Measures related to the PPP of the package are now being done it is possible for an employer to get a second forgivable PPP loan and impose fewer restrictions on how the loan can be used. It also relaxes the requirements to forgive small loans. And it allows companies to deduct expenses paid for their PPP loans.
In addition, this time, there are special provisions specifically designed to help restaurants and minority businesses.
Chris Hurn, founder of Fountainhead, a non-bank lender that makes loans with small business administration, described the measures as a Christmas gift for small businesses.
Here are some of the keys changes that will be made in the PPP loan program:
Now companies can get a second PPP loan
Companies that obtained a PPP loan when the program went into effect can now apply for a “second draw,” as long as they are not a public company, do not employ more than 300 people, have used, or will make full use of their first. PPP loan, and can show at least a 25% drop in gross revenue in the first, second or third quarter of this year compared to the same quarter in 2019.
Specific amounts are allocated to community development financial institutions – which are usually lent to minority-owned businesses in underserved communities – and also for companies with less than 10 employees, as well as for those in low-income areas.
Most eligible companies can get a loan equal to 2.5 times the average monthly payroll expense, just like before. But now restaurants and hosting companies can apply for loans equal to 3.5 times.
No loan can exceed $ 2 million, below the original $ 10 million.
Simplified forgiveness process for loans under $ 150,000
In order to forgive a PPP loan, companies that have lent $ 150,000 or less will only need to submit a one-page certification that includes the number of employees the company retained as a result of the loan, an estimate of the amount of the loan spent on payroll and the total amount of the loan. Borrowers must also certify that the information is accurate and that they met the loan requirements.
For any PPP loan to be fully forgiven, at least 60% of the money must be used for payroll expenses. And the remaining 40% or less can be used to cover an even wider range of business expenses than during the first rounds of PPP loans.
Beyond mortgage interest, rental payments and utilities, loans, for example, can now be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid’s restrictions, as well as some operations, property damage and supplier.
Great tax relief on business expenses
Typically, companies deduct their payroll and operating expenses from their gross income.
But for companies that get PPP loans, these expenses are largely paid off by the loan.
Covid’s latest relief package clarifies that if the loan is forgiven, it will be treated as tax-free for the company.
And it further clarifies that while the tax-free loan may have paid off many payroll and operating expenses, a company may deduct those expenses on its tax return.
Tax policy experts frowned at the legislators ’decision here because it is considered a“ classic double ”in the taxpayer’s pocket.
But for small businesses that have just tried to stay alive during the pandemic, it is a great source of relief because their incomes have been severely affected and it may take a while to wait for a real recovery for them. as coveted restrictions and consumer fear persist.