Three big ways small businesses will benefit from the new Kovid Relief Bill

Kovid relief package passed by Congress Earlier this week, an additional allocation of $ 284.45 billion in lending was made 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 places fewer restrictions on how the loan can be used. It also relaxes the requirements for waiving small loans. And it lets businesses cut back on expenses that pay for their PPP debt.

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

“Christmas came early for small businesses,” said Fountainhead founder Chris Hearn, a nonbank lender who makes small business administration-backed loans.

Here are a few Changes in PPP loan program:

Traders may now have to take a second PPP loan

Businesses receiving PPP loans can apply for a “second draw” when the program first comes into force, unless they are a public company, employing more than 300 people, using them or whole Use them the first PPP loan, and may show a decline of at least 25% in gross receipts in the first, second or third quarter of this year compared to the same quarter in 2019.

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Specific funds are earmarked for community development financial institutions – which typically lend to minority-owned businesses in ineligible communities – and For businesses with less than 10 employees, as well as in low-income areas.

Most eligible businesses can get a loan equal to 2.5 times the average monthly payroll expense as before. But restaurant and lodging businesses can now apply for loans equal to 3.5 times.

Any loan originally below $ 10 million cannot exceed $ 2 million.

Systematic forgiveness process for loans under $ 150,000

To forgive a PPP loan, businesses borrowing 150,000 or less simply need to submit a one-page certification that includes the number of employees who maintain the business as a result of the loan, an estimate of how much the loan was spent . On payroll and total loan amount. Borrowers also need to see that the information is correct and they Complied with loan requirements.

To completely forgive any PPP loan, at least 60% of the money must be used for payroll expenses. And the remaining 40% or less can be used to cover a wider swath of business expenses than during the initial phase of PPP lending.

Beyond Mortgage Interest, For example, rent and utility payments, loans, can now be used to cover the costs of personal protective equipment and other expenses to meet Kovid restrictions, as well as certain operations, property damage and supplier costs. Too.

Heavy tax breaks on business expenses

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

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

The latest Kovid relief package clarifies that if the debt is waived, it will be considered tax free for the business.

These small businesses cannot make it without more incentives

And it further clarifies that even if a tax-free loan has paid for many payroll and operating expenses, a business can still deduct those expenses on its tax return.

Tax policy experts stayed the MPs’ decision here as it is considered a “classic double dip” in the taxpayer’s pocket.

“Businesses that have received PPP grants want to reduce those costs as normal business expenses. But taxpayers have already paid for those expenses once through the PPP program. They are paid again for them. Why should I do? Well, because what business lobbyists do is very good at? ” “Howard Gelman, senior partner at the Tax Policy Center, wrote in the blog TaxVox.

But for small businesses who are just trying to stay alive during an epidemic, this is a great source of relief, as their revenue is very difficult and it may take a long time for them to make any real recovery. In the form of Kovid sanctions and consumer fears.


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