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As A New $900B Relief Bill Works Through Congress, What's In It For Small Businesses?

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As A New $900B Relief Bill Works Through Congress, What's In It For Small Businesses?

After months of legislative litigation and partisan bickering, Congress seems to have finally passed a new $900 billion relief package aimed at cushioning the financial impact of the ongoing global COVID-19 pandemic. While the White House has lobbied criticism of the new package, the relief has seemingly crossed it's biggest hurdle before passage.

Early analysis of the package is that it is a necessary stop gap following the more than six months that followed the $2.2 trillion CARES Act stimulus, but many economists feel it may be too little too late.

Although the new package includes direct payments of $600 to most individuals earning less than $75,000 annually and extended $300 unemployment benefits, the package lacks some key state funding provisions that Democrats had hoped would aid local governments. The package also risks rolling out just as previous employment protections from the CARES act near expiration.

However, the most critical features of the new relief package are those directed at the nation’s struggling small businesses, many of which have long since exhausted their loans made under the Paycheck Protection Program through bank and fintech lenders such as Credibly.

While the new package does provide some targeted aid for small businesses, there are some critical exclusions that may hamper expectations for a quick and painless recovery in the new year.

The Good: More PPP On The Way

Perhaps the most effective aspect of the CARES Act, PPP loans will be renewed under the new package through March 31, 2021, with $285 billion set aside for the program, nearly a third of the total stimulus.

Applicants to the new round of PPP will still be able to borrow up to 2.5 times their average monthly payroll expenses up to $2 million, though restaurants and other hospitality businesses will be allowed to borrow up to 3.5 times their average monthly payroll. What’s more, businesses with fewer than 300 employees that can show a greater than 25% drop in sales from the previous year may also qualify for additional relief up to $2 million.

In conjunction with the resumption of the deductible PPP loans, the new package also sets out to refine the program from its previous iteration. This includes an expansion of what the PPP funds can be put toward with a deduction, which in addition to payroll, rent and utilities now covers supplies, safety equipment and needed repairs.

The package also included $50 million for the Small Business Administration to conduct audits to prevent fraud and double-dipping, which the House Select Subcommittee on the Coronavirus Crisis said represented $4 billion in potentially improper loans in the initial PPP rollout.

Finally, the new package aims to provide more targeted relief for the businesses that need it most, excluding publicly-traded companies entirely while providing an additional $15 billion in funding for struggling arts and entertainment venues that have largely remained shuttered throughout the pandemic and an additional $12 billion for black and minority-owned businesses.

The Bad: Not Enough Where It’s Most Needed

While the return of the successful PPP program may be good news to many struggling small businesses, many others in some of the hardest hit areas and industries are still bracing for months of little-to-no revenue as the pandemic continues to rage across the U.S.

This is particularly troubling for restaurant and hospitality businesses in dense metro areas, which have seen the highest rates of infections and, as a result, the strictest lockdown measures. Democrats aimed to include greater state and local aid provisions in the package aimed at bolstering public services in these areas, but the measure was ultimately rejected by Republican legislators.

An additional measure, The Restaurants Act, is currently working its way through Congress and hopes to provide the industry with $120 billion to support independent restaurants and bars with fewer than 20 employees, but the measure was excluded from the final relief bill and will likely not see any action until the new year.

And while another addition to the relief package, the derisively-named “three-martini-lunch” deduction, hopes to increase the traffic these businesses see from those taking advantage of deductible lunch breaks, the restaurant industry and the broader small business environment are preparing for a tumultuous winter that may again strain their finances to the breaking point.

The Future: The Light At The End of The Tunnel

Of course, with few other options available in an increasingly dire public health emergency, this relief package will have to suffice for the time being. And because small business owners have already borne the brunt of more than 10 months of privation and sacrifice, they will undoubtedly carry on and make the most of this new wave of funding.

 

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