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Federal Stimulus December 2020

The federal government passed a new stimulus package at the end of December 2020. This legislation includes a number of updates and programs for small businesses. The San Diego & Imperial SBDC Network is here to help small business owners understand the programs and take advantage of the funding that may be available to sustain their business during this public health crisis.

You can view a quick briefing at https://youtu.be/Mp-stLl2kBo

Register for the Jan. 19 (2:30 PM) PPP Webinar
Register for the Jan. 21 (9 AM) PPP Webinar
Register for the Jan. 25 (10 AM) PPP for NONPROFITS Webinar

PPP (Paycheck Protection Program) – Reopening Jan. 11 for First-time PPP and Jan. 18 for PPP2

  • Small businesses or nonprofits that did not get a PPP loan between April and August 2020 can apply to receive a PPP loan.
  • Small businesses or nonprofits that received a PPP loan and can demonstrate at least a 25% loss in revenue during 2020 as compared to 2019 can apply for and receive a second PPP loan.
  • Second PPP loans cannot exceed $2 million and businesses must be less than 300 employees.
  • PPP loans will work the same as per the updates from June 2020. The loan is 2.5 times the monthly payroll. At least 60% must be used on payroll costs during an 8-24 week period. The other 40% can be used on rent, utilities, and now expenses related to workplace safety (for example, purchase of personal protective equipment, or PPE, and plexiglass installation). Businesses in hospitality, accommodation, and food services may be eligible for a higher loan amount – up to 3.5 times the monthly payroll.
  • The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations, among other types of organizations.
  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
  • Second Draw PPP are best applied for with the same lender who provided your first PPP. Stay in contact with them for when they will open the application process for PPP2.

PPP – Forgiveness Updates

  • PPP loans can be forgiven up to the full amount of the loan if utilized for eligible expenses. The Economic Injury Disaster Loan (EIDL) advance, if received, will not impact the forgiveness factor.
  • Loans less than $150,000 will be forgiven following completion of a one-page form that is a self-certification the funds were used for eligible expenses.

PPP – Tax Implications

  • The new law ensures that the PPP forgiven loan is non-taxable. The business expenses used to demonstrate forgiveness would qualify as any other typical expense.
  • Receipt of a PPP loan no longer precludes a small business from claiming the Employee Retention Credit (see below).

EIDL (Economic Injury Disaster Loan)

  • The EIDL grant program, up to $10,000, is reopened. Businesses that did not receive the grant can apply.
  • Priority for the full amount of the EIDL grant will be given to small businesses with less than 300 employees, located in low-income neighborhoods, who have experienced a 30% reduction in gross receipts during any eight-week period between March 2 and Dec. 31, 2020 compared to a comparable eight-week period before March 2. If you meet this description and received a grant that is less than $10,000, you can reapply to receive the difference.

SBA Debt Relief

  • All borrowers with qualifying loans approved by the Small Business Administration (SBA) prior to the CARES Act will receive an additional three months of deferral on principal and interest, starting in February 2021.
  • Underserved borrowers, namely the smallest and hardest-hit, will receive an additional five months (eight total) of relief.
  • SBA payments of principal and interest on the first six months of newly approved loans will resume for all loans approved between Feb. 1 and Sept. 30, 2021, also capped at $9,000 per month.

Employee Retention Credit

  • Employers can now also receive both the Employee Retention Tax Credit and a PPP loan, just not to cover the same payroll expenses.
  • The employee retention tax credit is a 50% tax credit for the first $10,000 of compensation, including the employer portion of health benefits, for each eligible employee as per the CARES Act.
  • The new law significantly expands the employee retention tax credit beginning Jan. 1, 2021. The credit expires on June 30, 2021. The prior credit was 50% on $10,000 in qualified wages for the whole year (or a maximum of $5,000 per employee). The new credit is 70% on $10,000 in wages per quarter (or a maximum $14,000 per employee through June 30).
  • The new law also expands which employers are eligible. Prior to the new law, the employee retention tax credit applied only to an employer who experienced a decline in gross receipts of more than 50% in a quarter compared to the same quarter in 2019. Eligibility is now expanded to include employers who experienced a decline of more than 20%.

Live Venue Grant

  • The new law establishes a $15 billion grant program to be administered by the SBA for shuttered live venues including those that are small businesses or nonprofits.
  • Grants are equal to the lesser of $10 million or 45% of gross earned revenue in 2019. Grants must be used for specified expenses such as payroll costs, rent, utilities, and PPE.
  • If you receive a grant, you may not apply for a new PPP loan.

Thank you to the continued collaboration with the County of San Diego and Supervisor Nathan Fletcher to assist small businesses impacted in our community. In addition to helping to communicate the assistance the SBDC provides, the County of San Diego has provided millions of dollars in grants to small businesses throughout San Diego County.

“It’s been a very difficult year for the business community, particularly the neighborhood businesses; that is the reason we have worked hard to provide relief and put them on the road to recovery,” said supervisor Fletcher, co-chair of the county’s COVID-19 sub-committee. I am excited to work with the San Diego & Imperial SBDC Network again to get information and support to businesses. The $500 million in grants from the State of California and the federal government’s renewal of PPP, and the roll-out of grants for live venues will be vital to the recovery of San Diego County businesses in the new year.”

In addition to help for small businesses, this program, and the new California Relief Grant, can be utilized by nonprofits, both 501(c)(3) and 501(c)(6) organizations. The SBDC Network thanks the San Diego Foundation for helping communicate this to our nonprofit community.

“The new state and federal funding measures are an opportunity to bolster the nonprofit sector as it continues to provide much-needed relief for San Diegans impacted by COVID-19,” shared Mark Stuart, president and CEO of The San Diego Foundation. “We will educate and inform San Diego nonprofits about the SBDC services and training available to them to assist in application development so we can bring federal and state funds home to San Diego to help our community.”

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