COVID-19 Relief for Small Businesses: 2021 EditionBy Randy Legair on Tuesday, February 9, 2021
Still struggling during the pandemic? Consider these government aid options.
Just before the start of 2021, the United States Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act that extended provisions laid out in the initial CARES act. The first round of relief outlined in the CARES Act included provisions for both individuals and businesses. Today, many of those provisions are still available for your business, so read on to find a solution that may make sense for you!
PPP (Paycheck Protection Program)
The Paycheck Protection Program aims to keep US businesses afloat. This program provides loans that enable small businesses to keep their workforce on payroll amid the crippling economic slowdown brought on by the COVID-19 pandemic. The government has earmarked approximately $284 billion for the program. To summarize, the participants in this program will receive forgivable loans they can use to pay qualifying expenses that include (but are not limited to) employee wages and operating expenses.
This loan is forgivable. In order to have your loan forgiven, you must use the funds for only qualifying expenses. Borrowers can obtain up to 2.5 times their average monthly payroll for the last 12 months up to $10 million.
In addition to the funding, the bill passed at the end of 2020 provided much needed clarification on an existing tax code. When the CARES act first passed, Congress specified that forgiven PPP loans will not count as taxable income. They also specified that expenses paid for with the forgivable loan would be deductible. The Treasury Department ruled that the existing precedent of prohibiting businesses from deducting expenses associated with tax-free income would prevail. The new bill clarifies that those expenses can indeed be deducted.
You can find detailed information on who qualifies for both first and second draw PPP loans at the Small Business Administration website.
EIDL (Economic Injury Disaster Loan)
The CARES Act put this loan in place to assist small businesses and nonprofit organizations that have experienced temporary loss of revenue. The key difference between this loan and the Payment Protection Program is that EIDL’s are not forgivable. Also, the maximum amount is capped at $150,000 compared to the $10 million available with PPP loans.
The primary purpose of this program is to give small businesses the funds they need to continue operating their businesses, outside of the funds they need to retain their staff. As such, these funds can be used for essential business operations, like supplies and marketing, or anything that will help your business keep its doors open. The loan is a long-term loan (30 years) with a fixed interest rate of 3.75% for businesses and 2.75% for nonprofit organizations.
Another substantial difference from PPP loans? EIDL’s for over $25,000 will require businesses to provide collateral such as machinery, furniture, fixtures, etc.
You can find detailed information on who qualifies for EIDLs at the Small Business Administration website.
SVO (Shuttered Venue Operators) Grants
This new program aims to assist owners of venues impacted by the pandemic. The United States Government has allocated $15 billion in grants to venues that have had to close down to help slow the spread of the virus. Applicants can be granted up to 45% of their gross earned revenue from 2019, up to $10 million.
Those who receive the grants will need to spend the money on specific expenses such as payroll, rent or mortgage costs, utility payments, debt payments, and other ordinary business expenses. The grantees must not use the awarded funds to pay for real estate acquisitions, make payments on loans originated after February 15, 2020, make investments or loans, or make contributions or other payments to, or on behalf of, political parties, political committees, or candidates for election. There is a requirement to keep all documentation that helps illustrate the grantee’s compliance with the eligibility requirements of the SVO grant. Employment records must be kept for at least 4 years, and all other records must be kept for 3 years after receiving the grant.
The grants will be processed according to a schedule that weighs the economic impact of the pandemic. Entities that suffered 90% or greater revenue loss between April 2020 and December 2020 will be given first priority and processed within the first 14 days of grant awards. The second priority awards will go to entities that have suffered 70% or greater loss of revenue between the same time period, and those will get processed within the next 14 days of grant awards. The third priority awards will be given to those who lost 25% of their revenue from one quarter of 2019 and the corresponding quarter of 2020, and will be processed 28 days after the first and second priority awards are made. There will be a round of supplemental funding made available as well. The recipients of first and second priority awards will be able to receive additional funding if they have 70% or greater revenue loss for the most recent calendar quarter.
The SBA is not yet accepting applications, but be sure to check out their website regularly for more information on the grants and the status of the program’s availability.
The pandemic has impacted the operations of many American small businesses, and it is clear that the United States government understands the importance of small businesses to the nation’s economy. If you operate a small business, be sure to utilize the relief provided by the Small Business Administration to help keep your business running and stimulating the economy.