What the second stimulus means for your small business

A second coronavirus stimulus package passed on December 21, and it isn't quite as generous as the first. It targets small businesses that are struggling the most during the coronavirus pandemic. Businesses that already got a Paycheck Protection Program (PPP) loan will likely have access to more funds — and some might be eligible for another loan.

It also establishes a grant program for businesses that rely on ticket sales and clarifies some confusion over whether PPP forgiveness is taxable — it isn't. Here are the highlights.

Increased access to PPP funds

The widest-reaching impact the second stimulus might have is the expansion of the types of costs eligible for PPP loan forgiveness. If your business spent money on the following types of costs, you could be eligible to receive more funds, which qualify for forgiveness.

• Supplier costs that are essential to running your business
• Facility modifications to meet safety requirements
• Personal protective equipment, like face masks and hand sanitizer
• Software or cloud computing systems for operating purposes, like tracking inventory and accounting

Group insurance, such as disability, life and dental, are also now counted as eligible payroll expenses. Talk to your PPP lender to find out how to access those extra funds if you think you qualify.

PPP Second Draw loans

Small businesses hit particularly hard by government shutdowns or slowed sales could be eligible for another round of funding through the PPP Second Draw Loan Program.

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.

• No more than 300 employees
• Experienced a 25% 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 or political activities. This includes local chambers of commerce and tourism offices.

With the second stimulus now signed, applications for PPP Second Draw loans should start opening up soon and will be available until March 31, 2021.

Dedicated financing for smaller businesses and underserved communities

The new bill also 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

This round of stimulus funding also creates a grant program for live venues and other businesses 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.

Eligible businesses earning 10% of a normal year's revenue or less would get first priority. Grant amounts are based on your operating expenses during the pandemic, up to $10 million. Like with the Second Draw PPP loan, the government will set aside $2 billion in grants for venues that have 50 or fewer full-time employees.

Taxes deferred on payroll and waived on forgiveness

The second stimulus bill extends payroll taxes for another year, to January 1, 2022. After that date, your business is required to pay half the taxes by the end of 2022 and the other half by the end of 2023.

It also clarifies that you don't have to pay taxes on the loan forgiveness or grants. This includes the following programs:

• The forgiven portion of a PPP loan
• The forgiven portion of a Second Draw loan
• Grants for shuttered venue operations
• Economic Injury Disaster Loan (EIDL) grants

Simplified forgiveness applications

This round of stimulus also makes it a lot easier to qualify for forgiveness on smaller loan amounts. If you borrowed less than $150,000 through the PPP, you can apply for forgiveness by filling out a simple one-page form.

If you borrowed between $150,000 and $2 million, you aren't required to submit any supporting documentation along with your forgiveness application — though you'll have to keep employment records for four years and all other relevant documents for three years.

Higher loan amounts are subject to the current forgiveness process.

Extended SBA loan debt relief

This bill extends the SBA debt relief that small businesses received through the CARES Act for three to eight months, depending on your industry and when you received the loans.

This means that the SBA will continue to cover principal and interest payments on loans through the SBA 7(a), 504 and microloan programs during that time. It will also cover any fees associated with repayments through these loan programs.

This debt relief covers both new and current SBA loans.

Other business assistance

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

• Extended paid sick leave tax credit. You can now write off paid sick leave related to the coronavirus until March 31, 2021.
• Reinstated EIDL Grants. This stimulus bill allows the SBA to offer grants to applicants of the Economic Injury Disaster Loan (EIDL) program.
• Increased SBA guarantees. The new stimulus bill ups 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.
• Reduced SBA loan fees. This bill also reduces fees that borrowers pay when receiving a new SBA loan.
• Extended 8(a) program. Businesses that were participating in the 8(a) SBA program on or before September 9 get a year extension of time in the program — even if you suspended their participation.

Bottom line

The second stimulus package is being referred to as a stopgap for good reason — it's not going to fix all the current hurdles businesses are facing, but it's a start. Read about other resources for your small business with our guide to business financing during COVID-19.