The PPP-related measures in the package now make it is possible for a business owner to get a second forgivable PPP loan and imposes fewer restrictions on how the loan may be used. It also relaxes the requirements for forgiving small loans. And it causes businesses to deduct the expenses for which their PPP loans were paid.
In addition, this time there are special provisions specifically designed to help restaurants and businesses in minorities.
Chris Hurn, founder of Fountainhead, a non-banking provider that supports loans with small business administration, describes the measures as a Christmas present for small businesses.
Here are some of the key changes that will be made to the PPP loan program:
Businesses can now take out a second PPP loan
Businesses that received a PPP loan when the program now went into effect can apply for a second lottery, as long as they are not a public enterprise, do not employ more than 300 people, use or will fully use first PPP loan, and may show at least a 25% decrease in gross receipts in the first, second or third quarter of this year, compared to the same quarter in 2019.
Specific amounts are earmarked for community development financial institutions – which are usually lent to minority enterprises in underserved communities – and also for businesses with less than 10 employees, as well as in low-income areas.
Most eligible businesses can, just as before, get a loan equal to 2.5 times the average monthly wage expense. But restaurants and accommodation establishments can now apply for loans equal to 3.5 times.
No loan may exceed $ 2 million, less than $ 10 million.
Streamlined forgiveness process for loans under $ 150,000
To obtain a PPP loan, companies that have borrowed $ 150,000 or less simply submit a one-page certification containing the number of employees the company has retained as a result of the loan, an estimate of how much the loan was. spent on payroll and the total loan amount. Borrowers must also testify that the information is accurate and that they meet loan requirements.
In order to fully forgive any PPP loan, at least 60% of the money must be used for wage expenses. And the remaining 40% or less can be used to cover an even wider amount of business expenses than was the case during the initial rounds of PPP lending.
In addition to mortgage interests, rental and utility payments, for example, the loans can now be used to cover the cost of personal protective equipment and other expenses to meet Covid restrictions, as well as for certain operations, property damage and supplier costs.
Big tax break on business costs
Businesses usually deduct their payment and operating expenses from their gross income.
But for businesses that get OBP loans, the loan is largely paid off.
Covid’s latest assistance package explains that if the loan is forgiven, it will become tax free for the business.
And it further states that, although the tax-free loan may have paid a lot of payment and operating costs, a business can still deduct the expenses on their tax return.
Tax experts frown on the decision of the legislators here because it is considered a ‘classic double dive’ in the taxpayer’s pocket.
But for small businesses that are just trying to stay alive during the pandemic, it is a great source of relief because their income has been hit so hard and any real recovery can wait for them. while Covid restrictions and fears of consumers linger.