Advance Grant was under $10,000. Learn more and apply for Economic Injury Disaster Loans through the SBA here.
The centerpiece CARES Act program, PPP offers federally guaranteed loans that include forgivable qualifying expenses for all small businesses and self-employed individuals. PPP loans can be totally or partially forgiven for businesses that spend them on qualifying expenses within a specified covered period. December 2020 PPP 2.0 legislation allocated an additional $284 billion in funding to re-open the program through March 31, 2021, or whenever funding runs out.
Businesses are eligible to receive a second forgivable loan if they employ 300 employees or less; have used or will use the full amount of their first PPP; and demonstrate at least a 25% reduction in gross receipts in any quarter in 2020 compared to the same quarter in 2019. Small business owners can also apply for an initial PPP loan.
The December recovery package:
- Simplifies the forgiveness application for loans under $150,000.
- Allows borrowers to specify a covered period between 8 and 24 weeks for PPP 2.0 loans.
- Repeals the requirement of deducting an EIDL Advance Grant from the PPP loan forgiveness amount.
- Expands eligible expenses to include costs for modified business operations, supplier costs, and costs associated with complying with health and safety guidelines. Payroll, benefits, rent, mortgage interest, and utilities also continue to be qualifying expenses.
- Makes businesses in the restaurant and hospitality industries eligible to receive loans of 3.5 times average monthly payroll, rather than 2.5 times.
The December 2020 COVID-19 recovery package also updated PPP tax implications, making the program more friendly to struggling small businesses in the following ways:
- Reverses IRS ruling to allow tax deductions for PPP forgiven expenses and clarifies that PPP loan forgiveness is not taxable income.
- Clarifies that EIDL Advance Grants are not included in taxable income.
- Extends FFCRA tax credits through March 31, 2021.
- Extends the Employee Retention Tax Credit through July 31, 2021 and expands the credit, allowing PPP borrowers to claim the credit retroactively and prospectively.
Application forms are now available:
Small businesses with non-disaster SBA loans can have their loan payments covered for an additional three months as a result of the December 2020 COVID-19 recovery package. SBA has yet to issue guidance for this relief, although details are expected soon. NFIB will provide updates as available.
If you have any questions, please contact NFIB’s Small Business Legal Center at 800-552-NFIB (1-800-552-6342) or email [email protected]. And please visit NFIB’s coronavirus news hub for frequent updates.