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The Latest COVID-19 Stimulus Package and Its Implications for Small Businesses

The new $900 billion COVID-19 stimulus package was recently signed into law. While the package provides for a host of appropriations in several areas, we want to update our clients on the relief it affords small businesses. The package revives the Paycheck Protection Program ("PPP") by appropriating over $284 billion for first and second forgivable loans, and the following are among its key components:

  • Allowance for a second loan for small businesses with less than 300 employees with a revenue reduction of at least 25% in the first, second, or third quarter of 2020 relative to the same quarter in 2019.
  • Allowance for a maximum second loan amount of $2 million for most businesses at 2.5 times their average monthly payroll costs, although some food service and accommodations businesses could see more, as their maximum equals 3.5 times their monthly payroll costs.
  • Creation of a simplified loan forgiveness application form consisting of a one-page certification that requires the small business to list the loan amount, the number of employees retained, and the estimated total spent on payroll costs.
  • Forgiveness for small businesses if they spend at least 60% of their PPP second draw loan on payroll costs during the covered period.
  • Expansion of covered expenses to include software; cloud computing resources; human resources and accounting needs; property damage costs due to public disturbances not covered by insurance; supplier costs; and the purchase of personal protective equipment.
  • Expansion of eligibility to include 501(c)(6) nonprofits, such as local chambers of commerce, destination marketing organizations, housing cooperatives, newspapers, broadcasters, and radio stations.
  • Repeal of a a previous CARES Act provision requiring small businesses to deduct Economic Injury Disaster Loans from PPP loan forgiveness.
  • Overrides of IRS ruling that barred small businesses from deducting expenses paid with PPP loan proceeds.
  • Prohibition on publicly traded companies and entities affiliated with the Chinese Government from accessing the PPP.
  • Creation of a farmer and rancher calculation for PPP loans.
  • Codification of rules for faith-based organizations and churches to maintain their eligibility in the program.
  • Allowance for PPP loan borrowers to choose between (a) an eight-week covered period, or (b) a 24-week covered period within which to use loan proceeds.
  • Provision for voluntary release of demographic information for PPP loans (though the Small Business Administration must include a demographic questionnaire in the loan origination application).
  • Clarification that group insurance payments count as payroll costs, including group life, disability, vision, and dental insurance payments.
  • Exclusion of businesses that receive a grant under a separate, $15 billion program for venues from PPP loan eligibility.
  • Creation of reapplication option for the PPP maximum for any business that returned all or part of its PPP loan, so long as the business has not yet secured loan forgiveness. Any borrower that would have received a larger loan under the new legislation may reapply for the difference.

While the package includes substantial appropriations, the funds are finite. If your business desires to obtain relief provided under the new stimulus package, then we suggest you immediately contact your bank or other financial representative to ensure priority. We also invite you to call Justin Larson at our office at: 602-955-1455 or e-mail him at: [email protected] with any questions you may have regarding the stimulus package. 

Disclaimer: This article is designed for general information only. The information presented herein does not constitute legal advice or the formation of a lawyer/client relationship.