After several months of filibustering, many weeks of vicious negotiations, and so many false starts, a new bill was passed to aid individuals and businesses across the country to get respite from the financial destruction prompted by COVID-19. The Consolidated Appropriations Act, 2021 comprises funding reserved for small business loans, including a new round of the PPP (Paycheck Protection Program).
The Paycheck Protection Program was introduced last spring under the CARES Act. Though many small businesses were able to take benefit of this program, there were a few faults in it which prevented many businesses to take the full advantage of it. Luckily, now there are some updates to the Paycheck Protection Program which aim to sort out these problems for first-time loan recipients and allow a second draw for those who already have obtained a PPP loan.
The basics of PPP:
The Paycheck Protection Program is a loan program administered by the SBA which lets certain lenders including FinTech companies, banks, and community lenders such as CDFIs & MDIs to allocate PPP loans at the behest of Small Business Administration to small businesses.
Here is a quick glance at everything that is changed under the new bill?
1. 284 billion has been allotted to PPP and the loan program has been extended till March 31,2021.
2. Business under 300 employees can apply for second-draw loans
3. There has been an expansion in businesses entitled for PPP loans and loan limitations for certain businesses has been expanded as well.
4. There is a new, simple one-page application for forgiveness for loans under $150K.
5. Eligible expenditures for forgiveness have been expanded
6. A clarifications has been given that PPP loan interest rates are non-compounding & non-adjustable and PPP loans aren’t taxable and forgiven expenditures are tax-deductible.
Only specific businesses are entitled to get a PPP loan, and these stipulations will be different for first-time loan recipients & second-draw recipients.
The following condition need to be met to be eligible for a first-draw PPP loan:
1. Your organization has fewer than five-hundred part-time, full-time, or seasonal workers.
2. Your business was in operation prior to February 15, 2020 and stays operational.
3. The Small Business Administration (SBA) has released the application form for first-draw loans.
The following condition need to be met to be eligible for a second-draw of PPP loan:
1. Your organization has less than 300 part-time, full-time, or seasonal workers. In the event you’ve more than one location, you mayn’t have more than 300 workers per location.
2. A revenue reduction of a minimum of 25 percent in the 1st, 2nd, or 3rd quarter of 2020. You can use tax fillings to show this.
You’ve used or will use the total sum of the first-draw of PPP loan.
Tax Tips for the Self-Employed
Small Businesses Are Expected To Get More Audit By IRS in 2021
Everything You Need To Know About Form 1099-NEC
An Overview of the Net Operating Loss Tax Provisions in the CARES Act
How To Decrease Your Small Business Debt? A Step-By-Step Guide