As of this writing, Congress is getting very close to nailing down a new stimulus package. The latest version includes both enhanced unemployment benefits and stimulus checks, as well as more than $300 billion for additional Paycheck Protection Program loans.
With 12 million people at risk of losing their unemployment benefits on December 26 and small businesses across America closing at an alarming rate, America needs this. Many of us have watched the lines at food distribution programs in our communities and those around us growing longer and wondered when Congress would finally move forward.
Nonetheless, it’s encouraging to finally see legislators recognizing what Warren Buffett has pointed out: We’re in an economic war, and many small businesses have become “collateral damage,” like the industries that got shut down during World War II, when the government prioritized defense production. Now it’s time to provide them the financial aid they need to survive. Hopefully, the SBA and Treasury will get the funds to them sooner, rather than later, as many will not be able to stay open much longer if they don’t have more access to capital.
We don’t know yet exactly how an extended PPP program would work, but our team has been staying on top of what’s going on in Congress on a minute-by-minute basis and will be ready to answer questions as soon as more information becomes available, which may be by the time you read this.
However, based on the framework of the $908 billion COVID economic relief plan that the sponsors revealed on Dec. 1, we do know that loan amounts will likely be based on 2.5 months of payroll costs, as in the first round of funding, with a maximum loan amount of $2 million. There are similar allowable expenses with the addition of safety expenditures and a 60%/40% allocation between payroll and nonpayroll costs required for full forgiveness.
The framework also contains another round of funding under the PPP for borrowers who have exhausted the first round of funds. It stipulates that forgivable expenses will include supplier costs and investments in facility modifications and personal protective equipment needed to operate safely.
Lawmakers have indicated that the $330 billion earmarked for small businesses will be geared specifically toward assisting those that can demonstrate economic hardship. There are provisions for a simplified forgiveness process for PPP loans of $150,000 or less and for expenses paid with PPP funds to be tax deductible.
If your business is interested in applying for a PPP loan in this new round, I encourage you to reach out to your Marcum professional for advice. As we saw with the last round of stimulus, the paperwork requirements for programs like this can be steep, so it helps to plan ahead. There are also many other considerations to keep in mind when you seek this type of funding, and we can help you make an informed decision about whether to apply.
Hopefully, the time when businesses urgently need this type of aid will be behind us sooner rather than later, as vaccines roll out and new testing options become available. I was encouraged to see that Fed chair Jerome Powell just projected a 4.2% increase in the nation’s GDP in the new year, as well as a drop in the unemployment rate to 5%. And with interest rates staying near zero for the foreseeable future, those consumers still in a position to buy homes will continue to have strong buying power. The light is at the end of this very long tunnel we’ve been traveling through, but we may have to endure a long, dark winter ahead to get there.
The next few weeks are going to continue to be challenging, but all indicators are that things are moving in the right direction. If business has been slow for you, why not set aside some time to revisit your strategic plan and consider whether there are any opportunities you’ve overlooked? Despite all of the challenges of 2020, many of our clients had their most innovative years ever, and 2021 will present even more opportunities to introduce new and better ways to do things.
We had just about a foot of snow in NYC Wednesday night into Thursday morning, and I realized on my drive out to our Long Island office yesterday that this will be the last blog before the year comes to a close. This year, due to travel restrictions and social distancing, the Weiner family will be celebrating Christmas in NYC. I will be spending several afternoons next week putting the finishing touches on shopping for stocking stuffers, as well as my traditional Christmas Eve day shopping excursion with Lily and Kate.
For those of you celebrating, from our family to yours, we hope you have a very Merry Christmas. And a Happy New Year! After what we’ve all been through in 2020, 2021 can’t get here quick enough. We’ll be back again on January 8.
Stay safe, stay healthy and remember, we’re all in this together!