What Small Businesses Need to Know About Covid-19 2021 Relief Packages
2020 has been a tumultuous year for everyone. The economic disruption caused by Covid-19 and the need to quarantine and socially distance ourselves continue to weigh heavily on small businesses in 2021. A large number of relief programs are still available, and it is expected that more to come as part of the Biden administration’s Covid-. 19 relief packages.
While these avenues to economic relief will provide vital support, the amount of information circulating on the Internet can often seem daunting and downright overwhelming. That’s why we’ve condensed it down to the essential things small businesses need to know in 2021.
What relief packages are available for small businesses?
New cycle of Payment Protection Program PPP Loans (Subsidized)
Small businesses can now apply for a PPP (subsidized) loan for a second drawdown, if you have already received a “first draw” and have used or used the full amount for the permitted uses. You must have been in business before February 15, 2020 and have no more than 300 employees.
A new requirement to qualify for the second round is that you must demonstrate that your gross revenue has decreased by 25% or more between comparable quarters in 2019 and 2020.
The amount you will receive will continue to depend on your average monthly salary costs, which are multiplied by 2.5 or 3.5 if you are in the hospitality and food industry. Remember that salary costs include allowances paid to employees whose primary residence is in the United States in the form of wages, salaries, commissions, cash tips, vacation pay, severance pay and payments by the employer for insurance premiums (group health care, group life, disability, vision, or dental insurance) and retirement.
To be eligible for the pardon, you must have maintained employee and compensation levels during the eight or 24 week covered period. The loan proceeds must have been spent on personnel costs and other eligible expenses with at least 60% of the proceeds spent on personnel costs.
Good bookkeeping is always important, but will be especially important in getting your loan canceled. You will need to keep track of the eligible expenses and the accompanying documentation during the period covered. Your lender and the SBA have the right to request and verify your business’ financial documents and records.
Here are some documents you need to keep in order to apply for a pardon:
- Records verifying the number of full-time equivalent employees on the payroll and their rates of pay for the periods used to verify that you meet staffing and compensation requirements.
- Documents verifying your interest, rent and eligible utility payments (canceled checks, payment receipts, account statements).
Economic Disaster Loan (EIDL)
The EIDL The loan is administered by the Small Business Administration (SBA) in the United States and is designed to provide economic relief to small businesses and nonprofits in the United States that have suffered loss of income due to Covid- 19. The loan has a term of 30 years and a very low fixed interest rate of 3.75% for businesses and 2.75% for nonprofits (fixed). The product can be used for working capital and normal operating expenses, including rent, utilities, or health care benefits.
SBA express bridging loans
The Express bridging loan pilot program is available for small businesses who currently have a relationship with an SBA Express lender and offers quick access up to $ 25,000. This cash injection can be vital for small businesses facing loss of revenue induced by Covid-19 and can be used for expenses when applying for an EIDL loan. The loan must be repaid in whole or in part by the proceeds of the EIDL loan.
Subsidy for operators of shuttered sites
The SBA is now preparing to offer the Shuttered Venue Operators (SVO) Grant Program, which includes $ 15 billion in grants to closed sites. Two billion dollars of these grants are earmarked for eligible applicants with up to 50 full-time employees so small businesses don’t have to worry about being left behind. Eligible applicants can claim SVO grants equal to 45% of their gross income, with a maximum amount for a single grant of $ 10 million.
To apply, you must be in business since February 29, 2020 and not have applied for or received a PPP loan as of December 27, 2020.
Eligible entities include:
- Operators or promoters of live rooms
- Theater producers
- Operators of performing arts organizations
- Relevant museum, zoo and aquarium operators that meet specific criteria
- Cinema operators
- Talent representatives
- Each business entity owned by an eligible entity that also meets the eligibility conditions
Applications are not yet open, but if you are eligible you should keep an eye on yourself so you don’t miss a thing. Applications from companies that have suffered the most severe economic shock (more than 70-90% revenue loss after April 2020) will be prioritized during the first 28 days of grant award.
How can I get relief funds?
What many small businesses have learned is that you need to act quickly when applying for grants and loans or you risk missing out on vital economic support. You need to be prepared to apply on the first day a new grant or loan becomes available if you want to maximize your chances.
This means that your finances are in order throughout the year, as incomplete or inaccurate records will not be acceptable for a relief request. If you don’t know how to keep your books up to date, or if you don’t have the time to do so, talk to a professional who can help you with the task.
It’s also a good idea to connect with potential lenders or even a loan officer. By asking yourself when your local bank or lending institution might participate in the next round of PPP loans, you can lock in some potential sources and build a relationship with one of their agents.
Finally, keep a close eye. Joe biden economic rescue plan should include significant support for small businesses, including $ 15 billion to create a new small business owner grant program to complement the existing P3 program. So it will pay to check what is advertised frequently, so that you can be ready once the apps are open.
The pandemic isn’t over yet – and the same means the same for its impact on businesses, but you don’t have to face it alone. Small businesses that are committed to keeping good financial records will be the first to receive the newly available relief funds.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
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