The latest fiscal stimulus bill was passed by Congress and signed into law in late December 2020. The bill offered economic relief for individuals, small businesses and provisions about distributing the COVID-19 vaccines. Here is a summary of how small businesses will benefit from the latest stimulus package:
Additional PPP loans
The latest stimulus package included an additional $284 billion earmarked for another round of Payroll Protection Program (PPP) loans for small businesses. The bill defines an eligible small business as one that has fewer than 300 employees and whose revenues declined by 25% or more during any one of the four quarters of 2020. Businesses meeting these criteria will be eligible to apply for the second round of PPP funding in addition to their initial PPP loan if applicable.
Use of Loan Proceeds
The December 2020 package added four additional categories that represent allowable uses for PPP loan proceeds:
- Purchase of business software and cloud computing applications.
- Property damage repair from riots and protests in the Summer of 2020 that were not covered by insurance.
- Coverage for supplier costs for orders placed before their PPP loan proceeds disbursed for essential supplies deemed essential to the borrower’s business.
- Purchase of worker protection equipment, including PPE equipment.
A significant clarification that the latest fiscal stimulus bill provided pertains to the tax treatment of expenses paid using PPP loans’ proceeds. Initially, the Treasury Department and IRS opposed businesses’ ability to deduct these expenses for tax purposes for businesses who had their loans forgiven.
The December 2020 stimulus package indicated that these expenses are fully deductible for federal tax purposes. This additional expense deduction is a significant benefit for businesses that received PPP loans. It is important to note that the latest stimulus package did not address these expenses’ deductibility when a business gets loan forgiveness at the state level. The tax treatment will vary by state, and business owners should consult with a tax professional to determine if this will impact them.
PPP loan forgiveness
The latest stimulus package contained a streamlined loan forgiveness process for businesses with $150,000 or fewer loans. There is a one-page application with minimal documentation required. The application form is still in review by the SBA, which expects the document to be ready by January 20, 2021.
The items discussed above are just a few of the latest fiscal stimulus bill features that will benefit small businesses.
Pulse by AssetBook helps you save time, deliver precise portfolio reporting, and demonstrate value to your business owner clients. We encourage you review all of the provisions of the latest stimulus with them.