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Small Business

How Small Businesses Can Get Funding from the New Stimulus Bill

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Topics: Small Business

December 29, 2020

A new $900 billion COVID-19 relief package was signed into law on December 27, 2020, but how exactly will it help small businesses? Here’s everything you need to know, including the new provisions to the Paycheck Protection Program and Small Business Administration Lending Programs, plus how you can access funds.

UPDATE (01/08/2021): As we did in May when the first stimulus package was signed, SpotOn is doing everything we can to help support small businesses. Specifically, we are  partnering with world-class financial experts to enable our clients to apply for PPP funds quickly and easily directly through their SpotOn Merchant Dashboard. SpotOn clients who are first-time PPP borrowers will be able to submit their application via their SpotOn Dashboard on Wednesday, January 13, 2021 , and second-draw borrowers will be able to apply on Friday, January 15, 2021. Please return to this site regularly for more information and resources as they become available.

100% Forgivable Loans Through the Paycheck Protection Program (PPP)

The new stimulus bill allocates $284 billion directly to the PPP. As with the first stimulus bill, the PPP loans are forgivable, as long as you spend at least 60% of the funds on payroll expenses. However, this time around, there are new qualifications to give small businesses priority over larger businesses:

  • If you’re borrowing less than $150,000, there’s a new, simplified 2-page application.
  • Restaurants can borrow up to 3.5x their monthly payroll (based on average monthly payroll before the pandemic or first PPP loan).
  • Other business types can borrow up to 2.5x their monthly payroll cost.
  • Eligible non-payroll expenses have been expanded to include cleaning products and services, supplier costs, and reconfiguration expenses for social distancing.
  • Special support will be provided to businesses with 10 or fewer employees, although the bill doesn’t specify exactly how that support will function.

In addition, this program allows prior borrowers under the PPP program to apply for a second loan of up to $2 million. These second time borrowers must have:

  • At least a 25% revenue loss for a quarter in 2020 compared to the same quarter in 2019
  • Fewer than 300 employees
  • Used all of the proceeds from the first PPP loan by the time the second loan is disbursed

To apply for a forgivable PPP loan, you will need to meet eligibility requirements and work with a participating lender. If you are a SpotOn client, you will be able to apply directly from your SpotOn Dashboard through our trusted financial partner. Together, we are able to provide you speed, ease, and supporting documentation for forgiveness with PPP loans.  Please check your email for specific information from SpotOn, and be sure to log in to your Dashboard when you are eligible to apply. 

PPP Loans Now Tax Deductible

SpotOn Stimulus FundingWith the first stimulus bill, the IRS and U.S. Treasury Department ruled that PPP loans were not tax deductible, meaning you would not be able to write off any standard business expenses if they were paid using PPP funds. The new relief bill closes that loophole, and you can now deduct eligible business expenses paid with PPP loans, including any previous PPP loan you might have taken. These expenses includes:

  • Payroll
  • Rent
  • Mortgage interest
  • Utilities
  • Personal protective equipment

New Tax Credit Rules for Retaining Employees

As an incentive for you to retain your employees, the new stimulus bill expands the Employee Retention Tax Credits (ERTC). If you are able to retain employees over the first two quarters of 2021, you may be able to deduct as much $7,000 per eligible employee. However, if you receive a PPP loan, the ERTC will only apply to employees whose wages are not paid for with PPP funds.

In addition to the ERTC, the Work Opportunity Tax Credit (WOTC) has been extended by five years, meaning there are more opportunities to earn additional tax credits for hiring, training, and retaining employees from targeted groups, such as qualified veterans, ex-felons, and people who have been on long-term unemployment, among others. 

Enhancements to Small Business Administration (SBA) Lending Programs

In addition to improving PPP loans, which are forgivable, the new funding package also improves non-PPP loan programs that are funded by the SBA through partnering lenders. The new enhancements apply whether you already have an SBA loan or are applying for a new one. Here are the key new changes:

  • The new stimulus bill extends the waiver on principal and interest payments for new and existing SBA loans, meaning you’ll get continued support on loan payments from the federal government.
  • The SBA is also extending how long it will pay the principal and interest you may owe on 7(a), 504, and micro-loans taken before the CARES Act; the extension is for 3 months for most businesses, with an additional 5 months for restaurants. 
  • To encourage financial institutions to lend money to small businesses, the SBA is increasing their guaranteed funding to lenders for 7(a) loans to 90% with no fees.
  • Similarly, the SBA will not be charging fees to lenders for 504 loans, which are used for business expansion and modernization projects, as well as acquiring fixed assets.

For further details on these enhancements or to apply for an SBA loan, visit the SBA website.


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