New COVID-19 Economic Relief Available for Struggling Small Businesses
by Akira Arroyo, Esq. January 13, 2021
Under the third and most recent round of stimulus funding passed on December 27, 2020, and known as the Economic Aid Act, there is some hopeful news for struggling small businesses.
For starters, the Paycheck Protection Program (PPP) reopened on January 11, 2021 and will accept new applications through March 31, 2021 or until funds are exhausted. So, if you missed the deadline to apply initially, now is the time to reach out to your lender and begin pulling together your documentation. Also, for certain businesses that did not apply for the PPP loan and instead chose to make use of the Employee Retention Tax Credit (ERTC), you may now apply for a PPP loan program and claim the ERTC, just not for the same payroll expenses.
For businesses that applied and received PPP loans earlier in the pandemic, you may be eligible to apply for a PPP Second Draw Loan.
The PPP Second Draw Loans program has generally similar terms and conditions to the original PPP program, however, it has a more targeted focus than the original PPP loan program. See some of the main differences below. Borrowers must:
- Have fully exhausted their first PPP loan for authorized purposes before disbursement of the Second Draw PPP loan.
- Have 300 or fewer employees.
- Have had a revenue reduction of 25% or greater in gross receipts during any quarter of 2020 as compared to that same quarter in 2019.
- The maximum loan amount is the lesser of $2 million or 2.5 months of average monthly payroll costs. For certain other employers, including those in the food and accommodation industry the maximum loan amount is up to 3.5 months of average monthly payroll costs or $2 million, whichever is the lesser amount.
One thing that does remain the same is that in order to maximize forgiveness of both the PPP and the Second Draw PPP Loan, 60% of loan proceeds must be used to cover payroll and their associated costs while 40% can be used for an expanded list of other costs, including rent.
The Economic Injury & Disaster Loan (EIDL) Program is also continuing to accept applications and will re-open the EIDL Advance Grant program, providing grants of up to $10,000 for certain qualified businesses. See the US Chamber of Commerce website for more information.
There have been significant changes as well to the Employee Retention Tax Credit (ERTC), including the ability for certain businesses to now claim the ERTC and receive a PPP loan. Also, the ERTC has been raised to 70% on $10,000 of wages per quarter for the first two quarters of 2021, raising the maximum amount to $14,000 per employee for eligible businesses. Businesses with up to 500 employees and a revenue decline of more than 20% may be eligible. Check the IRS website regularly for more information.
An additional $15 billion in aid was appropriated for Grants for Shuttered Venue Operators. This grant will also be administered by the U.S. Small Business Administration (SBA). Eligible applicants include certain live venue operators or promoters, theatrical producers, live performing arts organization operators, certain museum operators, motion picture theater operators and talent representatives that have experienced at least a 25% loss in revenue from the same quarter in 2019 and were operational on February 15, 2020. Further restrictions on eligibility and use of grant funds should become available on the SBA website soon.
For more details on the PPP & Second Draw PPP loans, the EIDL Advance Grant, ERTC and the Shuttered Venue Operators Grant as well as other government funded loan and grant programs, be sure to check the SBA’s website regularly. So, don’t wait any longer and reach out to your lender and accountant now in order to begin preparing your documentation and applications for this latest round of governmental assistance for small businesses.
Note: This blog is a brief overview of some of the recent additions of stimulus funding for small businesses. For a comprehensive look at available economic aid, please visit the SBA for more information and most recent updates: www.sba.gov
Akira Arroyo, Esq. is the Director of the Neighborhood Entrepreneur Law Project.
March 24, 2021
Lessons Learned: Our Immigrant Justice Project Reflects on Remote Legal Services Best Practices during the Pandemic
After one year into a dramatic shift towards remote work, the City Bar Justice Center’s Immigrant Justice Projec...Read more
March 23, 2021
In Solidarity: 5 Things You Can Do to Counter Violence and Hate Against the Asian-American Community
Statement of the City Bar Justice Center Daoyou Feng, Delaina Yaun, Hyun Jung Kim, Paul Andre Michels, Soon Chung...Read more
March 18, 2021
Amelia Toledo is a staff attorney for the Legal Hotline. Due to the COVID-19 pandemic, most court appearances ...Read more