Need-to-Know Updates About Federal Aid for Businesses
Throughout the pandemic, Congress has debated and passed financial aid packages aimed at helping struggling businesses survive. After the funds from the 2020 CARES Act were expended, the government moved forward with the Consolidated Appropriations Act in January of 2021. Before leaving office, President Trump signed the new relief bill in order to continue this essential support.
The new package totaled $900 billion in value. More than $284 billion of it is designated to the Small Business Association (SBA) in order to prop up the Paycheck Protection Program (PPP). Both prior borrowers and first-time borrowers can potentially qualify for loans of up to $2 million in value.
In order to qualify, the business must:
- Employ 300 or fewer employees
- Demonstrate a 25 percent (or greater) reduction in gross revenue receipts during any quarter of 2020, relative to the same quarter in 2019
- Prove that it has already used, or will use, the full amount of its first PPP loan (if it received one)
In addition, the new aid package expanded the rules related to loan forgiveness. Forgiveness is available when loan proceeds are spent on the following expenses:
- Covered mortgage interest
- Business software or cloud computing services that facilitate operations
- Cost related to property damage from public disturbances (if not covered by insurance)
- Costs associated with adapting business operations to comply with pandemic safety guidelines
- Certain other expenses
For those seeking forgiveness of loans in the amount of $150,000 or less, the process has been simplified under the new rules.
And finally, the new legislation clarified procedures regarding the tax deductibility of expenses paid from loan funds. Now, business expenses that would otherwise be tax deductible under usual IRS rules can also be claimed when paid from the proceeds of a PPP loan.
For more assistance regarding PPP loans, contact our business planning attorneys. We can help you identify these resources and understand how to use them in accordance with regulations.