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More PPP loans, grants could be coming with new emergency relief act

The proposed $900 billion stimulus bill could offer more funding to small businesses. Here's what we know so far.

Congress was negotiating a new stimulus bill on Thursday that could offer more relief to small business owners who have been affected by the COVID-19 restrictions. If passed, the Emergency Coronavirus Relief Act of 2020 (ECRA) would set aside $300 billion to the Small Business Administration (SBA) in loans, grants and debt relief to small businesses. This would be in addition to the $138 billion that’s still left from the last round of small business funding.

Since negotiations are still under way, a new version of the ECRA will likely be released before the bill is passed. But as far as small business assistance goes, the new bill is similar to the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act that Republicans proposed in July — with a few key additions.

If passed, it would be the second round of stimulus since the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here’s what small business owners might expect.

PPP Second Draw loans

Small businesses that have been hit particularly hard by government shutdowns or slowed sales would be eligible for another round of funding through the Paycheck Protection Program (PPP). It’s essentially an updated version of the Second Draw PPP loan program that was included in the HEALS Act.

Stricter requirements

This round of PPP funding won’t be as easy to qualify for as the first. Businesses must meet the following criteria to make the cut under the current version of the ECRA.

  • No more than 300 employees
  • Experienced a 30% revenue loss during any quarter in 2020

Small 501(c)(6) organizations can also qualify as long as they have fewer than 150 employees and aren’t involved in lobbying. This includes local chambers of commerce and tourism offices.

More generous forgiveness

The ECRA would also allow businesses to count more expenses toward forgiveness on a Second Draw PPP loan. These include the following types of costs:

  • Supplier costs
  • Facility modifications to meet safety requirements
  • Personal protective equipment, like face masks and hand sanitizer

Borrowers who receive a Second Draw PPP loan of $150,000 or less will also be eligible for a simplified forgiveness process, and the expenses you pay for using a Second Draw PPP loan will be tax-deductible.

Funds set aside for smaller businesses and underserved communities

The new bill would set aside a portion of Second Draw PPP funding for businesses that struggled to access the first round of PPP funding. This includes businesses with up to 10 employees and business owners that have historically struggled to receive funding.

These Second Draw PPP loans will be available through the Minority Business Development Agency and small community lenders that include the following:

  • Community Development Financial Institutions (CDFIs)
  • Credit unions
  • Community banks
  • Minority Depository Institutions (MDIs)
  • Farm service lenders

Grants for live venues

The ECRA would also create a grant program for live venues that were forced to close due to social distancing restrictions and stay-at-home orders. This includes venues like independently-owned theaters, cinemas and museums — places that rely on ticket sales as a main source of revenue.

Businesses that are earning 10% of a normal year’s revenue or less would get first priority. Grant amounts would either be based on your operating expenses during the pandemic, up to $10 million.

Extended SBA loan debt relief

The ECRA would also extend the SBA debt relief that small businesses received through the CARES Act. This means that the SBA will continue to cover principal and interest payments on loans through the SBA 7(a), 504 and microloan programs. It will also cover any fees associated with repayments through these loan programs.

This debt relief covers both new SBA loans and current SBA loans.

Other business assistance

In addition to these three main programs, the ECRA would also provide the following relief to SBA loan programs that are currently running:

  • Reinstated EIDL Grants. This stimulus bill would allow the SBA to offer grants to applicants of the Economic Injury Disaster Loan (ELD) program.
  • Increased SBA guarantees. The ECRA would up the percentage of SBA loans that the government agency guarantees, which vary depending on the loan program.
  • Increased SBA loan amounts. Small businesses can also access larger amounts of funding through SBA loans, increasing the maximum you can borrow to $10 million in some cases.
  • Reduce SBA loan fees. This bill would also reduce fees that borrowers pay when receiving a new SBA loan.

The details of these programs are likely to change before the new stimulus bill passes. Keep tabs on the news to find out what you can expect and how to apply to these programs, if and when they become available.

Photo: Getty Images

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