Covid’s aid package has been approved by Congress earlier this week, it allocates an additional $ 284.45 billion in loans to eligible companies.
In addition, this time around, there are special provisions designed specifically to help minority-owned restaurants and businesses.
“Christmas came early for small businesses,” said Chris Hurn, founder of Fountainhead, a non-bank financial institution that makes loans secured by the Small Business Administration.
Here are some of the keys changes to the PPP loan program:
Companies can now take out a second PPP loan
Companies that obtained a PPP loan when the program came into effect can now apply for a “second draw”, as long as they are not a public company, do not employ more than 300 people, have used or will fully use their first PPP loan and may present a drop of at least 25% in gross revenue in the first, second or third quarters of this year compared to the same quarter of 2019.
Specific amounts are reserved for community development financial institutions – which typically lend to minority-owned companies in underserved communities – and also for companies with less than 10 employees, as well as those in low-income areas.
Most qualified companies can obtain a loan equal to 2.5 times the average monthly payroll expenses, just as before. But restaurants and lodging companies can now apply for loans equal to 3.5 times.
No loan can exceed $ 2 million, down from $ 10 million originally.
Simplified forgiveness process for loans below $ 150,000
For a PPP loan to be forgiven, companies that have borrowed $ 150,000 or less will simply need to submit a one-page certification that includes the number of employees the company has hired as a result of the loan, an estimate of how much of the loan has been spent on the loan. payroll and the total loan amount. Borrowers must also certify that the information is accurate and that they fulfilled the loan requirements.
For any PPP loan to be fully forgiven, at least 60% of the money must be used for payroll expenses. And the remaining 40% or less can be used to cover an even broader range of business expenses than was the case during the initial rounds of PPP loans.
In addition to mortgage interest, rent payments and utilities, loans, for example, can now be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid’s restrictions, as well as certain operations, property damage and costs of Providers.
Great reduction of taxes on commercial expenses
Companies typically deduct payroll and operating expenses from their gross revenue.
But for companies that obtain PPP loans, these expenses are largely paid for by the loan.
Covid’s latest benefit package clarifies that if the loan is forgiven, it will be treated as tax-free for the company.
He further clarifies that, although the tax-free loan may have paid many operating and payroll expenses, a company can still deduct those expenses from its tax return.
Tax policy experts disapprove of the decision of lawmakers here because it is considered a “classic double dip” in the taxpayer ‘s pocket.
But for small businesses that have only tried to stay alive during the pandemic, it is a great source of relief because their revenue has been hit hard and any real recovery for them can take a long time to arrive. while Covid restrictions and consumer fear persist.