The $1.9 trillion American Rescue Plan Act of 2021 that President Biden signed into law on March 11, 2021, included a number of provisions aimed at assisting small businesses that have suffered due to the pandemic. Additional funding targets those businesses hit hardest, including entertainment venues, restaurants, and bars.
Economic Injury Disaster Loans (EIDL)
The American Rescue Plan Act of 2021 puts an additional $15 billion into the Economic Injury Disaster Loan program, which has been rebranded Targeted EIDL Advance program. The program is designed to provide financial aid to small businesses, including agricultural businesses and nonprofit organizations, that have experienced temporary financial hardship due to the COVID-19 pandemic. This round of EIDL loans prioritizes smaller businesses with fewer than 10 employees in underserved communities, especially those that are minority-owned. Any leftover money will be used to offer $5,000 grants to hard-hit businesses. You can find all of the details, including the terms, who qualifies, and requirements of the program, on the SBA website.
Included in the Act is a new SBA grant program specifically for bars and restaurants: the Restaurants Act. Of the nearly $29 billion grant, $5 billion will be set aside for restaurants with less than $500,000 in 2019 revenue. The funds can be used for a variety of expenses, including payroll, mortgage, and rent payments, utilities, and food and beverages.
UPDATE on 4/15/2021: For the first 21 days, applications will be limited to women, veteran, minority and disadvantaged business owners.
Employee Retention Tax Credit (ERTC)
The Employee Retention Tax Credit will be extended once again through the end of the year and now includes eligible startups that launched after February 15, 2020. Many modifications have been made, with changes going into effect on June 30, 2021. Businesses that are “severely financially distressed” (defined as a 90% or greater decline in gross receipts over 2019) will receive additional flexibility.
The Consolidated Appropriations Act opened up the ERTC to businesses that had received PPP funds. Businesses using other aid (such as the Restaurants Act) can also take advantage, provided they don’t use the same wages listed on the application for other programs.
Employer Paid Leave Credit
The Act amended and extended the Employer Paid Leave Credit, which was set to expire March 31. That credit is now extended through September 30, 2021. The program provides tax credits to cover certain costs of providing employees with paid sick leave, and it also expands family and medical leave due to COVID-19. One amendment now includes employee time off to receive the COVID-19 vaccine or to recover from any vaccination side effects. Employers are able to receive the credit for up to ten days, based on the employee’s salary (capped at $511 per day). The total credit has increased from $10,000 per employee to $12,000 per employee.
Paycheck Protection Program (PPP)
More money has poured into the PPP: the Act includes an additional $7.25 billion for the Paycheck Protection Program, which offers forgivable loans to small businesses and organizations that have been impacted by the pandemic. The 60% rule still applies, requiring businesses to use 60% of the loan for payroll expenses. The other 40% can be used for other eligible expenses, such as utilities, mortgage interest, rent, and PPE. The additional funding is intended to include larger nonprofit organizations, as well as online-only news outlets.
While the Act provides additional funds, it does not extend the deadline to apply for a PPP loan (March 31, 2021). Per the SBA, any loan that is not approved by then will not be eligible, which may become an issue as there are still thousands of pending applications. Some banks have stopped accepting new applications in order to ensure they can process their application backlog prior to the deadline.
As of May 27, 2021, the SBA has forgiven two-thirds of 2020 PPP loans, meaning roughly 69.5% of the 2020 loans have been forgiven in whole or in part. 81% of forgiven loans were for less than $100,000. The current system is expediting loans under $150,000, showcasing the difficulty some larger borrowers are facing in the forgiveness process. The SBA is working with lenders to figure out a simplified process to help all loans, regardless of size.
Aid for Venues
An additional $15 billion will be added to the Shuttered Venue Operators Grants program, which supports museums, concert halls, and other live entertainment venues that were forced to close due to the COVID-19 restrictions. The previous bill excluded businesses from applying for both the PPP loan and Shuttered Venue Operators Grant, but now eligible businesses will be able to apply for both. Under the new act, any PPP funds they receive would then be deducted from any grants they received under the program. The grant funds can be used for payroll, rent, PPE, state and local taxes and fees, utilities, and mortgage payments. The program will first open to those businesses that suffered a 90% or greater revenue loss between this past April and December, followed by those that suffered a 70% revenue loss. Others with lower percentage losses will have the opportunity to apply with the SBA later.
If you have further questions about the details of the American Rescue Plan Act of 2021, or wish to consult with a tax professional before pursuing any of the relief options, please contact us to schedule a consultation. Looking for information on the American Rescue Plan Act’s provisions for individuals and families? See our post covering stimulus, unemployment, tax credits, and much more.