As of Sunday evening, December 27, President Donald Trump has signed into law a new $900 billion coronavirus relief and stimulus package. The new Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act clarifies questions about the loan process, rules about applying for new loans, and seeking forgiveness for old ones. The bill gives the Small Business Administration 10 days to implement the new rules, so more guidance and information can be expected.
Second Draw PPP Loans
The new act allocates an additional $285 billion for the Paycheck Protection Program (PPP). Small businesses that obtained an initial PPP loan can qualify for a second round of loans, called “second draw” loans. To qualify for a “second draw” loan, eligible businesses must have:
- Been in business before February 15, 2020
- Fewer than 300 employees per location
- Used, or will use, prior PPP loan if previously received
- Seen at least 25% revenue decrease in gross receipts during any quarter of 2020 (compared to the same quarter in 2019)
For this round of PPP loans,
- The maximum loan amount is $2 million. The act also sets aside $12 billion specifically for minority-owned businesses.
- The 60-40 cost allocation between payroll and non-payroll costs will continue to apply.
- Application process is simplified for loans below $150,000.
- This application process has not yet opened.
New loan amounts are determined by a formula that involves payroll costs multiplied by a factor of 2.5 (again, capped at $2 million). Restaurants and other hospitality businesses may multiply those costs by 3.5, making them eligible for slightly more funding. The bill restricts certain companies from applying for loans, including businesses specializing in political or lobbying activities. More flexible rules have been added to provide for forgiveness of the loans, including clear guidelines that forgiveness of a PPP loan is not taxable.
For Already-Existing and New PPP Loans
The package allows 40% of expenses to be used on items beyond payroll. In addition to mortgage/rent and utilities, these now include:
- Operations expenditures (i.e. software and cloud computing needs)
- Property damage costs due to public disturbance
- Supplier costs for supplies ordered before the loan was received, or perishable goods ordered before or during the loan
- Businesses will still need to spend at least 60% on payroll expenses, which the program specifies includes employer-provided group insurance.
The deadline for all new loans is March 31.
Grants for Venues and Accommodations
Referred to as the Shuttered Venue Operator Grants, these will be offered for live venues, theaters, and museums that have lost at least 25% of revenue. The money received from these grants will be for specified expenses, such as payroll, rent, utilities, and PPE. The hardest-hit (90% revenue losses) will be eligible for the first 14 days of the program, followed by those with 70% revenue loss in the next 14 days, followed by all other eligible entities.
Economic Injury Disaster Loan (EIDL) Changes
The act added $20 billion for certain grants pursuant to the SBA’s Economic Disaster Injury Loan (EIDL) program. Eligible businesses, independent contractors, gig workers, and self-employed individuals are eligible for up to $10,000 in grants (not required to be repaid) if (1) they are located in a low-income community; (2) they suffered an economic loss of greater than 30% during an 8-week period between March 2, 2020, and December 17, 2021, relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019; (3) they employ not more than 300 people; (4) they are a qualifying business, such as a small business, private non-profit, sole proprietorship, or independent contractor; and (5) they were in operation by January 31, 2020.
Pandemic Unemployment Assistance, or PUA
The original Pandemic Unemployment Assistance - put in place by the CARES Act in the spring - expired July 2020 and provided $600/week in additional benefits. The updated plan provides $300/week in additional benefits. More details will be forthcoming.
Extension of the Debt Relief Program (Section 325 of full text)
Resumes the payments of principle and interest on SBA 7(a), 504, or microloans, as established in the CARES Act. This extension offers three additional months of payments on existing SBA loans starting in February 2021. The program will also offer six months of payments for new loans closed between February 1, 2021 - September 30, 2021.
More information to follow as updates become available.