Jim Probasco has 30+ years of experience writing for online, print, radio, and television media, including PBS. His expertise includes government programs and policy, retirement planning, insurance, family finance, home ownership and loans. He has a bachelor's from Ohio University and Master's from Wright State University in music education.
Updated October 10, 2022 Reviewed by Reviewed by Doretha ClemonDoretha Clemons, Ph.D., MBA, PMP, has been a corporate IT executive and professor for 34 years. She is an adjunct professor at Connecticut State Colleges & Universities, Maryville University, and Indiana Wesleyan University. She is a Real Estate Investor and principal at Bruised Reed Housing Real Estate Trust, and a State of Connecticut Home Improvement License holder.
The Consolidated Appropriations Act (CAA), 2021, signed into law on Dec. 27, 2020, provided money for a new type of Economic Injury Disaster Loan (EIDL) advance and funding for a new grant that targets shuttered venues.
Guidance from the Small Business Administration (SBA) describes how to get part or all of your PPP loan forgiven as well as what you need to do to take advantage of the new EIDL and shuttered venue grant programs.
The SBA now offers three programs struggling businesses can use to obtain forgivable operating funds provided they qualify. Amounts up to $10 million are available, depending on the program, circumstances, and qualifications.
Keep in mind that, with similar limits, previous advances averaged just $3,459 in 2020 and forgivable loans averaged only $100,729. The new programs are designed to offer more relief and target smaller businesses as well as those in low-income areas.
The CAA, 2021 amends the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide full $10,000 advances to qualifying businesses, up to $10 million dollar grants to shuttered venues, and as much as $10 million in first-time PPP loans ($2 million if you are applying for a second loan).
There is no application process for a Targeted EIDL Advance. The SBA will reach out to you by email if you qualify.
The Targeted EIDL Advance program, which is the most restrictive program authorized under the CAA, makes up to $10,000 available to applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to a lack of available program funding.
If you previously applied for and received a partial EIDL Advance ($1,000–$9,000) under the original, now expired EIDL Advance program, the SBA will reach out to you first by email to determine your eligibility and provide instructions on what documentation you need to submit.
If you previously applied for an EIDL Advance but did not receive one due to a lack of available funds, you are second in line to be contacted by the SBA.
Scammers posing as the SBA are already active. Communication from the SBA will come from an official government email with an @sba.gov ending. Do not send sensitive information to any email address that does not end in @sba.gov.
If you are in the first group—those who applied for and received an EIDL Advance of up to $9,000—you may qualify for a Targeted EIDL Advance if you:
If you are in the second group—someone who applied for an EIDL Advance on or before Dec. 27, 2020, but did not receive one—you must meet the qualifications above plus one more:
Any business that would normally be eligible for the EIDL program would potentially be eligible, including sole proprietors, independent contractors, and private, nonprofit organizations. Agricultural enterprises are not eligible.
All applicants may be asked to provide an IRS Form 4506-T, which gives the SBA permission to request your tax return information.
The SBA cautions against submitting a duplicate COVID-19 EIDL application. Only prior applicants will be considered for the Targeted EIDL Advance.
Your Targeted EIDL Advance will not have to be repaid provided that you use 100% of the money for:
You may not use your EIDL Advance (or loan) for:
Consequences of EIDL non-permitted use: If you use all or part of your advance (or loan) for non-permitted uses, it will not be forgiven and may be subject to immediate payback.
Because the EIDL loan and loan advance are considered disaster funds, if the SBA determines you misused the funds, the penalty could be immediate repayment of one-and-a-half times the original loan amount, plus possible criminal charges.
Your Targeted EIDL Advance will not be taxable and will not be deducted from any PPP loan forgiveness amount if you receive both an EIDL targeted advance and a PPP loan. If your PPP loan forgiveness amount was previously reduced by an EIDL grant, the CAA directs the SBA to issue rules correcting that situation.
There is no formal application process for Targeted EIDL Advance forgiveness. When you receive the funds, you are free to use them immediately. The only requirement is that you must spend the advance only for the expenses listed above. Although there is no application or accounting requirement, you should keep a detailed record of how you spend advance funds in the event the SBA has questions at a later date.
The Shuttered Venue Operators Grant (SVOG) program was established under the CAA, 2021 as part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act and later amended by the American Rescue Plan Act. The program includes $16 billion in grants to shuttered venues, to be administered by the SBA’s Office of Disaster Assistance.
Eligible applicants may qualify for 45% of their gross earned revenue, with a maximum amount available of $10 million per grant, and $2 billion is reserved for eligible applicants with up to 50 full-time employees.
To be eligible to apply for an SVOG, you must be:
In addition, you:
The SBA is working on an online SVOG application platform. Until the platform is up and running, the SBA suggests that interested entities:
SVOG funds may be used for: payroll, rent, utilities, mortgage payments, debt, worker protection, independent contractors, ordinary and necessary expenses, administration, state and local taxes and fees, leases (as of Feb. 15, 2020), insurance, advertising, and production costs
Grant funds may not be used for: buying real estate, making payments on loans originated after Feb. 15, 2020, making investments or loans, making contributions or other payments to, or on behalf of political parties, political committees, or candidates for election, or any other use prohibited by the Administrator
If you receive an SVOG you will be required to maintain documentation demonstrating that you have complied with eligibility and other requirements of the SVOG program.
This will include retaining employment records for four years following receipt of a grant. All other records must be retained for three years.
Because the entire PPP loan is subject to forgiveness, the rules are different for this program. PPP loans are made through an SBA-approved lender, creating another layer of bureaucracy.
The Paycheck Protection Program (PPP), ran out of funds a few times since it was enacted by the CARES Act and was last extended with the American Rescue Plan Act.
When you accept a PPP loan, you do so with the understanding that any part of the loan that is not forgiven will have to be paid back.
Passage of the PPP Flexibility Act of 2020 on June 5, 2020, made important changes to PPP loan forgiveness that extended the amount of time you had to spend the money, lowered the percentage that must be spent on payroll, and more. Beginning with the passage of the PPP Flexibility Act of 2020, you had to use at least 60% of your PPP loan proceeds on "payroll costs" as defined in the CARES Act.
The CAA, 2021 made even more changes, including the creation of two tiers of PPP loans, First Draw and Second Draw. Passage of the PPP Extension Act gives applicants until May 31, 2021, to apply for a PPP loan, gives lenders until June 30, 2021, to process those applications, and extends the covered period for all PPP loans to June 30, 2021.
First- and Second-Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the eight- to 24-week covered period following loan disbursement:
The CAA, 2021 adds several new categories of forgivable uses of proceeds from your First- or Second-Draw PPP loan.
You are not permitted to use your PPP loan proceeds for any of the following expenses:
Consequences of PPP non-permitted use: If you use all or part of your PPP loan for non-forgivable uses, those expenses may be subject to immediate payback.
You will not lose PPP loan forgiveness if you:
Instead, you can exclude those employees from the loan-forgiveness reduction calculation required under the Act.
In addition to the PPP loan's permitted uses, you must also adhere to some additional requirements:
Your covered period (during which you must spend PPP loan proceeds) begins on the disbursement date of your loan and ends on a date you select that occurs eight to 24 weeks after your loan is disbursed.
The IRS has ruled that any forgiven part of a PPP loan is exempt from being taxed as a "discharged debt." This means you do not have to declare the forgiven part of your loan as income when you file taxes for 2020 in 2021.
The CAA further provided that ordinary and necessary business expenses that were paid with a forgivable PPP loan were completely deductible.
The PPP Flexibility Act of 2020 lets businesses that took PPP loans also delay paying their payroll taxes. This delay was extended by the CAA.
The CARES Act requires that you apply to your lender for loan forgiveness at the end of the eight- to 24-week period following disbursement of your loan (depending on your selected date). To apply, you must submit the following:
Your lender must make a decision on your application for forgiveness within 60 days.
On Jan. 19, 2021, the SBA and Treasury Department announced a revised Paycheck Protection Program (PPP) loan forgiveness application Form 3508, which incorporates changes made by the CAA, 2021. At the same time, the SBA published a new three-page "EZ" version of the application for those who:
Following the passage of the CAA, the SBA released a new, simpler (two-page) loan forgiveness application for PPP loans of $150,000 or less. Additionally, the SBA and the Treasury relaxed the rules for PPP lenders to allow them to process forgiveness applications faster.
You are eligible to use the new Form 3508S if your PPP loan totaled $150,000 or less; however, if the SBA's affiliation rules apply and you and your affiliates together received loans totaling $2 million or more, you cannot use Form 3508S.
Any part of your PPP loan that is not forgiven must be paid back, either immediately, in the case of non-permitted use, or in the form of a five-year loan at 1% interest. Loan payments on permitted use, including principal, interest, and fees are deferred until the SBA remits your forgiveness amount to you or if you do not apply for forgiveness, for 10 months from the end of your loan-forgiveness-covered period.
An example of a permitted but not forgivable use would be utility costs that push your non-payroll expenses over the amount forgiven. Another example would be interest on non-mortgage debt in place on Feb. 15, 2020.
In addition, any PPP loans that were wrongfully forgiven, either due to omission or misrepresentation by the taxpayer, will be treated as taxable income. The IRS recommends that anyone this applies to file an amended tax return.
Yes, after the deferment period ends, you will need to start making principal and interest payments on Covid-EIDL loans 30 months from the notice. There are scenarios where you may be able to qualify for forgiveness so it is important to check before making payments.
Yes, there is a pause on student loan repayment during the COVID-19 pandemic, which suspends loan payments at a 0% interest rate and a stop on collections of defaulted loans through Dec. 31, 2022.
The CARES Act is supporting small businesses through the Paycheck Protection Program, which helps businesses pay for payroll, hire back laid-off employees, and cover other overhead costs.
Government programs allow for forgiveness up to certain amounts for COVID-19-related loans if borrowers meet certain requirements. Take the time to explore the criteria to determine if you qualify and take advantage of possible financial relief.
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