PPP Loans and Other COVID-19 Business Relief
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Note: As of May 4, PPP funding has been exhausted through many lenders, including banks. You may be able to obtain a PPP loan from a Community Development Financial Institution (CDFI) before the May 31 deadline.
Congress injected more cash this month into the large federal loan programs aimed at helping small business owners weather the coronavirus pandemic: The Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (EIDL). But it also created a brand-new grant for restaurant owners and put more money into an existing grant for live venue operators, both of which eligible business owners would not need to repay.
But these are just a few of the changes in the latest aid package. Many small businesses are eligible for:
The U.S. Small Business Administration (SBA) first opened its disaster loan program to businesses affected by COVID-19 in March 2020. A COVID-19 Economic Injury Disaster Loan (EIDL) is good for up to $500,000 in working capital. The deadline to apply is Dec. 31, 2021.
COVID-19 EIDL at a glance:
- Rates: 3.75% for small businesses; 2.75% for nonprofits
- Terms: 30 years
- Amounts: Up to 24 months of working capital ($500,000 max)
- Payments: First payment is due 18 months from the date of your loan (24 months for loans made in 2020)
A new EIDL advance
A COVID-19 EIDL must be repaid, but one of its most attractive features is a $10,000 grant that comes directly from the SBA. The American Rescue Plan Act added $15 billion to the Targeted EIDL Advance, which is open to businesses:
- With 300 or fewer employees
- In a low-income community, as defined by the Internal Revenue Code
- That suffered an economic loss of 30% or more
Out of that $15 billion, $5 billion is set aside for smaller and harder-hit businesses:
- With 10 or fewer employees
- That suffered an economic loss of 50% of more
These companies may be eligible for up to $15,000.
How to apply
Visit the SBA’s disaster loan portal to apply for a COVID-19 EIDL. The SBA sent out invitations earlier this year for the Targeted EIDL Advance, but you may also contact 800-659-2955 or [email protected] for more information. If you were rejected for an advance, you may request a reevaluation to [email protected] — include your 10-digit application number in the subject line and attach any documentation that addresses the reason for the decline.
Shuttered Venue Operators Grant (SVOG)
Operators of theaters, museums, live performing arts organizations, independent movie theaters and other venues can apply for a new SBA grant of up to 45% of their 2019 gross earned revenue for a maximum of $10 million. SVOG money may be used for payroll, rent or mortgage payments, utilities, administrative costs and other business expenses.
Application priority will be given to businesses that suffered the greatest losses. Here’s the breakdown:
- First 14 days: Entities that suffered 90% or greater revenue loss between April and December 2020
- Next 14 days: Entities that suffered 70% or greater revenue loss between April and December 2020
- 28 days after first and second groups: Entities that suffered a 25% or greater revenue loss between one quarter of 2019 and corresponding quarter of 2020
Though the program was established in late 2020, SVOG received additional funds from the American Rescue Plan Act in March. Business owners can apply online.
Restaurant Revitalization Fund (RRF)
The American Rescue Plan created another new grant program, this one aimed at restaurant owners. Restaurant owners can apply online or through their point-of-sale vendor (Square, Toast, Clover and others). They are eligible to receive the difference in their revenue — 2019 revenue – 2020 revenue = eligible amount — up to $5 million per location ($10 million per restaurant group). Funds may be used for payroll, mortgage or rent payments, maintenance, supplies, food and other business expenses. You can learn more about the Restaurant Revitalization Fund here.
Both the RRF and SVOG may be used for expenses through the end of 2021 with the possibility of extensions.
Paycheck Protection Program (PPP) loans
First-draw PPP loans:
- Amounts up to $10 million
- Eligible businesses include sole proprietors, independent contractors, self-employed business owners and any business or nonprofit organization that meets the SBA’s size standards
Second-draw PPP loans:
- Amounts up to $2 million (restaurant and hotel owners are eligible for larger loans)
- Eligible businesses with no more than 300 employees and can demonstrate a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
Regardless of which PPP loan you get, you may be eligible for loan forgiveness if at least 60% of funds are used for payroll over the term of your choice, eight or 24 weeks. The remaining amount, up to 40%, may be used for certain mortgage expenses, rent, utilities, personal protective equipment for you and your workers, supplier costs, operations expenditures and more.
If you don’t qualify for forgiveness, you would have to repay the loan with interest:
- 1% interest rate
- Terms up to 5 years (2 years for loans issued before June 5, 2020)
If you’ve never applied for a PPP loan, use the SBA’s Lender Match tool to find a lender near you.
Extended unemployment assistance
The American Rescue Plan Act extended the Pandemic Unemployment Assistance program for those who lost wages as a result of COVID-19. The program opens up state-level unemployment benefits to those who are typically not eligible including:
- Self-employed individuals
- Independent contractors
- Workers with limited employment history
Each recipient of unemployment insurance or Pandemic Unemployment Assistance will receive an additional $300 weekly up to Sept. 6, 2021.
How to apply
Each state runs its own unemployment insurance program that provides funds for people who lose their jobs through no fault of their own. You must meet your state’s individual eligibility requirements.
Visit CareerOneStop.org, a resource from the U.S. Department of Labor, to find state-by-state details about unemployment benefits and requirements.
Increased payroll tax credits
Congress extended — and tweaked — several tax credits for small business owners. They may claim:
- The costs of providing paid sick and family leave to their employees. Through Sept. 30, 2021, eligible employers could retain the amount of payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
- 70% of the first $10,000 paid to each employee per quarter through the end of 2021. The Employee Retention Credit is now open to more employers, including start-up businesses.
Additional tax provisions include:
- Deferment of employment taxes: Employers can also defer payment of their share of Social Security tax through Dec. 31, 2021.
- Modification of net operating losses (NOL): Unchanged in the most recent legislation, NOLs are typically subject to a taxable-income limit and may not be applied to previous years to reduce income. The Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 allowed business owners to take NOLs from tax years 2018, 2019 and 2020 and carry those back five years to offset income and provide cash flow to use during the crisis.
- Exemption from excise tax: A temporary waiver of excise tax for producers of beer, wine and distilled spirits is now permanent.
You can find more information about coronavirus tax relief on the IRS website.