Navigating stimulus funds for business owners

On Dec. 27, President Donald Trump signed a $900 billion stimulus bill into law. The bill renews the Paycheck Protection Program (PPP), which was established last March to help businesses that were struggling as a result of the COVID-19 pandemic. Four months since the end of the initial program, $284 billion are being allocated to the PPP as part of the new stimulus package.

What do business owners need to know?

The new funds for PPP loans are available through March 31. Owners who did not receive a loan in the first draw can apply. Those who did receive a loan and have either used or plan to use it may also be eligible to apply but with limitations. They must be small businesses with 300 employees or less and have had at least a 25 percent reduction in gross receipts year-over-year in any individual quarter in

2020 (alternatively, borrowers can use their tax returns and compare full year 2020 to 2019).

Borrowers can receive one first draw and one second draw PPP loan as part of the new stimulus package. Second draw loans will be calculated similarly to the first draw at 2.5 times the average monthly payroll of (a)

2019, (b) 2020 or (c) trailing 12 months or, for the Accommodation and Food Services sector (NAICS Code 72), 3.5 times the average payroll. No loan amount may exceed $2 million.

Borrowers may spend up to 40 percent of any forgivable amount on non-payroll costs.

Increased flexibility for allowable expenditures

By including a revenue reduction requirement and threshold of 300 employees, Congress hopes to deliver aid to smaller businesses that are most in need. In addition to allowing borrowers to receive new loans, the enhancements also provide for increased flexibility in allowable expenditures. Borrowers may spend up to 40 percent of any forgivable amount on non-payroll costs. These originally included rent or lease, utilities, and mortgage interest, and now will also include operational expenses, property damage costs due to public disturbances that occurred during 2020 and aren’t covered by insurance, supplier costs, and worker protection expenditure for PPE (e.g., face masks) and adaptive investments to help borrowers comply with federal or state health and safety guidelines (e.g., air filtration systems or sneeze guard barriers). Simplified forgiveness requirements

In addition to allowing for more expenditures, the new bill makes additional enhancements to streamline the forgiveness process. It is now at the business owner’s discretion to select the covered period, which can be anytime between eight and 24 weeks as opposed to eight or 24 weeks. There will also be a simplified one-page forgiveness application for loans of $150,000 or less, an increase from the current threshold of $50,000. These changes apply retroactively to existing PPP loans, unless the owner has already received forgiveness for some or all of their first draw loan. Borrowers who have already received loan forgiveness may not take advantage of the expansion of non-payroll costs.

To read more about the changes and others including tax deductibility of PPP loans, please refer to the “Latest COVID-19 Relief Overview for Business Owners” at www.ubs.com/business-resilience

Tom Mantione