It looks like businesses suffering from the lockdowns likely have another round of PPP funding on the way. Passed after months of squabbling in both chambers, the Bipartisan Emergency COVID Relief Act of 2020 appears to be approaching passage. A wide-ranging proposal, the bill includes funding for COVID testing, contact tracing, nutrition assistance and student loan relief, while also putting new money aside for a second round of PPP loans.

Background

Following the creation of the initial PPP in the CARES Act, the rapid creation provided a few more questions than answers. Large businesses and well-endowed universities jumped in and grabbed millions or billions of dollars in PPP loans, small businesses struggled, and this is all before the pending challenges companies will face in forgiveness and taxation.

But all in all, the initial PPP was a success—touted as the single most effective relief program passed by Congress in a CNBC Op-Ed.

“In May, economists expected the economy to lose upwards of 8.3 million jobs and unemployment to reach levels unseen since the Great Depression. Instead, with more than $500 billion in PPP loans injected into small businesses across the nation during April and May, our economy added a record 2.5 million jobs — all amid a pandemic.

Across the United States, the PPP helped support up to 55 million jobs, including up to 4.5 million in manufacturing, with an average firm size of just 20 employees.”

However, lockdowns continue, and despite many states offering more freedom than others, businesses are struggling. This is why small businesses can expect more relief.

Paycheck Protection Program Extension and Small Business Funding

Part of the larger and somewhat pork-filled Bipartisan Emergency COVID Relief Act of 2020, the Paycheck Protection Act gets additional money. Allocating $300 billion to the Small Business Administration, funding from this bill will allow the hardest-hit small businesses to receive a second forgivable Paycheck Protection Program (PPP) loan.

The following criteria are put in place to ensure that only the right businesses receive PPP loans:

  • Specifically built for businesses with fewer than 300 employees who lost 30 percent or more of revenue.
  • Small 501(c)(6) organizations with fewer than 150 employees (local chambers of commerce, economic development organizations, and tourism offices) would become eligible for PPP.
  • Forgivable expenses are expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely.
  • Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act.
  • Loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.
  • Set-asides are included to ensure that smaller borrowers and underserved communities get the help they need, such as: for small businesses with 10 or fewer employees; for loans made by small community lenders; and for the Minority Business Development Agency
  • Funding set aside for independent live venues forced to close by lockdowns.
  • Targeted emergency investments to help low-income and minority communities withstand the economic impact from the lockdowns.

What to Expect

According to Inc. analysis of the bill, here are some of the changes and provisions:

  • Still Open to First-Time Applicants: Things change, and even though the bipartisan framework specifically allows businesses that have already received a PPP loan to once again gain access to the program, there is nothing in place to prevent newcomers from securing a loan.
  • Healthy Targeting for Small Lenders and Underserved Communities: Much of the money set aside will go to small lenders and focused institutions including Community Development Financial Institutions (CDFIs), credit unions, small community banks, Minority Depository Institutions (MDIs), and farm service lenders.
  • A Change in the Fee Structure: Under the Cares Act, banks collected 5 percent loan processing fee on loans totaling $350,000 and under; 3 percent on loans greater than $350,000 and up to $2 million; and 1 percent on loans greater than $2 million. Expect a change in this round, with a variety of provisions being floated.
  • Deductibility Becomes a Top Priority: After the many clarifications set aside, the next round of PPP hopes to ensure businesses could get the money and take their normal deductions.

Though forgiveness of the PPP loan is tax-free, business owners currently can’t claim a deduction for those covered business expenses, according to the Treasury and IRS.

Other Provisions in the Bipartisan Emergency COVID Relief Act of 2020

A bill totaling $908 billion, the sadly acronym-free Bipartisan Emergency COVID Relief Act of 2020 (BECRA?) offers a variety of provisions needed for passage in addition to PPP extensions:

  • Support for State, Local and Tribal Governments: Agreement in principle to provide $160 billion as the basis for good faith negotiations.
  • Unemployment Assistance: Extends all pandemic unemployment insurance programs by 16 weeks, expands federal supplemental insurance benefits by $300, and puts $1 billion for state systems to prevent fraud.
  • Transportation Funding: Extension of the Payroll Support Program (PSP) through March 31, 2021. As in the CARES Act, funds will go directly to frontline aviation workers’ wages, salaries, and benefits. Additional funding put in place for airlines, buses, and trains.
  • Vaccine Development and Contact Tracing: Includes $6 billion for tracking vaccine distribution and building an infrastructure for supply. Additional funding for contact tracing and testing.
  • Education: Secures $82 billion for education providers. Extends Student Loan forbearance to April 30.
  • Nutrition and Agriculture: Expands funding for food assistance programs including SNAP, Meals on Wheels, and more. Allocates $13 billion to address farmers.
  • Other: Gives $10 billion to USPS, $10 billion to child care providers, and $10 billion to provide broadband access to those in need. Approximately $5 billion to address addiction, mental health, and substance abuse.

Keep Up with All the Changes

Though the PPP was a lifeline, many businesses are still working on understanding the challenges that go into forgiveness and tax liability. For those in need, this will continue to be a chance to stay open in the face of lockdowns and hopefully come out of the lockdowns stronger.

Looking to understand more about the nuance and challenges set forth by PPP forgiveness? Stay tuned for news and analysis on the passage of this bill and discuss this with your peers in the members only Controllers Council Forum.

Additional Resources

Bracing for PPP Forgiveness Applications: What to Know

New FP&A Expectations Set for Post-COVID Recovery

Solidifying Accounts Payable on the Road to Recovery

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