Some long-awaited financial assistance for small businesses is coming after President Trump signed the new $900 billion dollar stimulus bill into law on Sunday, December 27. The relief package allocates $284 billion dollars to a new round of Paycheck Protection Program (PPP) loans and sets aside funds for businesses in low-income and minority communities. The arts and entertainment industry, shuttered live venues, independent movie theaters, and cultural institutions will have access to $15 billion in grants.
Aid measures also address the needs of those who are unemployed, facing eviction, experiencing food insecurity, or without access to high-speed Internet service. Under the bill, workers receiving unemployment benefits will get an additional $300 per week until March 14. Beginning January 1, Supplemental Nutrition Assistance Program or monthly food stamps will increase by 15% for six months. The bill also provides $25 billion in rental assistance and extends the moratorium on evictions, originally expiring December 31, for another month, through January 31.
Individual Payments
Perhaps the most highly discussed component of the package is the stimulus check of $600 direct payment for individuals whose income was $75,000 or less and $1,200 for married couples who make up to $150,000 a year. The amount represents a 50% decrease from the payments under the CARES Act. Adults will also receive an additional $600, up from $500, per dependent aged 16 or younger, with no limit to the number of dependents.
Eligibility requirements have not changed much — generally, a Social Security number is required for a payment. However, a new exception was introduced for citizens and permanent residents married to someone without a social security number, allowing some spouses of undocumented immigrants to receive a check for $600, as well as $600 per dependent child.
The IRS will automatically send a second stimulus payment to all eligible individuals who filed a 2019 federal income tax return. Recipients of Supplemental Security Income, Social Security Disability Insurance, or other federal benefits as their only form of income will also receive payments automatically through the same method they receive their federal benefits, according to the IRS.
Those who have their direct deposit information on file with the IRS will likely receive a stimulus check the fastest, as early as Tuesday, December 29, said Treasury Secretary Steven Mnuchin. The IRS website notes that those without direct deposit set up will receive the payment as a check or debit card in the mail, which began being mailed out on December 30. Anybody who does not receive their check can claim it by filing a 2020 tax return in 2021, and people can check the status of their payment on the IRS website.
Payment Protection Program (PPP) Extension
The second stimulus bill offers a new round of PPP loans to first-time borrowers and businesses that previously received a loan. Additionally, it introduces more permissive rules on deducting expenses that were paid with PPP Loan funds, expands PPP-covered expenses, and provides more flexible covered periods. Eligibility for reapplication requires businesses to have 300 or fewer employers, have used or plans to use the full amount of their first loan, and proof of significant (at least 25%) revenue declines in any 2020 quarter compared to the same quarter in 2019. Maximum loan amounts are capped at $2 million for those reapplying, but first-time borrowers face the same maximum of $10 million from the first round.
“We expect that the second draw will skew even more toward smaller businesses due to the new eligibility requirements. We also expect a higher percentage of our clients in the Hospitality and Food Services sectors to apply, as their businesses have really been impacted,” said Matt Vondersaar, first vice president and credit supervisor at East West Bank.
Kwong Kow Chinese School was one of the businesses in Boston’s Chinatown that received a PPP loan during the first round in April. Their treasurer Stephen Chan said the funds gave them the resources to adapt classes to an online format and get through the summer months when their enrollment “dropped dramatically,” and they “did not have any substantial income.” “We’re lucky that we were able to maintain all the teaching staff from April, May, June, and throughout the whole few months. So we did not lay off any person during the school year because of the PPP loan,” he said.
Chan explained that applying for the loan was a completely new process for him. “I have to say that even though I read all the articles, the Small Business Administration’s guidelines, and frequently asked questions, there was still so much uncertainty, and I didn’t know what was going on.” Indeed, in late May, 51 state bankers associations raised concerns that the forgiveness application for PPP loans was overly technical and burdensome. The new COVID-19 relief bill creates a simplified forgiveness application process for loans of $150,000 or less.
During the first round of the PPP, initial funds ran out while many small businesses were still actively seeking loans. Although Treasury Secretary Steven Mnuchin criticized large public companies for taking a loan designed to help small businesses, the PPP program itself was accused of being poorly designed and irresponsibly run. Following a months-long investigation, a report from the Treasury and SBA encouraged big banks to prioritize their wealthy existing clients over truly struggling small businesses in underserved communities, running contrary to the first-come, first-serve basis the SBA said the program would use. “As a result, small businesses that were truly in need of financial support during the economic crisis often faced longer waits and more obstacles to receiving PPP funding than larger, wealthier companies,” the report read.
Originally, Chan had tried applying through a large bank but due to the large number of applicants, the bank subcontracted out the processing to another company, leading to significant delays. “I think my application was sitting in there for three to four weeks. And you see I was very very nervous because I heard that the money is running out, the earlier you apply the better off you are,” he recalled. He went to his community bank afterward, crediting it for processing his application in three to four days.
Chan said they will “definitely apply for the second round.” He added that many local businesses are relying on the state and federal government programs because community fundraising is no longer an option. “You go to Chinatown yourself, it is empty. How can I ask for help when they are suffering too? So I talked to some of the owners, they’ve lost 50% of their business,” he said. “The school has been in Chinatown for so many years, and we really rely on the community to help us out, but in this particular case, the whole community is hurting.”
Along with adding the stricter requirements and loan cap, the latest PPP agreement has targeted this problem by setting aside $12 billion specifically for minority-owned businesses. “The SBA and Treasury are committed to ensuring that the next round of PPP is launched as quickly as possible to deliver critical economic relief to America’s small businesses,” SBA spokesperson Carol Chastang told Sampan, adding that they are “working expeditiously to identify changes to program rules, forms, and processes as laid out in the legislative text, and to appropriately update guidance and systems for PPP lenders and borrowers.”
East West Bank has already heard inquiries about applying or reapplying from quite a few borrowers who follow the legislation closely in the news, according to Vondersaar. In preparation, they have started laying the groundwork for when new guidance becomes available from the SBA. “We’ve held multiple meetings of our PPP task force, conducted training sessions for our associates and started contacting existing clients about the new program,” he said. They also hope to move more of the application process online to process applications in a shorter time frame.
Frank Quaratiello, vice president of media relations at Citizens Financial Group, told Sampan their bank, too, has begun prep work. “Citizens has recently updated its website’s Paycheck Protection Program portal to prepare for the new round of PPP applications,” he said.“This time around, we won’t have to build the solution; it already exists.”
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