President Donald Trump signed a new $ 900 billion bill for coronavirus relief and a stimulus package. Among its provisions: An extension to last spring’s Payment Check Protection Program, allowing another $ 284 billion or more in forgivable federally supported loans for struggling small businesses.
The initial program, overseen by the United States Department of the Treasury and Small Business Administration, generated about $ 525 billion for more than 5 million beneficiaries, but it was fraught with gaps and liabilities that raised a number of issues over the course of an already existing process. complex.
The new Economic Aid Act for Small Businesses, Nonprofits and Locals Law clarifies questions about the loan process, but also adds rules on how to apply for new loans and ask for forgiveness for old ones. The project gives Small Business Administration 10 days to implement the new rules, so more specific rules may be coming. Until then, borrowers must ask their creditors for guidance.
Here are some answers to the questions that business owners may have.
How does this round of loans differ from the last?
Some aspects are basically the same. Applicants have between eight and 24 weeks to use the funds, with at least 60% going to payroll and the rest to eligible expenses, such as rent and utilities.
New loans are limited to $ 2 million, compared to previous $ 10 million. Applicants should not have more than 300 employees, instead of up to 500, and must demonstrate a drop of at least 25% in fourth quarter 2019 earnings for the same period this year.
The project expands the type of expenses covered to include things like cloud computing or remote work software; and equipment for compulsory sanitation and social distance, such as splash guards or air filtration systems. It even covers “material damage and vandalism or looting due to public unrest during 2020”.
A notable aspect of the new bill that is not directly linked to new loans is an expansion of the employee retention tax credit, a facet of the Aid, Recovery and Economic Stimulus Act (CARES) that encouraged employers not to lay off jobs. Originally, companies that obtained loans from the Salary Protection Program were not eligible to claim that credit. Now they are.
If I have already taken out a loan, can I get another one?
Yes. They are called “second draw” loans, and as long as you meet the qualifications above, you can apply. The deadline for all new loans is March 31.
Are there companies qualified to receive more help than others?
The values of new loans are determined by a formula that involves payroll costs multiplied by an factor of 2.5 (again, limited to $ 2 million). Restaurants and other hospitality companies can multiply these costs by 3.5, making them eligible for a little more funding.
The bill restricts certain companies from applying for loans, including businesses specializing in political or lobbying activities – such as the Democratic Party of Florida, which received and returned $ 780,000 last time. Also excluded: companies with extensive business in China or who have residents in China on their boards.
Concert, theater and museum venues, which have long been lobbying for additional help, are not eligible for new Salary Protection Program loans, but can apply for special “Closed Venue Operator Grants” worth up to $ 10 million.
How will this affect my existing request for forgiveness?
If you won more than $ 150,000, you probably won’t. If you got less, the process should be a lot easier.
A few weeks ago, the government simplified forgiveness requests for companies that received less than $ 50,000, requiring only a description of how much loan money was spent on payroll and how many employees the beneficiary was able to retain as a result. The new account increases this limit to $ 150,000. Affected companies will not need to send documentation to support their claims, but should keep it on hand in the event of a later audit.
If you have already requested and received forgiveness, none of the new provisions apply – you are done. But you can try to get a second loan.