Almost eight months after the federal government launched a second round of loans to protect paychecks, the new stimulus package will include $ 900 billion in relief for businesses.
The bill includes $ 284.45 billion for the first and second paycheck protection program’s first and second eligible loans.
In addition to reimbursing the program, the bill also expands the companies eligible for PPP loans, including nonprofits, news agencies, and churches.
The aid package includes financing for first-time applicants for the program, but also a “PPP second loan” especially for “smaller and more severely affected companies” that need a second loan.
Companies that are not in operation by February 15, 2020 are not eligible.
A minimum of $ 35 billion is allocated for first-time borrowers and $ 15 billion for businesses with 10 employees or fewer or loans of less than $ 250,000.
For second-drawing borrowers, the bill provides $ 25 billion for businesses with 10 employees or fewer or loans of less than $ 250,000.
The deal includes $ 20 billion in targeted grants under the Economic Injury Disaster Loans program.
Funding for new PPP loans runs until March 31, 2021.
The new information was set out in a 29-page document detailing each section of the $ 900 billion stimulus package.
Here’s everything we know about corporate relief.
New additional eligible expenses
Originally taken out in April, the PPP loans were intended to cover a company’s payroll. They were only awarded when 75% of the funds were used for payroll. In June, the government relaxed these requirements to 60% to give companies more leeway.
This round of funding expanded the forgiveness even further, encompassing operating costs, property damage, supplier costs, and more.
In addition, the new elements were retrospectively incorporated into the original CARES law. It does not include borrowers whose loans have already been canceled.
Here are the new eligible expenses:
- Business expenses: Payments for software, cloud computing, and other staffing and accounting needs.
- Property damage costs: Costs related to property damage due to civil unrest that occurred in 2020 that are not covered by insurance.
- Supplier costs: costs of a supplier for goods necessary for the operation before taking out a loan. Supplier charges for perishable goods can be claimed prior to or during the term of the loan.
- Employee protection expenses. PPE and adaptive investments to comply with federal health and safety guidelines or equivalent federal and local guidelines related to COVID-19 between Jan.
Loans for the second drawing of the Paycheck Protection Program
The bill states that the “second draw” loans are for “smaller and harder-hit businesses” that have already used the funds from their first PPP loan.
The maximum loan amount is $ 2 million.
To be eligible for the second drawing, a company cannot have more than 300 employees. Businesses must have drawn or are using the full amount of their first PPP loan.
In order to receive a second PPP loan, companies must demonstrate a reduction in gross income of at least 25% in the first, second and third quarters of 2020 compared to 2019. Applications submitted on or after January 1st can use the fourth quarter to provide evidence of eligibility.
However, this means that companies founded in January 2020 will not be eligible as they will not be able to provide supporting documents from a previous year.
In general, the bill states that a company can borrow up to 2.5 times the average monthly labor cost in the year preceding the loan or calendar year. Companies assigned to the NAICS code 72, the lodging and catering sector, can obtain loans up to 3.5 times their average monthly wage bill.
However, no loan can exceed $ 2 million.
Seasonal employers can calculate the loan amount based on a 12 week period from February 15, 2019 to February 15, 2020. The draft law defines seasonal employers as companies that do not work for more than seven months a year or do not earn more than a third of their income in one of the six months of the previous calendar year.
Lending on the second drawing
Borrowers are entitled to loan waiver in the amount of the sum of their wage, mortgage or rent and utility payments as well as operating expenses, property damage costs, supplier costs and employee protection costs. There must be a 60/40 cost split between wage and non-wage costs for full forgiveness.
Duration of credit coverage
The bill continues the relaxed protocols introduced in June. Borrowers can choose to have the loan spread over a period of eight to 24 weeks.
Simplified application for small loans
The new law introduces a simplified application process designed to streamline the approval of loans under $ 150,000. The draft law stipulates that the SBA must prepare a form for the simplified application within 24 days of the economic stimulus package coming into force.
The only clues on the invoice as to what the application might look like is a one-page document asking for the number of employees withheld due to the loan, the estimated wage costs and the total loan amount.
Entitled new companies
The new bill allows FCC license holders and newspaper holders with more than one physical location to apply for financial assistance. The bill also makes 511 public service broadcasters at colleges and universities eligible.
The company cannot have more than 500 employees per physical location.
501 (c) (6) Organizations such as business leagues, chambers of commerce, property management companies, chambers of commerce, and professional sports leagues with certain restrictions.
The organization may not receive more than 15% of lobbying income and lobbying may not include more than 15% of its activities. The cost of lobbying the organization cannot exceed $ 1,000,000.
The organization must have 300 or fewer employees.
Not eligible to participate are professional sports leagues or organizations that aim to promote or participate in a political campaign or other political activity.