The long-awaited next round of economic stimulus for small businesses has arrived, in the form of a bill called the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, passed by the House and Senate and awaiting the President’s signature.
The President has not yet signed this legislation. Until it does, you cannot apply for one of these PPP loans. Once he does it may take a couple of weeks before lenders are able to accept applications.
In this legislation, we have another wave of new Paycheck Protection Program loans, EIDL grants, and extended Pandemic Unemployment benefits. Here’s how this legislation may help your home-based business.
Keep in mind that this information is based on my understanding of the legislation. As with the CARES Act, there are questions that the Treasury Department and the SBA will have to answer. They will also issue guidance that may affect how this law is implemented. Use this information to research your options and then talk with your tax or accounting professionals.
1. There Will Be More PPP Loans Available
If you did not receive a PPP loan in the first round, you may qualify for a new PPP loan. These loans are available to small businesses that meet the normal standards for SBA loans, including sole proprietors, self employed individuals, or independent contractors.
In addition, some businesses will be able to get a second PPP loan. These “second draw PPP loans” are designed to target smaller businesses impacted by COVID-19, which means that in addition to the above qualifications, your business must:
- Not have more than 300 employees and
- Have at least a 25% reduction in revenues in at least one quarter in 2020 when compared to the same quarter the year before (with some alternate comparisons for newer or seasonal businesses)
If you took out a PPP loan the first time and want more funding, you must have already used or plan to use the full amount you borrowed.
The good news is that publicly traded companies can’t apply this time so they won’t gobble up funds that might otherwise help smaller businesses.
If you’ve been struggling in your home business because of COVID-19, consider a PPP loan. Just like the first round, these loans may be fully forgiven as long as you use them for qualified expenses.
2. You Might Qualify for a $10,000 EIDL Grant
As part of this bill, Congress has allocated another $20,000,000 in EIDL grants. If you recall, with the first CARES Act, the law created a grant (advance) of up to $10,000 but then SBA decided it would only provide $1,000 per employee. Many businesses who applied didn’t get any of the grant before funds ran out. Other small businesses didn’t count themselves as an employee and so they also missed out.
Now the EIDL grant is returning with the full $10,000 for qualifying businesses, even those whose EIDL applications were denied the first time around. (And yes, it is retroactive if you qualify.)
So, who qualifies for the $10,000 EIDL grant? In addition to meeting the requirements in the CARES Act, to qualify a business must:
- Be located in a low-income community
- Have suffered an economic loss greater than 30%
- Employ not more than 300 employees
EIDL loans and grants come directly from the SBA so you’ll apply at SBA.gov. If you didn’t get the full $10,000 the first time around, you’ll also be eligible to apply for a total of $10,000 (after subtracting any grant you did receive).
It may take the SBA a little time to gear up and open up applications once the legislation is enacted. But if you qualify, you’ll be entitled to a grant that does not have to be repaid.
3. There Are More Unemployment Benefits Available
The Act also extended unemployment benefits by 11 weeks. This includes the Pandemic Unemployment Assistance that can help gig workers and the self-employed who normally don’t qualify for state unemployment benefits. The additional weekly payment of $300 from the federal government through the Federal Pandemic Unemployment Assistance (FPUA) program is extended as well.
There is also a new Mixed Earner Unemployment Compensation benefit that will provide an additional $100 weekly benefit for those who earn at least $5000 in self-employment income. Generally all of these benefits are available December 26 through March 14 for those who qualify and a few may qualify through April 5th if they haven’t reached their maximum benefits.
Keep in mind that there are (vague) restrictions on getting unemployment benefits and PPP or EIDL during the same time period. So do your research before deciding which program is right for you.
4. There’s Good News in the Tax Department
(When do you ever hear that statement?) The Act has decreed that EIDL grants and PPP loans aren’t taxable, and that you cannot be denied a tax deduction for qualified expenses paid for with those funds.
This means that for your home business, you won’t have to include the funds you borrowed and had forgiven through PPP or those you received as a grant through EIDL. Plus, you can still deduct qualified business expenses you paid for with those funds. That will hopefully mean a smaller tax bill.
We’re not out of the woods yet, but the new stimulus bill does provide some hope for the American economy, and the thousands of small businesses that keep it going, as we continue to navigate these difficult times.
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