Three big ways small business would benefit from the new Covid relief bill

The House and Senate have passed a $900 billion Covid-19 relief package that promises to accelerate vaccine distribution and deliver much-needed aid to small businesses, Americans who have lost their jobs and health care workers on the front lines of the pandemic.

Posted: Dec 22, 2020 6:19 AM
Updated: Dec 23, 2020 10:45 AM


Given how much the pandemic has hammered small businesses, three big changes to the Paycheck Protection Program are likely to come as a welcome relief.

The Covid relief package passed by Congress earlier this week allocates an additional $284.45 billion in lending to eligible businesses.

The bill, which President Trump has not yet signed into law, now makes it possible for a business owner to get a second forgivable PPP loan and imposes fewer restrictions on how the loan may be used. It also relaxes requirements to have small loans forgiven. And it lets businesses deduct the expenses that their PPP loans paid for.

Plus, this time, there are special provisions designed specifically to help restaurants and minority-owned businesses.

'Christmas came early for small businesses,' said Chris Hurn, founder of Fountainhead, a nonbank lender that makes Small Business Administration-backed loans.

Here are some of the key changes to the PPP loan program:

Businesses may now take a second PPP loan

Businesses that got a PPP loan when the program first went into effect now may apply for a 'second draw,' so long as they're not a public company, don't employ more than 300 people, have used or will fully use their first PPP loan, and can show at least a 25% drop in gross receipts in the first, second or third quarters of this year compared to the same quarter in 2019.

Specific amounts are earmarked for community development financial institutions -- which typically lend to minority-owned businesses in underserved communities -- and also for businesses with fewer than 10 employees, as well as those in low-income areas.

Most eligible businesses may get a loan equal to 2.5 times average monthly payroll expenses, just as before. But restaurants and lodging businesses may now apply for loans equal to 3.5 times.

No loan may exceed $2 million, down from $10 million originally.

Streamlined forgiveness process for loans under $150,000

In order to have a PPP loan forgiven, businesses that borrowed $150,000 or less will simply need to submit a one-page certification that includes the number of employees the business retained as result of the loan, an estimate of how much of the loan was spent on payroll and the total loan amount. Borrowers must also attest that the information is accurate and that they complied with 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 may be used to cover an even broader swath of business expenses than was the case during the initial rounds of PPP lending.

Beyond mortgage interest, rent and utility payments, the loans, for instance, now may be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid restrictions, as well as certain operations, property damage and supplier costs.

Huge tax break on business expenses

Businesses normally deduct their payroll and operating expenses from their gross income.

But for businesses that get PPP loans, those expenses are largely paid for by the loan.

The latest Covid relief package clarifies that if the loan is forgiven, it will be treated as tax free to the business.

And it further clarifies that even though the tax-free loan may have paid for many payroll and operating expenses, a business may still deduct those expenses on their tax return.

Tax policy experts frown on lawmakers' decision here because it's considered a 'classic double dip' into the taxpayer's pocket.

'Businesses that got PPP grants want to deduct those costs as ordinary business expenses. But taxpayers already paid for those expenses once through the PPP program. Why should they pay for them again? Well, because business lobbyists are very good at what they do,' Tax Policy Center senior fellow Howard Gleckman wrote in the blog TaxVox.

But for small businesses that have just been trying to stay alive during the pandemic, it's a huge source of relief because their revenue has been so hard hit and any real recovery for them may be long in coming as Covid restrictions and consumer fear linger.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 690391

Reported Deaths: 8104
CountyCasesDeaths
Hennepin1417751856
Ramsey59044950
Dakota52670498
Anoka48579482
Washington30969309
Stearns25163241
St. Louis20636336
Scott19872145
Wright18754163
Olmsted16057111
Sherburne13701104
Carver1224752
Clay926795
Rice9192121
Blue Earth881947
Crow Wing7905102
Kandiyohi749389
Chisago722958
Otter Tail678794
Benton6567101
Mower569138
Winona561352
Goodhue556680
Douglas541684
Itasca526471
Beltrami516972
McLeod512064
Steele510721
Isanti495670
Morrison472463
Nobles452950
Becker443759
Polk438675
Freeborn433838
Lyon398754
Carlton394459
Nicollet384047
Pine378426
Mille Lacs359360
Brown353044
Cass350635
Le Sueur344729
Todd327334
Meeker310249
Waseca294525
Martin267933
Wabasha24654
Dodge24575
Hubbard236141
Roseau234824
Houston206816
Redwood203542
Renville202448
Fillmore200210
Pennington193022
Wadena188926
Faribault182225
Sibley178410
Cottonwood178324
Chippewa172639
Kanabec166729
Aitkin156838
Watonwan156511
Rock140719
Jackson135112
Pope13468
Yellow Medicine126620
Pipestone125326
Koochiching121919
Stevens121511
Swift118819
Murray116010
Marshall105318
Clearwater104818
Lake92821
Wilkin90214
Lac qui Parle86824
Mahnomen7059
Big Stone6964
Grant6958
Norman6699
Lincoln6554
Kittson53522
Unassigned51793
Red Lake4927
Traverse4315
Lake of the Woods4114
Cook2150

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 435755

Reported Deaths: 6339
CountyCasesDeaths
Polk67341672
Linn25698353
Scott22828261
Black Hawk19121334
Woodbury16940233
Johnson1659690
Dubuque14547218
Pottawattamie13058183
Dallas12746102
Story1187148
Unassigned93740
Warren685993
Webster6304102
Cerro Gordo6212102
Clinton620097
Des Moines594482
Muscatine5781108
Marshall564280
Sioux542775
Jasper516575
Lee511078
Wapello4993128
Buena Vista472942
Marion449083
Plymouth434083
Henry339940
Jones331158
Bremer325365
Crawford321644
Carroll317053
Washington315754
Benton312656
Boone308736
Mahaska275453
Dickinson270846
Kossuth251471
Jackson246044
Clay245729
Tama238273
Delaware234643
Buchanan233938
Hardin230847
Page221624
Cedar220525
Fayette220345
Wright217641
Winneshiek215937
Hamilton211752
Harrison198875
Clayton194458
Madison193820
Butler188836
Floyd187742
Mills185224
Poweshiek181036
Cherokee179440
Iowa176425
Allamakee176252
Lyon174441
Jefferson169138
Calhoun168313
Hancock167335
Winnebago164231
Grundy158835
Cass155556
Louisa154949
Shelby151739
Appanoose151249
Emmet149541
Franklin148524
Humboldt147226
Sac144722
Union144237
Mitchell141643
Guthrie138132
Chickasaw137518
Palo Alto131124
Clarke125024
Montgomery122239
Keokuk116232
Howard115622
Monroe114033
Ida107538
Davis103125
Pocahontas99023
Greene98012
Adair95334
Monona94733
Lucas94523
Worth9268
Osceola83717
Decatur74510
Fremont74111
Taylor72412
Van Buren70919
Wayne65123
Ringgold62226
Audubon58414
Adams3914
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