After much debating, Congress finally passed a new COVID-19 stimulus package, which President Trump signed into law on December 27.
The new stimulus package — estimated to pump approximately $900 billion into a sluggish American economy — represents some lessons learned, as it aims to provide small business support, which wasn’t made available in the first round of funding back in March.
So what exactly is in the new stimulus package? And what does it mean for small business owners like you?
One of the biggest complaints around the Paycheck Protection Program was that it was difficult to apply for. Additionally, definitions of what constitutes a “small business” were loose, meaning many larger companies took funding that threw the PPP’s purpose into chaos.
The new stimulus package includes a second PPP loan that aims to get funding where it needs to go. This PPP loan is designed for:
Most small businesses can apply for loans of up to 2.5 times their monthly payroll (based on any month in 2019). However, any food industry business can apply for 3.5 times its monthly payroll.
Important note: Depending on the amount you'll be applying for, you may need to show proof of business insurance coverage to get approved for a PPP loan. Contact your SBA lender to learn more about their insurance requirements.
Say goodbye to complicated applications: If you’re applying for a PPP loan under $150K, you’ll only need to complete just a one-page application that contains the following information:
Good news for those who used the first stimulus’s small business support to fund their business: Payments made with PPP or Economic Disaster funds are considered tax-deductible. That’s welcome news for you (and your accountant!) as we approach the 2020 tax season.
The first PPP loan was limited in terms of how you could use the funding (basically, you could cover only payroll expenses). This new round of funding opens up additional expenses you can pay for with your PPP loan, including:
Software that helps you maintain your business operations, like payroll software, payment processing, inventory tracking, and more
Property damage costs that were incurred as a result of public demonstrations in 2020 (such as vandalism, broken windows, etc.)
Supplier expenses, especially if those costs are considered necessary to running your business
Costs incurred as a result of keeping your business compliant with COVID restrictions (such as air purifiers, masks for employees, sanitizers, etc.)
The new stimulus package sets aside $3 billion in grant funding for minority-owned businesses in underserved communities. This funding aims to address the criticism that the first stimulus package didn’t do enough to get funding to the communities with the greatest needs.
Details are still being hammered out on how this funding will be distributed; we’ll provide updates when those details become available.
One thing we all can agree on is: as the pandemic continues, more small business support will be needed to help prevent massive closures.
With the incoming administration vowing to continue providing support for small businesses, we’ll keep you updated with any news on what will be done in 2021.
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This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
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