Small-Business Aid Could Get Here Before Christmas

FORT SMITH, Ark – Lawmakers on Wednesday made encouraging progress in the race toward approving a fresh round of coronavirus relief ahead of a December 18 deadline on federal spending.

Leaders from both parties continued to negotiate on Wednesday, working toward a new framework for additional Covid-19 stimulus funding, which includes payments to individuals, jobless aid, and renewed funding for struggling small businesses facing new lockdowns and surging Covid-19 cases. Two sticking points–funding for state and local aid, which Republicans opposed, and additional liability protections for businesses, which Democrats opposed–have been dropped, leaving a package of less than $900 billion.

U.S. House and Senate leaders have to take any agreement back to their rank-and-file members for approval. Senator Bernie Sanders (I-VT), for instance, had been pushing for another round of $1,200 economic impact payments to individuals. The latest reports show that the amount would drop to $600 for “working class” individuals and their children, which Sanders seemed to approve, during an interview on MSNBC earlier Wednesday. “For a family of four that would be about $2,400 bucks, which I think will be pretty good news during this rather bleak Christmas period,” Sanders said. It isn’t clear if there will be a cap on the total outlay per household or whether there will be income limits on eligible recipients. The latest deal would also provide $300 per week in enhanced unemployment benefits, which is half what the Cares Act provided but a better cushion than the paltry sum many states are now able to muster.

As for small business owners, the prospect for an additional round of Paycheck Protection Program (PPP) funding is very good. The refundable loan program is on track to get about $300 billion, which includes the $138 billion left over from the Cares Act. That money is widely expected to be available to first-time PPP borrowers, as well as previous recipients who experienced significant revenue losses tied to the pandemic and resulting business closures.

Should the latest bill adopt the legislative language that the “problem-solvers caucus” put forward on Monday, the small-business relief doesn’t stop there. The Small Business Administration’s flagship 7(a) loan program could see loan-size maximums increase to $10 million. Plus, fees would drop and guarantees would jump to 90 percent of the loan value, up from the 75 percent and 85 percent guarantees currently offered under the program. That bill also calls for a continuation of the SBA’s Economic Injury Disaster Loan (EIDL) program, due to sunset on December 31, as well as an additional $13.5 billion for EIDL advances, which were exhausted in July.

The biggest deal for many existing borrowers will be the new forgiveness protocols, which would be dramatically eased for the smallest debtors. Those with loans of less than $150,000 would be asked to submit a new (still to come) one-page forgiveness form with their lender. Borrowers would not be required to submit supporting documentation or certification previously described for loans under $150,000.

And accountants everywhere will cheer the clarity offered under this bill, which quells the numerous complaints among borrowers about the opacity of tax deductibility of forgiven PPP loans. While PPP money doesn’t count as taxable income, the Internal Revenue Service had declared that any expense paid for using forgiven PPP funds cannot be counted as a tax-deductible expense. Instead, this bill says PPP expenses are deductible, as was the original intent of the Cares Act, says Bill Smith, managing director for CBIZ MHM’s National Tax Office in Bethesda, Maryland. In other words, it means you can now take the deductions you’re accustomed to, regardless of whether you used forgiven funds. “You’ll have the double benefit,” adds Smith.

What’s next in the legislative timeline? Karen Kerrigan, president of the Small Business & Entrepreneurship Council, a nonpartisan advocacy group in Vienna, Virginia, says the likely scenario is that an amendment will be offered in the House to add the Covid-19 relief package to the government-spending bill that needs to be passed. Which could mean everything gets to the president by Friday.

After that, it’s unclear when exactly these aid programs would kick back in, says Kerrigan. She notes that the program changes may require additional rules, guidance, and probably some internal process adjustments at the lenders themselves. The timing, right before the Christmas holiday, might also set things back, or mean that lenders and government workers will be toiling through the holiday.

Either way, the import of injecting additional stimulus into the economy is hard to overstate. More than 70 percent of small businesses recently surveyed by the U.S. Chamber of Commerce said they need more government aid to succeed in 2021. Half of those polled said that under current conditions they could continue operations for a year or less before shutting down.

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