All the information we can verify
Update: December 27, 2020
- PPP applications are still open and the program has received additional funding
- Businesses that received PPP funding may be eligible for a second loan
- Individuals that made $75,000 or less in 2019 may receive a $600 check; those that made more than that will receive less based on a sliding scale
- Absent from the act were aid for cities and states and COVID-specific liability protection for businesses
Congress has finally passed the long-debated second coronavirus relief act — officially called the Consolidated Appropriations Act — and it is one gigantic bill. It’s nearly 6,000 pages long and touches on a huge range of issues, many unrelated to the COVID-19 pandemic. President Trump signed it into law on December 27, 2020.
Here is a quick look at the critical elements for small- and medium-sized businesses. If you have any questions, we’re happy to answer if we can and connect you with better resources if we can’t.
What The Act Means for Small Businesses
There’s a lot of good news for manufacturers and other small-business owners in the new act, particularly those that took advantage of the original Paycheck Protection Program (PPP).
Perhaps the biggest win for businesses is that the PPP was extended and given an additional $284 billion in funds to loan out. One major change from the original PPP is that businesses that employ fewer than 300 people and have seen a 25% reduction in quarterly revenues are now eligible to receive a second PPP loan.
Eligible businesses that received $150,000 or less in PPP funds are now virtually certain of forgiveness under a simplified repayment form. We encourage you to talk to your lender for specifics, but supplementary documentation is unlikely to be required.
Additionally, Congress clarified that tax deductible expenses paid for with PPP funds can still be deducted from your 2020 taxes, which should let some business owners breathe a huge sigh of relief and make subsequent investments in their business knowing the funds are both available and deductible.
If you’re unsure whether your business qualifies or how repayment and forgiveness work, see our previous guides further down this page.
In total, there is $319 billion allocated to small businesses in the bill, as well an extension of the Employee Retention Tax Credit. This largely preserves the way things have been since March and extends the status quo into 2021.
The provision of the new Coronavirus Relief Act that will receive the most coverage is, of course, the $600 check that most Americans that made less than $75,000 in 2019 will receive. While most of the same provisions that governed the $1200 check sent out last spring will still apply, this time, U.S. citizens in households that also include non-citizens will be eligible for this payment, even though they weren’t for the first round.
For those that have lost their job, the federal unemployment insurance (UI) programs started by the original CARES act have been extended for another 11 weeks and an additional $300 in benefits have been made available. Primary UI will still be administered through the states, which could create issues in some places because a provision that would have provided aid specifically to state and local governments did not make the final act.
Liability Protection and State Aid Not Included
The act does not include relief for states and municipalities, even though many are increasingly spending down rainy day funds to help provide UI and other forms of relief to their citizens. Unlike the federal government, states and cities cannot legally spend themselves into a deficit, which means many forms of state-level aid may begin to run out in the new year.
For those relying on programs like UI, it would be wise to keep an eye on your local news for changes to these programs.
Another missing element came as something of a surprise: The bill does not include COVID-specific liability protection for businesses. It had previously been considered a necessary provision to get enough votes to pass the Senate, but negotiations shifted away from it in favor of other priorities very late in the process.
While this does mean that employers are still theoretically open to COVID-related lawsuits being filed by employees that get sick on the job due to negligent behavior on the part of the business, action could be taken at the state level to shield employers.
Additionally, Senate Majority Leader Mitch McConnell said following the passage of this second relief act that liability protection was going to be a non-negotiable element of any third COVID-related bill, so there is a very real possibility that this will eventually get passed despite not being in this version.
Looking Ahead to 2021
Both parties left key requests out of this bill and congressional Democrats have already said they expect a third relief bill to be passed early in the new year, which means this is far from the end of the negotiations on COVID-relief.
Two complicating factors in the timeline are the Georgia special elections — which could tip the balance of power in the Senate, thereby making liability protection less likely and the overall scope of the relief offered much larger — and the rollout of vaccines. Current estimates have 100 million doses available to Americans by the end of February, though the order in which people get the vaccine is still unclear. The longer negotiations last next time around, the more likely it is that the final bill is narrow, since the end of the pandemic will likely be in sight at that point.
Whatever happens, check back here as we’ll keep this page updated with the most up-to-date analysis we can provide.
Updated 8/8/2020: PPP Loan Forgiveness and Next Steps
As of August 8, the deadline to apply for a Paycheck Protection Program (PPP) loan has passed. The SBA has yet to announce a future round of loan applications.
PPP borrowers may now apply for loan forgiveness according to the criteria outlined by the SBA. Generally, if the loan has been used as intended, or for the purpose of an “employer maintaining or quickly rehiring employees and maintaining salary levels”, the loan will be forgiven.
The SBA has also added clarifying language: “The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 60% of the forgiven amount must have been used for payroll).”
Partial forgiveness is also a possible outcome.
What Happens Next: PPP Loan Forgiveness Process
Employers can submit their loan forgiveness applications to their lender. For most employers, this will be SBA Form 3508EZ. The lender has up to 60 days to review and approve. The form is then submitted to the SBA which in turn has up to an additional 90 days to review.
As employers await a forgiveness decision, they do not need payments on the loan, nor do they accrue interest in that timeframe if the loan is forgiven. However, if the loan is not forgiven at 100%, the employer will be subject to repayment and potential interest. The lender will outline any repayments including any interest due, as well as payment dates.
See Frequently Asked Questions on PPP Loan Forgiveness for More Details.
This guide should not be taken as financial advice, rather a helpful guide to share all of the verifiable information that we’ve collected. If you have any comments, please email us at firstname.lastname@example.org.
Updated 6/15/2020, 8:57AM
In early June, the Payroll Protection Flexibility Act was formally passed. You can find a great summary here. A few items to note:
- Extension of the eligible period to use the PPP funds from 8 weeks to 24 weeks
- There was originally some confusion around a potential cliff caused by the 60% payroll/non-payroll costs. The Treasury and SBA clarified that is not the intent in a joint statement here
- You are now eligible for deferral of the employer social security tax, even after determining that your PPP loan is forgiven, through December 31, 2020
- Some changes in the FTE computation to be more lenient when determining the impact on the forgiveness calculation If you have any questions on the new PPP changes or the mutual NDA, please let me know. Happy to hop on a call to discuss further
If you’re still waiting for a response, or for your EIDL Grant, the SBA has increased staffing and their customer support has ben extremely helpful. To directly access a Tier 2 Support person, you can use this number: 877-641-8202
The Treasury Department has published it’s final version of the application. Click here for the document. The SBA and the Treasury department have cleared up their disagreements through a document you can read here. There have been a few notable changes:
- Interest rate has been raised by 50 basis points to 100 basis points on the PPP Loan (0.5% to 1.0%)
- This interest will accrue even though there is a 6 month deferral of payment dues.
- The application now asks you to reduce your loan by any EIDL Grant Advance you may have already received.
- Any previously approved EIDL loans must be rolled into this loan if you used your EIDL loan proceeds for payroll costs There is confusion here as the maturity (length of loan) is 2 years on the PPP whereas the EIDL had a maximum maturity of 10 years. If an EIDL loan gets rolled into this loan, it’s unclear which will prevail.
- Payroll taxes imposed or withheld between 2/15/2020 and 6/30/2020 are excluded from the payroll amount calculation.
- Independent Contractors do not count as employees for the purpose of PPP loan qualification amounts or for forgiveness calculations. They must apply on their own.
- Specific allowance for using e-signature and e-consent.
- Banks outside of currently registered SBA 7(a) banks are now able to extend loans, including any Farm Credit System institution, any FDIC or federally insured credit union, and other small banks.
- Agents who assist small business applicants will be paid by the bank from 0.25% – 1% of the loan value. Agents are not allowed to collect from the borrower or from the proceeds of the loan to the borrower.
There’s a lot of information circulating around with often opposing statements. We’ve reached out to 41 banks and relied on the Treasury Department and the Small Business Association as well as industry contacts to help us assemble this page. This guide should not be taken as financial advice, rather a helpful guide to share all of the verifiable information that we’ve collected. If you have any comments, please email us at email@example.com.
Websites currently accepting applications:
It does not appear that any banks listed have a live application available with the new application format. We will check throughout the night and post any updates here.
National – Lendio – Form Now Available
National – Bank of America – Currently Accepting Applications
National – US Bank – Currently Accepting Applications
National – Sunrise Bank – Currently Accepting Applications
National – Paypal – Currently Accepting Applications
National – Fountainhead – Will not be ready until Monday at earliest
Sole proprietors, independent contractors, self-employed, and small businesses with fewer than 500 employees. Also some sectors qualify with more than 500 employees. For example, a Surgical and Medical Instrument Manufacturing company qualifies with up to 1,000 employees. A Railroad Rolling Stock Manufacturer qualifies with up to 1,500 employees. Check here.
Two Major Programs
The primary programs available are listed below in the Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) sections. While both of these programs are fundamentally loans, the PPP is structured to be a forgivable loan. The EIDL also carries with it a cash grant component. You can apply for both.
Paycheck Protection Program
This loan program is live on April 3, 2020 for small businesses. April 10th for independent contractors and self-employed. The primary purpose is to provide forgivable loans with restrictions on how you can spend the money: primarily payroll (75% of funds) and also rent, utilities, and interest payments (25% of funds).
- For non-seasonal businesses this is calculated based on your previous year’s average payroll multiplied by 2.5, the loan maxes out at $10,000,000
- These funds can be used for the 8 weeks starting when your loan is funded.
- If you use these funds to pay payroll for employees making up to $100,000 a year, those amounts are forgiven.
- You can also use no more than 25% of the loan amount to pay for rent, utilities, lease agreements, and interest. This amount is also forgiven
- The rest becomes a 2 year loan, with the first 6 months payments deferred, at 1% interest. Bank of America has pledged $250 million. Many other banks are silent on their expected participation.
- Start with a bank that you have a relationship with, if possible. If you applied for the EIDL loan you can also apply for this loan. The same bank or institution will be able to service both.
- This loan does not require collateral.
- This loan does not involve a credit check.
- You need to prove your payroll amounts for the year prior or for the seasonal period if you are a seasonal employer.
- Banks are paid a fee. Agents are also paid a fee out of the bank’s fees (0.25 – 1%). Be wary of anyone offering assistance for a fee that you pay.
- Application is available now!
Economic Injury Disaster Loans
These loans were available before the CARES act was signed. You are eligible if there is a Disaster Declaration in your state. As of this writing all states and territories within the United States have active declarations. The CARES act added a $10,000 grant that can be applied for at the same time.
- Loans up to $2,000,000
- Personal Collateral not needed below $250,000
- Qualification calculation: (Revenue – COGS) / 2
- *Likely requires a credit score of 650 or higher.
- 4% Interest Rate Maximum
- Payments paid for by SBA for 6 months
- 10 year maximum loan length
- Administered through SBA Lender
- Streamlined application available
- Current timelines are around 2-4 weeks for processing.
- Some reports of grant money being wired within 3 days.
- SBA is available 24/7 but does not have the ability to check on your filing status, and are overwhelmed.
- 800-659-2955 DisasterCustomerService@sba.gov
Payroll Tax Relief
If your revenue dropped by more than 50% from the same quarter the year before or if your operations were fully or partially suspended due to a COVID-19 related shut down order. This likely means that you were NOT classified as essential.
This credit is equal to 50% of the first $10,000 of qualified wages paid to employees.
If you have less than 100 full time employees, all employees count.
If you have more than 100 full time employees, qualified wages only covers wages paid to employees who were not working.
If you receive a loan under the Paycheck Protection Program, you do not qualify.
Payroll Tax Deferral
All employers and self employed individuals can defer payment of the employer’s share of payroll taxes for the period ending December 31, 2020 (this year). You have to pay 50% by December 31, 2021, and the other 50% by December 31, 2022.
If you receive loan forgiveness under the Paycheck Protection Program, you are not eligible for this deferral.
401(k) and IRA tax waiver and loan amount increases
You can take up to $100,000 in early 401(k) and IRA distributions during 2020 and the 10% tax penalty is waived. Normal income tax still applies. If you put the money back within 3 years after you get it, you won’t be taxed on it.
You can now borrow up to $100,000 or 100% (whichever is lower) of the vested balance of any tax-qualified plan like a 401(k) or IRA. Any plan that’s due in 2020 has its payment due date extended by a year.
Net Operating Loss Carryback
Taxable income limitations are removed to allow a Net Operating Loss to fully offset income and reduce tax burden. Any Net Operating Losses in 2018, 2019, 2020 can be carried back 5 years with no limitations.
Facilities improvement costs can be recognized all in this year instead of having to depreciate it over the life of the building, allowing for reduction in taxable income.
Foreclosures or Evictions
No federally backed mortgage loans can be foreclosed on for a 60 day period starting March 18, 2020.
Landlords are not allowed to take legal action to repossess rental property or collect on nonpayment of rent or other fees and charges for 120 days on any properties insured, guaranteed, supplemented, or protected by federal agencies or programs.
Existing SBA Loans
If you have an existing SBA loan, you can still apply for the PPP and EIDL loans. Your existing loans will also have both their principal and interest payments made for them for 6 months. There is a $17 billion limit on these funds. It’s unknown what will happen if the funds run out before the 6 month period.
Small Businesses: To calculate your loan forgiveness, you want to take the last eight (8) weeks of your 2019 payroll and divide it by 0.75. This amount will equal your loan forgiveness. The rest of the loan doesn’t matter. It’s capped at 25. However, it can’t exceed 8/52 of profits for sole proprietors or self-employed individuals. The payroll paid up to and including $100,000 of annualized wages which would be no more than $15,384 per employee in the 8 weeks.
Sole Proprietors: Schedule C Sole Proprietors can never get 100% forgiveness of loan. Any lease obligation in place before February 15th, even if it includes utilities, is still forgivable. Anything on your lease that you have to pay to support your lease counts. You’ll need to supply your lease documents. All interest on debt obligations and leased equipment (includes AWS, Azure, etc.) is allowable.
- A google spreadsheet with private, federal, and state assistance programs all collected in one place. Assembled by our friends at Gusto payroll
Click here to see the google sheet
- Official documentation from the Treasury department