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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: 604184

Reported Deaths: 7620
CountyCasesDeaths
Hennepin1248631774
Ramsey52480895
Dakota46804470
Anoka42746458
Washington27416291
Stearns22552224
St. Louis18137312
Scott17548135
Wright16370149
Olmsted13391102
Sherburne1201295
Carver1066448
Clay825892
Rice8196110
Blue Earth762543
Crow Wing681594
Kandiyohi667885
Chisago619752
Otter Tail585884
Benton582998
Goodhue483874
Douglas475381
Mower470733
Winona461251
Itasca459263
Isanti439964
McLeod430361
Morrison424662
Nobles407950
Beltrami407561
Steele397616
Polk389072
Becker386655
Lyon363853
Carlton352756
Freeborn346932
Pine335023
Nicollet331045
Mille Lacs311654
Brown307840
Le Sueur297226
Cass286032
Todd285632
Meeker263142
Waseca238023
Martin235332
Roseau211021
Wabasha20783
Hubbard196441
Dodge18783
Renville182446
Redwood176338
Houston174616
Cottonwood167124
Wadena162823
Fillmore157410
Faribault154419
Chippewa153938
Pennington153820
Kanabec146828
Sibley146810
Aitkin138837
Watonwan13579
Rock128719
Jackson122612
Pipestone116726
Yellow Medicine114920
Pope11296
Murray107010
Swift106918
Koochiching95217
Stevens92411
Clearwater89016
Marshall88817
Wilkin83213
Lake83120
Lac qui Parle75622
Big Stone6044
Grant5938
Lincoln5843
Mahnomen5669
Norman5479
Kittson49022
Unassigned48293
Red Lake4017
Traverse3775
Lake of the Woods3453
Cook1720

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 370914

Reported Deaths: 6048
CountyCasesDeaths
Polk58232640
Linn21204339
Scott20306247
Black Hawk16119312
Woodbury15238230
Johnson1461585
Dubuque13506211
Dallas1128999
Pottawattamie11223174
Story1071448
Warren583991
Clinton561493
Cerro Gordo553593
Sioux517074
Webster515494
Muscatine4880106
Marshall486676
Des Moines467271
Wapello4337122
Buena Vista426940
Jasper421172
Plymouth402981
Lee382356
Marion366076
Jones300957
Henry294637
Bremer288261
Carroll286852
Crawford268540
Boone268434
Benton259655
Washington256751
Dickinson249344
Mahaska232351
Jackson225242
Clay216627
Kossuth216166
Tama211871
Delaware210943
Winneshiek198535
Page194522
Buchanan193733
Cedar192223
Hardin187444
Fayette186543
Wright185940
Hamilton181851
Harrison179973
Clayton171057
Butler166235
Madison164619
Mills163724
Floyd163342
Cherokee159338
Lyon158841
Poweshiek157036
Allamakee152652
Hancock150234
Iowa149824
Winnebago144531
Cass139255
Calhoun138913
Grundy137333
Emmet135841
Jefferson133435
Shelby131537
Sac130920
Union129935
Louisa129749
Appanoose129049
Mitchell126643
Chickasaw124717
Franklin123323
Guthrie123232
Humboldt119626
Palo Alto113523
Howard104922
Montgomery103638
Clarke100924
Keokuk96532
Monroe96330
Unassigned9560
Ida91535
Adair87332
Pocahontas85822
Davis85225
Monona82931
Osceola78916
Greene78011
Lucas77923
Worth7598
Taylor66812
Fremont6269
Decatur6169
Van Buren56418
Ringgold56324
Wayne54423
Audubon53411
Adams3444
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