This post comes from Bench, America’s largest bookkeeper for small businesses. If you’re looking to get professional bookkeeping support for loan applications or tax season they can help you get started—you’ll also get a special discount with my referral link!
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The US government passed a new stimulus bills in the final days of 2020. If you run a small business, that’s good news: You may be eligible for additional funding. On top of that, the bill has expanded how you can spend existing loans, and made new tax deductions available.
In case you don’t feel like reading through all 5,000 pages of the new stimulus package, here’s everything you need to know.
PPP loans, round two
Didn’t apply for a PPP loan in 2020? You can apply for your first round of funding in 2021.
Got a PPP loan in 2020? You can apply for a second round in 2021. In some cases, you an also increase the amount of your first round retroactively.
In order to qualify for a second round of PPP funding, you’ll need to prove a financial loss for your business in 2020. That means showing, for any quarter of 2020, that you suffered at least a 25% reduction in gross receipts compared to the same quarter in 2019.
Whether you’re applying for your first PPP loan or your second, your loan will have the same, original terms.
That means your second PPP loan follows the same forgiveness guidelines as the first. To qualify, you’ll need to spend at least 60% of the loan amount on payroll, and the rest on eligible expenses.
(Good news, though: The eligible expenses have been expanded. More on that shortly.)
If your PPP loan is not forgiven, you’ll have to pay it back with an interest rate of 1% over five years. The first payments are deferred until 10 months after the term of the loan ends, or when you have your loans forgiven—whichever comes first.
Are you eligible for a PPP loan in 2021?
First PPP loans
You need to meet the following requirements to apply for your first PPP loan in 2021:
Your business was operating before February 15, 2020
Your business is still open and operating
You have less than 500 employees
If your business has multiple locations, you employ no more than 500 people at each location
Second PPP loans
You need to meet the following requirements to apply for your second PPP loan in 2021:
You have used all of your first PPP loan amount on eligible expenses
Your business was operating before February 15, 2020
Your business is still open and operating
You have no more than 300 employees
If your business has multiple locations, you employ no more than 300 people at each location
You can prove a 25% or greater reduction in gross revenue compared to 2019
Expanded eligible expenses for PPP loans
For the first round of PPP in 2020, the eligible expenses for the loan included payroll, rent, and utilities.
The new stimulus package adds the following eligible expenses. This applies to all PPP loans, past and present:
Operations costs. Including HR, accounting, and small business bookkeeping, and any software or SaaS tools.
Property damage costs. Including any damage caused by public disturbances in 2020 that aren’t covered by your insurance.
Supplier costs. Any purchase of goods essential to operations made prior to receiving your PPP loan.
Worker protection costs. Including any personal protection equipment or property improvements made to comply with COVID regulations. This applies from March 1, 2020 onwards.
How to increase a previous PPP loan
Many small business owners were approved for PPP loans in 2020, but were uncomfortable keeping the full amount they were approved for. In those cases, the business owners only opted to take a portion of the loan, or returned some of it.
If this situation applies to you, you can apply to receive the difference to meet the full amount. For instance, if you qualified for a $30,000 loan in 2020, but only took $20,000, you can apply now to take the remaining $10,000.
You are not eligible for a loan increase if the SBA has already remitted forgiveness payments for you for the original loan amount. In that case, however, you can still apply for the second PPP loan.
Also, to qualify for an increase, the lender must have reported, prior to Dec. 27, 2020, that you did not take the full loan amount.
BONUS: EIDL is back
The new stimulus introduces an additional $20 billion to relaunch the Economic Injury Disaster Loan (EIDL) program. This allows small businesses to apply for up to $10,000 in grant money. The funding is made available to businesses in low-income communities.
If your business received an EIDL advance last year, but didn’t qualify for the full $10,000, you can apply to receive the difference this year.
If you received an EIDL loan, but didn’t get an advance because the program ran out of money, you can now apply for the entire $10,000 grant.
As part of the CARES act, these loans were promised to be distributed in three days in less. Under the new program, they will be disbursed in 21 days or less.
Good news! EIDL no longer reduces your PPP forgiveness
In 2020, many small businesses learned they would not be forgiven the full amount of their PPP because they got an EIDL advance grant.
Any amount these businesses took as an EIDL grant equally reduced their eligibility for PPP forgiveness. For instance, if you borrowed $20,000 with PPP, and got an EIDL grant of $7,000, you could only apply to have $13,000 of your PPP forgiven.
That’s changed. Now, receiving an EIDL grant will not reduce your forgiveness amount.
How to apply for PPP
To receive either your first or second round of PPP funding, you’ll need to apply through an SBA-approved lending institution. To get started, check out this list of PPP lenders by state.
How to make sure your business navigates 2021
As your business navigates 2021, organized bookkeeping is a must. You’ll need up-to-date, accurate financial statements and records to qualify for PPP or EIDL.
For this, I recommend Bench, the online bookkeeping service for small businesses. It’s the service I use in my own business. In 2020, Bench helped hundreds of small businesses keep their doors open by aiding them in compliance and reporting, and connecting them with lenders.
Plus, if you’re behind on your bookkeeping, they can get you caught up—so you’re able to apply for funding ASAP.