2021 COVID-19 Federal Relief Program for Merchants

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At i3 Merchant Solutions, we’re committed to helping merchants by sharing vital business information about the latest COVID-19 relief programs. In late December, the long-awaited $900 billion COVID-19 relief package bill was passed and signed into law. The bill, known as the Consolidated Appropriations Act, 2021 or the Act, contains numerous provisions to help individuals and businesses fuel economic development. The bill includes restarting a $300 boost to the federal unemployment insurance benefit, extending eviction moratoriums for renters by a month, and a $600 direct deposit payment to most Americans. Out of the total package, approximately $325 billion is set aside as part of the economic aid to hard-hit businesses and nonprofits – including 501 (c) (6) organizations, and other aid to assist struggling businesses and bolster the existing Paycheck Protection Program (PPP).

Below is an overview of the major changes to the PPP loan with the passing of the Act:

Extension of the PPP loan: The Act extends the PPP from December 31, 2020 to September 30, 2021.

Second Draw of PPP funds: The Act authorizes a second round of PPP funds for entities that had already borrowed, and expended, their first PPP loan. The second draw of loans will end on March 31, 2021. Borrowers who received a first PPP are eligible for a second draw; however, eligibility standards differ. Businesses must employ no more than 300 employees (a decrease from the previous 500 limit), must be able to demonstrate that revenue has fallen in 2020 by 25% as compared to the same quarter in 2019, and (most important) must use or will use the full amount of the original PPP loan. Also, the borrower may now elect the length of their covered period between eight and 24 weeks, and now included under payroll costs are group life, disability, vision and dental insurance. The amount of the second PPP loan is based on the same metrics as the original PPP, but it is now capped at $2 million.

Entities Applying First Time for PPP: For eligible entities applying for their first PPP loan, the original PPP rules apply. This includes the original cap of 500 employees and the maximum amount of funds is $2 million.

Additional Allowable Uses of PPP funds:

  • Covered operations expenditures – payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing payment or tracking of payroll expenses, human resources, sales and billing function, or accounting or tracking of supplies, inventory, records, and expenses.
  • Covered property damage costs – costs related to property damage, vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance or other compensation.
  • Covered supplier costs – expenditures made by an entity to a supplier of goods that are essential to the operation and is made pursuant to a contract or purchase order before the covered period of the PPP loan. Perishable goods in effect before or at any time during the covered period of the PPP loan are also covered.
  • Covered worker protection expenditures – costs related to personal protection equipment (PPE) which include, but are not limited to: drive-through window facilities, physical barriers, indoor, outdoor or combined commercial real property or health screening capabilities.

Changes to Loan Forgiveness Application Procedures for Loans $150,000 or Under: PPP loans that are $150,000 and under are eligible for automatic forgiveness if the borrower fills out a one-page form attesting that the borrower complied with the requirements. Enforcement actions will be taken against the borrower only if fraud is committed or if the money was spent on ineligible expenses.

PPP Available in Bankruptcy Cases: The Act authorizes debtors and trustees in bankruptcy cases to apply for the PPP loan with the supervision and approval of the bankruptcy judge.

EIDL Advance Deduction Eliminated: The Act repealed the provision that borrowers who received an EIDL advance must deduct it from the eligible PPP forgiveness amount.

Borrowers May Claim Tax Deductions for Eligible PPP Expenses: A reverse from the prior position; borrowers may now claim deductions for expenses covered by the PPP loan proceeds.

Grants for Shuttered Venue Operations: The Act also establishes grants for struggling in-person industries, such as movie theaters, museums, and live venues. For eligible individuals or entities, grants may be awarded under varying levels of priorities based on the percentage of lack of income.

This is only a brief overview of the new legislation. For updates and additional guidance on these changes and eligibility, please go to sba.gov and irs.gov.

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