In March 2020, when nations over the world were heading into lockdown and economies started falling apart, the US government released the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act) to spur the economy.
The estimated $2.2 trillion stimulus package introduced significant laws and programs to provide loans, tax benefits, health benefits, and unemployment reliefs for individuals.
At the center of the CARES Act was the Paycheck Protection Program (PPP), which designated $350 billion for private loans backed by the Small Business Administration (SBA). Small businesses, freelancers, gig economy workers, sole proprietors, and self-employed workers were eligible to apply for these loans provided by a pool of 800 private lenders across the US, the maximum loan amount being $10 million.
These loans can be converted into grants, provided that businesses are spending the funds in authorized ways, in which case the entire loan amount can be forgiven.
The intention was to encourage small businesses to keep employees on their payroll and to not lay off workers due to Covid-19 disturbances.
Since the stimulus bill came fully into action, $700+ billion PPP loans have been granted to businesses.
EID loans were issued even before the pandemic, but the government released a subset for small businesses finding it difficult to pull through Covid-19, lowering the cost significantly. Small businesses, including agricultural businesses, were eligible for an EIDL with a fixed rate of 3.75%, and for non-profit organizations, the fixed-rate was 2.75%.
However, contrary to PPP loans, EIDLs are not forgivable.
On December 27, 2020, the Economic Aid Act was introduced by then-President Trump, announcing the second round of PPP loans to be released in 2021 after undergoing revisions.
The new administration set aside an additional $7.25 billion for PPP loans under the American Rescue Plan. The applications opened on January 11, with the deadline remaining March 31, 2021.
Earlier, it was stated that expenses paid by a PPP loan would not be tax-deductible. In round two of the small business stimulus package, these expenses are tax-deductible, and a forgiven PPP amount will not be counted as taxable income. Also, the list of expenses approved under PPP has been expanded to include operations expenditures, property damage costs, supplier costs, etc.
If your small business had availed PPP in 2020, then you might be eligible to apply for a small business grant again, provided you've faced a 25% decline in revenue in at least one quarter of 2020 as compared to the same quarter in 2019. Also, if your business was not eligible for a loan in 2020, you might qualify in the second stimulus bill.
Loan agreement terms remain the same, meaning the entire loan amount can be forgiven if guidelines are properly followed. However, if you aren't eligible for a forgiveness grant, your rate of interest would be 1% with a 5 year repayment period.
This time, the maximum amount limit for a small business stimulus has been stipulated at $2 million.
An additional $15 billion has been allocated to the EIDL program, rechristened as the Targeted Economic Injury Disaster Loan, as the eligibility criteria to receive loans under this grant have been tightened. Meaning, an EIDL will specifically be offered to low-income communities as defined by IRS.
EIDLs will now be released within 21 days of approval. If your business was eligible and received an EIDL grant, but it was not the full amount of $10,000, you can apply again this year for the remaining amount.
Also, many businesses were startled to hear that their PPP forgiveness amount had been reduced because they obtained an EIDL loan grant. This has been scrapped in the second stimulus package, and your forgiveness amount will no longer be reduced due to an EIDL advance grant.
Pandemic Unemployment Assistance (PUA) extends $300 per week to part-time workers, freelancers, independent contractors, and self-employed professionals. It was introduced in the CARES act and expanded in the second stimulus bill with applications open till 14th March.
The maximum number of weeks a beneficiary can receive PUA has been extended from 39 to 50 weeks.
Also educate yourself all about women-centric business grants.
All COVID-19 stimulus packages are unknown territories. Through these unprecedented times, it is important to procure maximum benefits from the small business stimulus package and keep your micro-enterprise running.
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