For small businesses set back by the Covid-19 crisis, the wait for stimulus package news has been long and stressful. Fortunately, there have been several areas of relief already approved in previous rounds. Here’s a closer look at business relief that’s already available, as well as what small businesses can expect from the next government stimulus package.
Upcoming stimulus package news
The new stimulus package for 2021 has already passed the House of Representatives at the time of writing, but must now pass the Senate to come into effect. It promises 1.9 trillion in relief, sending $1,400 checks to American individuals, expanding child tax credits, and extending federal unemployment benefits.
For small businesses, this new stimulus package could include an extension of grants for struggling small businesses. It would also allocate more funds to each state to boost the State Small Business Credit Act Initiative. Relief available would be dependent on the states but could include additional credits for businesses with fewer than 10 employees, along with sole proprietors.
The Paycheck Protection Program (PPP) would also be impacted, with new eligibility requirements put in place to apply for second draw PPP loans. We’ll take a deeper look at the PPP loan program below when discussing existing aid.
Forgivable PPP loans
In the most recent stimulus package, Congress passed $284 billion to fund the Paycheck Protection Program (PPP) with forgivable loans for small businesses. This means that there are first and second draws for the loans, designed to help businesses keep employees on payroll. To be eligible for the most recent second round, you need to prove that:
Your income has declined by 25% or more from any quarter of 2020 compared to the same quarter in 2019.
You have already received the first PPP loan and used all of the funds.
You have a business with fewer than 300 employees.
You cannot borrow more than $2 million in the loan.
Eligible businesses can receive their average monthly payroll times 2.5. For example, if the total 2019 monthly payroll was $10,000 on average, this means you’d be eligible for $25,000. Payroll expenses include wages as well as bonuses, health insurance, and other benefits. What’s great about PPP loans is that they are forgivable, provided you spend them for the approved purpose.
As part of the CARES Act, PPP expenses are tax deductible. The latest economic stimulus package has also streamlined the forgiveness application form down to a single page.
Business grants for cultural activities
The arts industry has been one of the hardest hit throughout the pandemic, so the most recent government stimulus package allocated $15 billion in grants to movie theaters, museums, live events, and other cultural venues. To qualify, you must prove that you’ve experienced at least 25% reduction in revenue. The grants can be used for everything from payroll costs to utilities, PPE costs, and rent.
EIDL (Economic Injury Disaster Loan) grants
There has been some back-and-forth in Congress about EIDL payments for struggling businesses, regarding whether they qualify as a grant or a loan. The original stimulus package offered a $10,000 advance to be used as a grant, but this was scaled back by the SBA to be only $1,000 per employee. With the more recent economic stimulus package, businesses in low-income communities can now get a grant equal to $10,000.
Another change to be aware of is that if you received both a PPP loan and EIDL grant, you had to deduct the advance grant money from your PPP forgiveness. According to the more recent stimulus package, this is no longer necessary.
The bottom line for small businesses
What’s important to keep in mind is that grant money is used up quickly, so it’s important to keep an eye on all the latest stimulus package news. You’ll need to submit your application as quickly as possible to take advantage of allocated relief. As we wait for updates, it doesn’t hurt to pull together some basic accounting information from your financial statement. This should include things like payroll amounts, revenues, profits and losses, and bank statements. These are all required documentation for stimulus grants and loans, so make sure they’re current.
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