In late December 2020, a new COVID-19 relief bill designed to support struggling businesses and citizens was signed into law. Featuring a wide range of support, it included funds for the Small Business Association (SBA) and their various assistance programs, stimulus checks, additional unemployment benefits, and more.
In this blog post, we will briefly cover some of the aspects of the bill that may help small businesses. For more detailed information, visit our COVID-19 Relief Programs page.
Paycheck Protection Program Second Draw
Arguably one of the most beneficial aspects of the bill for struggling businesses is the second draw of the SBA’s Paycheck Protection Program (PPP). This is for businesses who have used up all funding provided in their first PPP loan, and can show a 25% reduction in income in the first, second, or third quarter of 2020 (compared to same 2019 quarter).
Similar to the first round of PPP, these loans can potentially be forgiven if the funds are used for eligible expenses. Mainly, they are designed to ensure payment of payroll expenses, but businesses can apply to cover 2.5x their average monthly payroll costs to help fund other eligible business expenses. However, it’s important to note that a 60/40 cost allocation between payroll and non-payroll expenses is required for full forgiveness.
This description is a very brief overview of the PPP second draw, click here for a more detailed explanation.
SBA to Make Temporary Payments on Eligible 7(A) or 504 Loans
Borrowers who have SBA 7(A) or 504 loans may be eligible for having the SBA cover principal and interest payments from February 1, 2021 through April 1, 2021. These payments will be capped at $9,000 per month, per borrower.
After April 1, 2021, some borrowers in the hardest hit industries will have their payments covered through September 30, 2021. These include food service and accommodation; arts, entertainment, and recreation; education; and laundry and personal care services.
There are also programs in place to help support borrowers interested in new SBA 7(A) or 504 loans. The SBA will cover payments for principal and interest from February 1, 2021 through September 30, 2021, waive fees through September 30, 2021, increase the lender guarantee and maximum loan amount, and more.
If you have a current SBA 7(A) or 504 loan, or plan on borrowing, click here for a full run down of the details of this program.
Economic Injury Disaster Loan and Advance (EIDL)
The December COVID-19 relief bill has repealed the provision in the CARES Act that required PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount. This could make a big impact on small businesses who have utilized both options.
These advances are designed to help small businesses in low-income communities and can provide up to $10,000 grants to eligible applicants that did not secure initial grants because funding was exhausted. EIDL has now been extended to December 31, 2021.
Looking for help?
If you think your small business could benefit from the programs mentioned above, we recommend taking the following steps:
- Carefully read over our detailed overview of the new relief bill, which goes into deeper detail of the benefits and options available.
- Visit our COVID-19 relief program website to learn more about what Bank of Southern California offers.
- Reach out to your local Bank of Southern California Banker with any questions.