The new COVID-19 relief bill from Congress means a second round of PPP, and more for small businesses

With a new relief bill passed by Congress late Monday night, small businesses will have access to additional relief funds and tax provisions as many continue to struggle in the pandemic.

The $900 billion package, which is combined with a $1.4 trillion government spending deal, was months in the making. But when an agreement between leaders of the Democrat-controlled U.S. House and Republican-controlled Senate finally came over the weekend, time was suddenly marked in hours. The text of the 5,600-page bill was released Monday afternoon. By the end of the night, both legislative bodies had voted to approve it.

While there was pressure on Congress dating back to the summer to act sooner, the fact that relief is coming remains welcome.

“I think it’s good news clearly for businesses and individuals and those who are struggling through these times,” said Jim Wilhelm, director of the tax services team at Sparks, Maryland-based management consulting, audit, and tax firm SC&H Group.

While there’s a lot to sort through, here’s a look at some of the major provisions for small businesses:

Paycheck Protection Program is back

The bill includes another round of funding for the Paycheck Protection Program, with $285 billion available for the program’s forgivable small business loans. The PPP was put in place by the federal government in the early weeks of the pandemic to get money to small businesses. It was then reupped to add more funds to the existing program.

With the new bill, the program is essentially getting a fresh start. Businesses that received a loan can now apply for a second round of funding.

“They can get a second bite at the apple,” Wilhelm said. “I think businesses did a great job adapting this year, but you can only adapt so much. I think this hopefully will help those businesses get through to Q2, Q3 of next year.”

But with the second loan comes changes. For one, there are more requirements to qualify. Businesses have to show that gross receipts are down at least 25% in a calendar quarter, when comparing 2020 versus 2019.

The loan amount is capped at $2 million, or 2.5 times monthly payroll. For hospitality and restaurant businesses, however, can access 3.5 times monthly payroll.

Businesses must have 300 employees or fewer, and public companies aren’t allowed to apply.

It’s still required that 60% of the loan funds go to payroll, but there are also additional expenses that can be covered. These fall into categories such as supplies like PPE and plexiglass shields to maintain safety, operations expenses such as software and human resources functions, and property damage from vandalism that wasn’t covered by insurance.

The federal government is also making forgiveness easier for the smaller borrowers. If a loan is under $150,000, it is essentially being forgiven without a need for documentation outside of a signature.

For a business owner considering whether relief programs are beneficial, Berman said looking at PPP is the first place to start.

“This is being substantially revised to make it much easier to get forgiveness, and also to make it easer for people to get second loans with limited protections to insure that the loans go to the businesses that need it most,” said Jennifer Berman, CEO of Pikesville, Maryland-based MZQ Consulting LLC and senior VP of compliance for Kelly Benefit Strategies.

And for businesses that already received loans, another big change will come at tax time. The government offered clarity that many were seeking by spelling out in the bill that expenses related to PPP can be deducted, effectively meaning business owners won’t pay taxes on PPP.

Employer Retention Credit Program

While the PPP gets a lot of light, there’s another program called the employer retention credit that’s designed to help employers keep folks on payroll amid COVID-19 biz opening restrictions. And now it has been extended through July 1, 2021, and expanded.

“This program was primarily meant for businesses that could not get a PPP loan. The concept is if you’re keeping people on the payroll that you otherwise would not from a businesses perspective, the government would help subsidize that,” Wilhlem said. “The benefit you get from this provision has increased substantially and the eligibility requirements have been broadened.”

By the numbers, that means the losses a business needs to show are now 20% at minimum, instead of 50%, and the limit on the credit for an employee is now $10,000 per quarter rather than $10,000 per year.

Essentially, the government provides a payroll taxes for payroll spend for businesses that were affected by a shutdown.

Community-level loans

With the PPP funds mostly being lent by banks, one gap that emerged during the first round was a need for additional access for those who didn’t have previous relationships with financial institutions. As a result, this bill includes $15 billion for loans from community development financial institutions (CDFIs), minority-depository institutions (MDIs), and SBA 504 and microlenders. Plus, $15 billion is for loans from credit unions and farm credit institutions.

Another $20 billion is being provided for advance payments from the Economic Injury Disaster Relief program for businesses in minority communities.

“In addition to tackling the root of the problem, this bill targets small business aid to the hardest-hit, most vulnerable small businesses — including Black, Native, Hispanic, Asian and women-owned businesses — as well as small businesses in the industries that have been most affected by COVID-19,” said U.S. Sen. Ben Cardin of Maryland, the top Democrat on the Senate’s small business committee, in a statement.

FSA relief

As Berman explained, another provision allows employers who set aside funds in flexible spending accounts (FSAs) to retain funds for employees into the next year. Previously, there was a “use it or lose it” rule at the end of a calendar year, but now the balances will be able to roll into the next year.

Payments for individuals

Additional funds are set to head out on the individual level. The government is going to provide additional payments to people at $600 per individual. They could start going out as soon as next week. And for those who were laid off, pandemic unemployment assistance will extend another $300 in addition to what folks receive from the state. Both of these were the result of compromises between the parties.

What’s not in the bill?

Two major items on the agenda for the economy were additional funding for state and local governments (a Democratic priority) and liability protection for employers (a Republican priority). This bill addresses neither of those.