Congress reached an agreement on a nearly $900 billion COVID-19 stimulus package. $300 billion is allocated for the Small Business Administration, the federal agency responsible for overseeing the Paycheck Protection Program – a forgivable loan created through the CARES Act.
Small business owners with failing finances are in line for additional funding from the Paycheck Protection Program as it does not only include a new round of direct payments to struggling Americans and more aid for businesses.
A $300 in weekly supplemental unemployment payments, as well as an extension of student loan forbearance through the end of April 2021 this is called the Bipartisan Emergency COVID Relief Act of 2020,
The funding will aid the second round of PPP and make additional funds available to firms that have suffered the most.
Borrowers may be eligible for loan forgiveness if the funds were used for:
1. Payroll Costs
2. Payments on business mortgage interest payments, rent, or utilities during either the 8- or 24-week period after disbursement.
To date, more than 5 million PPP loans were approved, with a total of $525 billion.
600 companies and more availed the maximum $10M in PPP loans, disadvantaging Small businesses were at a disadvantage as more than 600 large companies got the maximum $10 Million in PPP loans. These businesses that had relationships with banks had first availed of the loans.
As a result, the new bipartisan framework favors the hardest-hit firms to take a second forgivable PPP loan.
Eligibility for the second tranche of PPP cash changes will be limited to only small businesses with no more than 300 employees and have sustained a 25% revenue loss in any quarter of 2020.
Another funding will be set aside to cover smaller borrowers, businesses with 10 or fewer employees, and communities that cannot avail in the first tranche of aid.
As IRS ruling hurt businesses that had their PPP loan forgiven, an expanded list of forgivable expenses covered by PPP proceeds that includes supplier
costs, investments in facility modifications, and personal protective equipment needed to operate safely is also included in the proposal.
Lawmakers are pushing the simplification of the forgiveness process for those with loans of $150,000 or less, and while business owners currently can’t claim a deduction for those covered business expenses even though the PPP loan’s forgiveness is tax-free according to Treasury and IRS.
These deductions should be allowed as, in the new bill as it is in agreement to the framework, ” consistent with Congressional intent in the CARES Act.”
Lawmakers launch legislation that would allow firms to take the write-offs, and tax professionals stated that it would result in higher tax bills if deductions are not allowed.
Through several notices, last month, Treasury and the IRS said that business owners who expect their PPP loans will be forgiven couldn’t deduct the costs.
The proposal’s timing is crucial and is expected to clarify where businesses stand as they head into tax season.
If you are interested in learning more about the PPP and EIDL Loan Advances and are keen to know your options with this new program, feel free to book a commitment-free consultation with a finance professional at https://calendly.com/levine-and-associates