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Information on the new Federal Covid relief bill is trickling out. Here’s some points I thought you might find helpful.
Disclaimer – Please talk with your accountant and/or bank to verify or confirm any/all of these points shared.
Changes to the PPP loan in the new relief package – discussed during a U.S. Chamber webinar this afternoon.
1. Allowable expenses have expanded. Was just payroll, mortgage, rent, utilities. Now it includes cloud computing, back end systems, supplier goods needed to run the business, retrofit equipment (ie outdoor heaters for outdoor dining), loses due to Covid.
2. The same 60/40 rule applies- 60% of PPP money used for payroll costs. 40% for other expenses.
3. This expanded allowable expense list applies to “old” PPP and new PPP loans.
4. Those who have already gotten a PPP Loan can get a 2nd, but there are conditions – ask your bank. Must have exhausted all funds from the first loan. Must demonstrate at least a 25% drop in business due to Covid. Must have less than 300 employees.
5. The loan forgiveness timeframe has changed – The covered period is now flexible. It is from the date you receive the loan (money) to 8 weeks - up to 24 weeks (you decide the time frame between 8-24 weeks).
6. Are PPP loans taxable? – NO. AND the IRS can’t limit your deductions for PPP expense items.
7. If your loan application was denied the first time, you are welcome to apply again.
8. 501c6 (and 501c3) orgs can apply for a PPP loan.
9. If a business applied for the Employee Tax Credit, you can now also apply for a PPP loan.
10. Max amount of PPP loan is $2 million dollars per biz.
11. For NAICS 72 businesses (food/hospitality) the avg monthly payroll calculations is 3.5 times (instead of 2.5 times).
12. Live Venue Grant - $15 billion. Must demonstrate a drop in revenue due to Covid, or up to 45% of your 2019 receipts. Can apply for up to $10 million dollars per biz. Can NOT apply for a PPPL and Live Venue grant. Bars with entertainment don’t qualify. Theaters and museums do. Those who depend on sale of tickets as a main source of revenue.
13. The Employee Tax Credit has expanded. Jan 1 2021- to June 30 2021. 70% of wages, up to $10k of employee’s salary (so $7000 per employee), per quarter. So $7kx2 = $14k per employee. Old limit was up to 100 employees. New limit is less than 500 employees. *Before the end of this year, businesses can apply for the employee tax credit for up to $5k per employee – this is a refundable tax credit. You cannot claim the same employee wages for PPP and Employee tax credit however.
14. EIDL – reopening with $20 billion. It includes the same (up to) $10k grant. If you applied before and only got $2k, you can apply again to get the additional $8k. New – the grant amount (up to $10k) will NOT be deducted from your PPPL forgiveness.
15. Next Steps – Once relief package is signed by all, the SBA will go to work on creating/updating forms. The banks will use these forms for PPP loans. You apply for a PPP loan at your bank (same as last time). The EIDL application will appear on the www.SBA.gov website once it is ready.
Q. If I received a PPP loan, but then closed my business, can I apply for a 2nd loan to pay off the debt?
A. Not likely as the PPP loan is generally not used to pay off debt.
Q. If I received a grant from my county or state, or some other source, does that count as revenue when applying for a PPP loan?
A. Unknown at this time. Stay tuned for further clarification to come.
Q. If my PPP loan is less than $150k is it automatically forgiven?
A. NO – you must still apply for forgiveness. You will get to use a much simpler 1-page application however. Work with your bank on this.
Unemployment – the Pandemic Unemployment Assistance (PUA) has been extended through March 14th. This is an additional $300 a week for those on unemployment.
Independent contractors can apply for a PPP loan.
Rental Assistance - $25 billion set aside to help those behind on rent. This money will go to the states and be distributed by them.
SBA 7A loan – For those who have gotten a new loan recently AND for those who get a new 7A loan, the SBA will pay your first 6 months of payments.
Resources for additional information
www.SBA.gov (Great source for PPPL, EIDL, 7A loans and other small business information, tools/resources)
New Small Business Guide: from the U.S. Chamber: https://www.uschamber.com/report/guide-small-business-covid-19-emergency-loans
KatzAbosch accounting firm, located in Columbia MD, offers their own summary along with tools and examples:
Tools and examples from KatzAbosch - https://www.katzabosch.com/services/paycheck-protection-program-services/
Disclaimer Reminder – Please talk with your accountant and/or bank to verify or confirm any/all of these points shared. Please also understand that many details are still being worked out and additional changes may (likely) come in the weeks ahead.
