The unforgiving year of 2020 is nearly ending but the drastic repercussions of the pandemic will be keenly felt throughout 2021. While the COVID-19 cases are far from control, the struggle of small businesses to stay afloat intensifies despite the stimulus bills. Lockdowns may be able to contain the spread of coronavirus but it will badger the sustainability of small businesses.
Much has already been talked about the Paycheck Protection Program (PPP) monitored by the Small Business Administration. PPP is the main stimulus bill and a forgivable loan created for small businesses under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. $525 billion PPP loans were approved through 2020.
The latest approach introduced to protect small businesses is the Bipartisan Emergency COVID Relief Act of 2020. The Act aims at an emergency relief of $908 billion out of which $300 billion will be set aside for Small Business Administration which means small businesses can expect additional PPP funding. The Act is not limited to small businesses but also aims to provide supplemental unemployment payments and extension of student forbearance loans.
As the year closes, businesses that received the loans under PPP are trying to understand the application know-hows for PPP forgiveness. Businesses that have applied at least 60% of proceeds to payrolls are eligible for PPP loan forgiveness while others may be partially forgiven. The Act proposes to simplify the forgiveness process for borrowers of loans of $150,000 or less.
The bipartisan act would permit the most affected businesses to apply for a second forgivable PPP loan to small businesses with 300 employees or less that have sustained 30% loss in 2020. This comes as good news considering that many small businesses didn’t get a fair chance to access the PPP loans at all.
Applying for forgiveness is the first of the small business’ owners’ worries. Taxes come next. Forgiveness of PPP loans is tax-free. However, business owners can’t claim deduction yet. The Bipartisan Act proposes the business expenses paid using the PPP loans be tax deductible and aims to clarify the scenario for small businesses before the next tax season.