Three big ways of small business would benefit from the new Covid aid bill

Covid aid package approved by Congress earlier this week, it is allocating another $ 284.45 billion in loans to eligible businesses.

The bill, which President Trump has not yet signed into law, now makes it possible for a business owner to obtain a second forgivable PPP loan and imposes fewer restrictions on how the loan can be used. It also relaxes the requirements to have forgiven small loans. And it allows businesses to deduct the expenses for which they have paid their PPP loans.

In addition, this time, there are special provisions designed specifically to help restaurants and minority-owned businesses.

“Christmas is coming early for small businesses,” said Chris Hurn, founder of Fountainhead, a non-bank lender that lends with the support of small business management.

Here are some of the keys PPP loan program changes:

Businesses can now take out a second PPP loan

Companies that received a PPP loan when the program went into effect can now apply for a “second lottery” as long as they are not a public company, do not employ more than 300 people, have used or will use fully the first PPP credit and may show a decrease of at least 25% in gross receipts in the first, second or third quarter of this year compared to the same quarter in 2019.

Struggling Americans make the stimulus bill too small, too late

Specific amounts are allocated to Community development financial institutions – which usually lend to minority-owned enterprises in disadvantaged communities – and also for enterprises with less than 10 employees, as well as for those in low-income areas.

Most eligible companies can receive a loan equal to 2.5 times the average monthly salary expenses, as before. But restaurants and accommodation companies can now apply for loans equal to 3.5 times.

No loan can exceed $ 2 million, down from $ 10 million initially.

Simplified forgiveness process for loans under $ 150,000

To be forgiven a PPP loan, companies that have borrowed $ 150,000 or less will simply need to submit a one-page certification that includes the number of employees retained by the business as a result of the loan, an estimate of how much was spent. from the loan on salary and the total amount of the loan. Borrowers must also certify that the information is accurate and correct complied with the loan requirements.

For any PPP loan to be fully forgiven, at least 60% of the money must be used for salary expenses. And the remaining 40% or less can be used to cover an even wider portion of business expenses than was the case in the first rounds of the PPP loan.

Beyond mortgage interest, rent and utility payments, loans, for example, can now be used to cover the costs of personal protective equipment and other expenses incurred to comply with Covid’s restrictions, as well as certain operations, property damage and supplier costs.

Huge tax cuts on business expenses

Businesses normally deduct their gross income and operating expenses from their gross income.

But for companies that obtain PPP loans, these expenses are largely paid off by the loan.

The latest Covid exemption package clarifies that if the loan is forgiven, it will be treated as business-free.

These small businesses may not succeed without more incentives

It further clarifies that, although the tax-free loan could have paid for many salary and operating expenses, a business can still deduct these expenses in their tax return.

Fiscal policy experts are frowning here over the parliamentarians’ decision, as it is considered a “classic double” in the taxpayer’s pocket.

“Businesses that have received PPP subsidies want to deduct these costs as regular business expenses. But taxpayers have already paid these expenses once through the PPP program. Why should they pay for them again? Well, because business lobbyists they are very good at what they do, ”Howard Gleckman Senior College of Tax Policy Center wrote on the TaxVox blog.

But for small businesses that have just tried to stay alive during the pandemic, it is a huge source of relief, as their incomes have been so badly affected, and any real recovery for them could be delayed. as Covid restrictions and consumer fear persist.