Stimulus bill offers small business aid
Last updated 12/22/2020 at 11:27pm
Orange County small businesses could be eligible for a second round of federal Paycheck Protection Program loans if legislation passed by Congress Monday is OK’d by the White House.
Under the legislation, loans are eligible for forgiveness and the money from PPP loans is not taxable. This changes the old law, making the tax deduction retroactive.
President Trump threatened Tuesday not to sign a stimulus bill based on $600 checks to American taxpayers, calling it “ridiculously low” and seeking $2,000 stimulus checks instead.
Ida Schossow, president of the Greater Orange Area Chamber of Commerce, said that while her office is closed for the holidays, she would continue to pass along information about the PPP program to members as quickly as it comes to her.
“It’s hard because it’s the end of the year, but this stuff is important to a lot of people,” she said. “And you need to sign up as soon as possible.”
Part of the bill would be Second Draw PPP Loans. The legislation in the original $900 billion bill allocates $284 billion and refers to the new loans as second draw loans.
“This would reopen the PPP process and allow a second draw for small businesses that have exhausted the PPP funding available earlier this year,” Neil Bradley, vice president and chief policy officer at the U.S. Chamber of Commerce, said during a Small Business Update streamed Tuesday.
The loan limit is $2 million and the amount a small business is eligible for is determined by taking their average monthly payroll in 2019 and multiply it by 2.5, which equals 2.5 months of payroll.
Restaurants and food businesses are able to obtain loans for 3.5 months.
Changes in PPP2 include the size of a small business to be eligible. The maximum size has been cut from 500 employees to 300. A small business must have already used or planned to use their original PPP loan.
“Borrowers must demonstrate at least a 25% drop in gross receipts in a quarter in 2020 relative to the same quarter in 2019,” Bradley said.
“If you were shuttered for four to five months, or were barely open, you qualify.”
The second draw loans are forgivable but 60% must be spent on payroll costs. As the loan funds will cover 10-11 weeks of payroll, but have a 24-week use-or-lose date, most businesses will have little trouble using 60% of funds.
“You have to spend PPP loans on certain things in order to get the loans forgiven,” Bradley said.
The biggest change, the USCOC veep said, “PPP loans are not taxable income, and this is retroactive to the beginning of the CARES Act.
“It’s not taxable and the IRS cannot limit your deduction.”
Another big change is that small business owners used to have to choose between a PPP loan or and employee retention tax credit.
Bradley says the new bill means you can apply for both.”