On March 11, 2021, President Biden signed H.R. 1319, or the American Rescue Plan (ARPA), into law.
The $1.9 trillion stimulus package follows the $2.2 trillion CARES Act, which President Trump signed last March, and the $900 billion stimulus attached to the Consolidated Appropriations Act of 2021, signed in December.
Small businesses have much to gain under ARPA, especially with extended funding for the Economic Injury Disaster Loan (EIDL) program. We’ll cover EIDL loans and what’s new for Targeted EIDL Advance grants.
First, here’s a summary of the provisions directed toward individuals:
Stimulus Checks – $1,400 per person, with a phase-out beginning for folks making more than $75,000 a year. People can also get up to $1,400 for each dependent.
Extension of Unemployment – Still at $300 per week, but extended until Sept. 6.
Child Tax Credit Expanded – Credits for people with dependents have increased from $2,000 to $3,000 ($3,600 for children under 6). For the first time, parents reporting zero income can claim the credit.
$350 Billion for State and Local governments – Fairly straightforward, although some states are concerned about a small portion of the bill which could block the use of aid money to offset tax reductions.
EIDL Loans Are Big Opportunity For Small Businesses
Since Mar. 27, 2020, the Small Business Administration (SBA) has been accepting loan applications for an expanded EIDL Loan program available through the SBA.
Shortly after, the SBA extended the deadline for EIDL applications to Dec. 31, 2021. So there’s no excuse not to apply.
The maximum loan amount is $500,000 and may be used for “working capital and normal operating expenses,” says the SBA. It’s a forgiving set of standards; but don’t forget to keep EIDL & PPP loan funds pointed in different directions. For loans over $25,000, collateral is required according to the general security agreement (UCC) used by the SBA.
The terms of the loan are exceedingly generous:
- 30 years maturity
- 3.75% fixed interest rate for businesses
- 2.75% fixed interest rate for nonprofits
- No prepayment penalty or fees
Previously, qualifying businesses and nonprofits with 500 or fewer employees could receive only $150,000.
So if your loan application was approved before April 6, 2021, your business may be eligible for loan increases up to $500,000. If your loan is approved after April 6, your business could receive the full $500,000.
Targeted EIDL Advances for Small Businesses & Entities
In late December, the Consolidated Appropriations Act of 2021 extended EIDL loans and grants to Dec. 2021. $20 billion was added to the EIDL Advance program, requirements were modified, and the EIDL’s advanced deduction was repealed.
ARPA continues the tradition with revamped requirements and additional funding for the SBA’s Targeted EIDL Advance grants. Here’s a breakdown of the grant:
- A cash grant of up to $10,000
- For small businesses, nonprofits, and agricultural collectives who suffered economic loss due to COVID-19
Targeted EIDL Advance Grants Get $15 Billion Boost from ARPA
Now ARPA is allocating $15 billion in new spending to fund the SBA’s existing Targeted EIDL Advance program, plus a new supplemental program.
Both programs are designed for small entities, though ARPA has created more stringent eligibility requirements in terms of economic loss and demographics.
$10 Billion For Small Businesses That Received A Partial Grant or No Grant
The SBA is currently contacting businesses and nonprofits who received a grant of less than $10,000 and is offering a new grant to make up the difference. For example, if your small business initially received $4,000, expect a $6,000 grant.
The SBA will also be contacting entities that applied and were approved but received no grant due to lack of program funding.
If your business is eligible, sit tight. The SBA will contact you through the email you used on your application.
Still, businesses that received a partial grant will need to produce paperwork that satisfies the new requirements below. (Note: Businesses that received no grant money will not have to meet new requirements.)
- In operation since Jan. 31, 2020
- Have 300 or fewer employees
- Directly affected by COVID-19
- Located in a low-income neighborhood
- Experienced economic loss greater than 30%
Remember: Watch out for phishing scams. If you receive an email that purports to be from the SBA but does not have an @sba.gov address, do not send them sensitive information.
$5B For New Supplemental Targeted EIDL Advance Program
As of publication, the SBA has not issued guidance regarding ARPA’s $5 billion supplemental program. Fortunately, the letter of the bill is clear.
Supplemental Targeted EIDL Advance grants support entities and organizations that are especially small and hard-hit by COVID-19. Eligibility requirements are as follows:
- In operation since Jan. 31, 2020
- Directly affected by COVID-19
- Have 10 or fewer employees
- Experienced economic loss greater than 50%
Eligible businesses, nonprofits, or collectives will be awarded a flat $5,000 grant. There’s no language in the bill to prohibit a small business from receiving both the $10,000 grant and the supplemental $5,000 grant.
Still, the SBA has yet to release more details on the supplemental program, and there is currently no way to apply.
Keep up with us over the next two months. I’ll be adding updates as the situation changes.
Paycheck Protection Program (PPP)
There’s less money earmarked toward the Paycheck Protection Program (PPP) than the previous stimulus package — where it was more of a centerpiece — but there are still some things you should be aware of.
The American Rescue Act has directed $7.25 billion to the PPP. Qualifying small businesses can now apply for up to two loans through the program, though there are more restrictions if you wish to do so.
There’s also increased eligibility for nonprofits. That means more kinds of nonprofits — 501(c)(3), 501(c6), and 501(c)(19) now qualify, in addition to “internet publishing organizations.”
If you remember, PPP loans are coordinated through third-party lenders. The SBA has information on how to get started on its website.
$28.6 Billion Restaurant Revitalization Fund (RRF)
Restaurants will be able to apply for grants of up to $5 million for one location or $10 million total. Note that the bill’s definition of “restaurant” includes any business with a primary focus on serving food and beverages. Bars, food trucks, and caterers are included.
The SBA hasn’t released details on the process yet but is expected to soon.
Need Help Navigating the American Rescue Plan?
If you’re interested in applying for an EIDL Advance grant or a PPP Loan and need assistance with the process, Jeremy A. Johnson, CPA P.C. can help.
Jeremy A. Johnson