What’s in the new stimulus package for small businesses?

The American Rescue Plan was signed into law on March 11, 2021. Read this article to learn what this new Covid-19 relief bill means for small businesses.

2/23/2021 Update: New PPP improvements benefit small businesses

A new round of PPP funding opened on January 11, 2021, and the program continues to undergo changes aimed at helping small businesses claim the funds they need. Here are some recent improvements to the program that will help businesses in underserved and low- and moderate-income areas:

• Providing an exclusive two-week PPP loan period for businesses and nonprofits that have fewer than 20 employees. Beginning Wednesday, February 24, PPP loans will only be available to these organizations for a two-week period. This is an opportunity for these small businesses to access funds without having to compete with larger entities. 
• Revising the funding formula to provide more support to sole proprietors, independent contractors, and self-employed individuals. 
• Allowing access to PPP funds for small business owners with prior non-fraud felony convictions, as well as those who have struggled to make federal student loan payments. 
• Allowing business owners who are lawful US residents, but not citizens, to use an Individual Taxpayer Identification Number (ITIN) to apply for a PPP loan. 
• To learn more, or apply for a PPP loan, visit the SBA website. 
   

Update: Second round of small business stimulus PPP loans opens January 11, 2021

The SBA issued new guidance on January 6, 2021 around the additional funds for the Paycheck Protection Program (PPP) that are included in the Economic Aid Act, the new stimulus bill that was signed into law on December 27, 2020. Here’s how it works:

• The Paycheck Protection Program will re-open on January 11, 2021. 
• Community financial institutions can make loans to new borrowers beginning January 11, and to those who have already received a PPP loan beginning January 13. Shortly after that, the program will reopen to all participating lenders. 
• If you did not receive a PPP loan from the CARES Act (passed in March 2020), you can apply for one now. 
• If you received a PPP loan from the CARES Act, and you experienced a 25% reduction in revenue in at least one quarter of 2020 compared with the same quarter in 2019, you can apply for another loan. 
• If you already applied in round one and are applying for a second loan of $150,000 or less (based on 2.5 times 2019 payroll), you do not have to submit new documentation if you’re going through the same lender. Your lender can ask for additional documentation, however, and you will have to document your decreased revenue when you apply for forgiveness. 
• Some loan criteria have been relaxed. Some operations expenses, supplier costs, and other expenses are covered, and some non-profits and other types of organizations are now eligible. 
• Round two loans are available for a maximum of $2 million.

 For more information on PPP loans from the new stimulus package, visit the SBA website. 

Here are some of the details in the new stimulus bill that are aimed at helping small businesses that have been adversely impacted by the coronavirus pandemic.

Stimulus package includes more PPP

The new stimulus bill provides for $284 billion in additional funds for the Paycheck Protection Program. This includes $12 billion that is specifically earmarked for minority-owned and very small businesses, through community-based lenders like Minority Depository Institutions and Community Development Financial Institutions. 

It also includes $15 billion for live venues, cultural institutions, and independent movie theaters. Eligibility has been expanded for nonprofits, local newspapers, and TV and radio broadcasters. 

If you were not eligible for a PPP loan the first time around, you may be this time. Eligibility has been broadened for some types of businesses in the new stimulus bill. 

Related: What it’s really like to apply for a PPP loan 

If your business has already received a Paycheck Protection Program loan, you can apply for another one from this new stimulus package. You’ll need to show that your 2020 revenues declined significantly from your 2019 revenues. For most businesses, this won’t be much of a challenge. 

There will also be another $20 billion available for grants through the Economic Injury Disaster Loan program, which is administered by the Small Business Administration. Some businesses were shut out of EIDL grants earlier this year when funding ran out. 

Related: EIDL loans for small businesses 

Relief for freelancers in new stimulus bill

The new stimulus package includes additional relief for freelancers, independent contractors, gig workers, and the self-employed who have been receiving unemployment benefits under the Pandemic Unemployment Assistance program. It provides an additional 13 weeks of payments after state benefits have been exhausted. 

Because the new bill was not signed before the existing benefits expired, there will be a lapse in benefits while states reprogram their systems. But benefits will be retroactive once they are back up and running. 

If you qualify for these benefits but have not yet applied, you have until the middle of March to do so. If you’re currently receiving benefits, the additional funds will be phased out at the beginning of April. 

Like all Americans, freelancers may also receive a stimulus check depending on how much income they showed on their 2019 taxes.

Related: Liability insurance for freelancers

Expenses covered by PPP loan proceeds are now deductible

The new stimulus package includes an important provision for those who have received PPP loans already, or for those who will be receiving them this time around. The new bill stipulates that payroll, rent, and other expenses that can be paid with PPP loan proceeds can still be deducted as a business expense on the business’s tax return, just as they would have if there had been no loan proceeds. 

The new bill does not address the deductibility of expenses paid for by a PPP loan that has already been forgiven, but it’s likely this will be addressed later. 

Related: How to get your PPP loan forgiven 

Consult your tax advisor

The Paycheck Protection Program and other stimulus programs are uncharted territory for businesses and for the IRS. Be sure to consult your tax advisor about how these programs impact your tax liability.