How Has the Paycheck Protection Program Changed in 2021?

 Posted on January 26, 2021 in Business Law

The COVID-19 pandemic has had a huge impact on the U.S. economy. In many cases, small businesses have been hit the hardest. Many businesses have been forced to close, scale back their operations, or come up with new ways of completing essential business activities. This has in turn caused difficulties for people who have been laid off or forced to reduce the hours they can work and the amount they are able to earn. To address these ongoing problems, the federal government has passed economic stimulus and relief programs meant to help businesses continue operating and paying their employees. A law that was implemented at the end of 2020 may provide businesses with more opportunities to receive relief through the Paycheck Protection Program (PPP).

Relief for Businesses Through PPP Loans

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed in March of 2020, created the Paycheck Protection Program. Under this program, businesses that had been affected by the pandemic could obtain low-interest loans from the Small Business Administration (SBA), and these loans were forgivable, as long as a certain percentage of the balance was used to pay employee wages and other payroll costs.

Initially, applications for PPP loans had to be submitted by June 30, 2020. The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA), which was passed on December 27, 2020, reopened the Paycheck Protection Program, making it available to businesses that had already received a PPP loan, while also allowing other types of businesses to receive loans for the first time, including sole proprietors, independent contractors, and people who are self-employed. 

A business is eligible to receive a second PPP loan if it is not a publicly-traded company, does not have more than 300 employees, and has experienced at least a 25% decrease of gross receipts in any quarter of 2020 when compared to the same quarter in 2019. To qualify, a business must have used all of its initial PPP loan or must be able to show that it will expect to do so.

The CRRSAA also streamlined the process of applying for forgiveness of a PPP loan. For loans of $150,000 or less, a certification can be submitted that specifies the number of employees that the loan allowed the business to keep on staff, as well as an estimate of the percentage of the loan that was used for payroll purposes. To be forgivable, at least 60% of a loan must be used for payroll costs, and the other 40% may be used for rent, utilities, mortgage interest payments, software, supplier expenses, personal protective equipment for employees, and modifications to a workplace to maintain compliance with COVID-19 public health guidelines.

Businesses that receive PPP loans can also take advantage of tax benefits. While PPP loans that are forgiven are tax-free, businesses are also allowed to deduct payroll and operating expenses from their gross income when filing business tax returns. This can provide some additional relief for businesses that are struggling financially.

Contact Our Kane County Small Business Lawyers

If you are looking to take advantage of a PPP loan or other relief programs, the lawyers of Ariano Hardy Ritt Nyuli Richmond Lytle & Goettel, P.C. can advise you of your options and help you meet all of your requirements. We will work with you to make sure your business can succeed during this difficult time. Contact our Elgin business law attorneys today at  847-695-2400 to arrange a free consultation and learn more about how we can provide the help you need.

Sources:

https://www.uschamber.com/co/start/strategy/federal-small-business-stimulus-aid-programs-guide

https://www.nerdwallet.com/article/small-business/coronavirus-relief

https://www.cnn.com/2020/12/23/success/covid-relief-bill-small-businesses-ppp-loan/index.html