President Donald Trump has signed a new $ 900 billion coronavirus relief and stimulus package. Under the terms of this: an extension of last year’s paycheck protection program, which still enables about $ 284 billion in lending, federally backed loans to troubled small businesses.
The initial program, overseen by the U.S. Department of Treasury and Small Business Administration, raised about $ 525 billion for more than 5 million recipients, but was crammed with loopholes and burdens that raised numerous issues in an already complex process .
The new Economic Aid for Small Business, Non-Profit and Local Government Act clarifies questions about the lending process, but also adds rules on applying for new loans and asking for forgiveness for the elderly. The bill gives the small business administration ten days to implement the new rules so that more specific rules can come. Until then, lenders need to consult their lenders.
Here are some answers to questions business owners may have.
How does this loan round differ from the last one?
Some aspects are generally the same. Applicants have between eight and 24 weeks to use the funds, with at least 60 percent towards payroll and the rest eligible expenses such as rent and utilities.
New loans are limited to $ 2 million, compared to $ 10 million previously. Applicants should have no more than 300 employees, instead of up to 500, and should show at least a 25 percent drop in revenue from the fourth quarter of 2019 to the same period this year.
The bill extends the type of covered expenses to things like cloud computing or remote software; and equipment for sanitary state assignments and social distance, such as sneezing protectors or air filtration systems. It even covers “property damage and vandalism or looting as a result of public unrest that took place during 2020.”
A striking aspect of the new bill that is not directly linked to new loans is an extension of the tax credit for employees, a facet of the Coronavirus Aid, Recovery and Economic Stimulus Act (CARES) that encouraged employers not to give up work. Originally, businesses that received loans from the Paycheck protection program could not claim the credit. Now they are.
If I already got one loan, can I get another loan?
Yes. These are called ‘second draw’ loans, and as long as you meet the above qualifications, you can apply. The deadline for all new loans is March 31st.
Are any businesses eligible for more assistance than others?
New loan amounts are determined by a formula in which payment costs are multiplied by a factor of 2.5 (again, limited to $ 2 million). Restaurants and other hospitality businesses can multiply the cost by 3.5, making them eligible for slightly more financing.
The bill prevents certain companies from applying for loans, including businesses that specialize in political or lobbying activities – such as the Florida Democratic Party, which last received $ 780,000 and then returned it. Also excluded: companies with extensive operations in China, or which have residents of China on their boards.
Concert halls, theaters and museums, which have long assisted for additional assistance, are not eligible for new loans for the Paycheck Protection Program, but can apply for special “Shuttered Venue Operator Subsidents” worth up to $ 10 million .
How will this affect my existing application for forgiveness?
If you have more than $ 150,000, it probably will not. If you have less, the process should be much easier.
A few weeks ago, the government simplified forgiveness applications for businesses that received less than $ 50,000, requiring only a description of how much loan money was spent on payroll, and how many employees the recipient could retain as a result. The new account increases to $ 150,000. Affected businesses do not have to submit documentation that supports their claims, but must keep it on hand in the event of an audit.
If you have already applied for and received forgiveness, none of the new terms apply – you are done. But you can try to get a second loan.