What you need to know about the new stimulus bill

Including PPP forgiveness, the new round of PPP loans and additional stimulus for your business

Senior Vice President, Director of Government Guaranteed Lending, WSFS Bank

In December 2020, the Federal government passed a new $900 billion stimulus that includes $284 billion in additional Paycheck Protection Program (PPP) funding for small businesses.

The legislation also calls for a more streamlined loan forgiveness process for some loans, as well as tax relief for all PPP loans that was not previously addressed in the CARES Act.

Here are some initial questions and answers for small businesses as they navigate PPP Forgiveness and weigh applying for additional PPP funding, or want to apply for the first time.

At the heart of this new round of PPP funding, or PPP 2.0 as many are calling it, is a narrowed focus on helping small businesses that may have been left out of the CARES Act’s PPP loans, as well as small businesses that are still struggling and need more support.

The eligibility requirements for PPP 2.0 include lowering the cap on total employee count of a business to 300; makes 501(c)(6) organizations and other businesses including hospitals, local newspapers, TV and radio broadcasters, and housing cooperatives eligible to apply for the first time; excludes publicly-traded companies; and earmarks funds specifically for businesses with less than 10 employees that operate in low- and moderate-income areas.

Those applying for a second time are capped at $2 million in PPP funds and must demonstrate a quarterly revenue loss of 25% or more for the same quarter in 2019.

PPP 2.0 also provides some additional relief for the hardhit hospitality industry, allowing hotels and restaurants to apply for a PPP loan of up to 3.5 times their payroll cost, compared to 2.5 times for most other industries.

The bill explicitly calls for costs associated with a PPP loan to be tax deductible, helping to clear up an area that was not covered in the CARES Act and that the IRS had initially ruled to be taxable.

Four new types of eligible forgivable expenses were also added, including PPE expenses associated with outdoor dining and supplier costs, and the bill creates the option for new covered periods.

Businesses that received an Economic Injury Disaster Loan (EIDL) will also no longer be required to deduct the grant from the PPP forgiveness amount. Finally, a new streamlined forgiveness application is coming from the SBA for all PPP loans under $150,000 and will not require documentation.

Check with your lender to determine next steps if your PPP loan is under $150,000.

There are several benefits to small businesses with SBA loans, including any Section 1112 subsidy payments from 2020 not being included in a business’s gross income tax. This applies for any subsidy payments in 2021 as well, which are expected to begin in February. $3.5 billion is allocated for debt relief payments of principal and interest (P&I) on small business loans amending the regulations and rules surrounding Section 1112 payments authorized by the CARES Act.

Additionally, there are enhancements to SBA Express Loans, with an increase in loan amounts from $350,000 to up to $1 million through Sept. 30, 2021, and various enhancements to 7(a) loans including fee reductions and waivers that could be very beneficial for small businesses in need of cash flow.

On Jan. 6, 2021, the SBA released its Interim Final Rules for new PPP loans and second draw loans.

Small business leaders should continually monitor the SBA website for updates and contact their accountant or other business advisors for help preparing documents.

Remember, these services, when used for PPP purposes, are now tax deductible.

Editor’s Note: All government program descriptions and details above are accurate as of Jan.7, 2021 and are subject to change.

Candice Caruso is Senior Vice President, Director of Government Guaranteed Lending at WSFS Bank. She brings more than 20 years of experience in the financial services industry, including 12 years as a business funding expert, and has been featured on Bloomberg Radio, CNBC’s Closing Bell, The Wall Street Journal and Franchising World.