Over the last year, the COVID-19 pandemic has limited business activity and strained the economy and job market.  This has forced the federal government to step in and provide a variety of assistance programs, where small business owners/managers can access the resources they need to continue operations.  One area where small business owners may find their needed financing is in the federal programs supported by the Consolidated Appropriations Act, 2021.

Consolidated Appropriations Act, 2021

The Consolidated Appropriations Act, 2021 was passed by Congress on December 21 and was signed into law on December 27.  It serves as a continuation of the many programs and actions created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was originally passed on March 27, 2020.  The main purpose of the CARES Act and the following Consolidated Appropriations Act is to provide financial support to American businesses and citizens struggling through the economic hardships created by the pandemic.  Over $2 trillion was set aside to support Americans in the CARES Act, with an additional $900 billion being dedicated to continuing this support with the Consolidated Appropriations Act.

This support took a variety of different forms, from an additional round of stimulus checks to increased unemployment benefits.  However, an observant business leader should pay special notice to the actions taken by the United States Small Business Administration (SBA).  The two most important actions that should be noted are the restarting of the Paycheck Protection Program (PPP) and the new stipulations on American loans.

Lifeline Loans

With $325 billion in the Consolidated Appropriations Act being dedicated to supporting small businesses, business owners are given the perfect opportunity to receive the resources they need to sustain their business.  This opportunity presents itself in the format of generous loans.  These loans fall into one of two categories with SBA 7(a)s, 504s, and microloans making one group, while the other group consists of loans created by the PPP.  While both loan groups can be helpful to support small businesses, the effects and structures of each group are starkly different.

SBA 7(a)s, 504s, and Microloans

SBA 7(a)s, 504s, and microloans are standard loans that have been part of the American financial system for a considerable amount of time.  Yet, the new stipulation that governs these loans are quite unprecedented.  Loans in this category will have their payments of principal and interest be paid for by the SBA for the first six months if they were created within six months of the CARES Act or approved between February 1 and September 30, 2021.  These payments will be capped at $9,000 a month per borrower.  The SBA has also been authorized to waive borrower and lender fees for these loans.

Paycheck Protection Program (PPP) Loans

PPP loans were created specifically by the CARES Act and Consolidated Appropriations Act to provide much-needed capital to small businesses. While the program ended its first run in the summer, it has been restarted and funding extended in the Consolidated Appropriations Act to begin accepting loan applications again.  These loans are unique as they are fully forgivable if certain requirements and stipulations are met.  Some key stipulations include:

• 60% of the capital provided by the loan must be spent covering payroll costs
• Borrowers must maintain full-time equivalent employees and their respective salaries/wages
• Loan applications must be submitted before March 31, 2021
• If the business was not in operation by February 15, 2020, then it is not eligible for a PPP loan

Some businesses are also eligible to apply for another PPP loan if they have already received one during the first run of the PPP and have met certain requirements.  For more information about all the stipulations and functions of PPP loans, please contact our firm.

If you are considering using this source of funding, please contact Barnard Vogler & Co. for more information about how to access the funds and how to properly use them in regard to SBA guidelines.

Works Cited:

Drew, J. (2021, January 14). Guidance issued for PPP first-draw loan increases, reapplications. Journal of Accountancy. https://www.journalofaccountancy.com/news/2021/jan/ppp-first-draw-loan-increases-reapplications.html.

Flynn, M. C., Pear, A. M., Connell, L. D., James K. Dyer, J., Gillison, R. S., Mitchell, T. A., & Peo, V. B. (2020, December 28). New PPP Changes in the Stimulus Bill: Second PPP Loan for Hardest-Hit Existing PPP Borrowers, Additional Categories of Forgivable Expenses, Tax Deductibility for Expenses Paid with PPP Proceeds, Lender Liability Limitations, Simplified Forgiveness Application for Loans of $150,000 or Less, and Other Changes. Lexology. https://www.lexology.com/library/detail.aspx?g=78c0d14e-1eba-434c-96f9-1f7bbca1fa44.

The New Stimulus Bill’s Sweeping Changes to the Paycheck Protection Program. (2020, December 29). https://www.huschblackwell.com/newsandinsights/the-new-stimulus-bills-sweeping-changes-to-the-paycheck-protection-program#:~:text=For%20SBA%207(a)%2C%20504%2C%20and%20microloans%20made,capped%20at%20%249%2C000%20per%20month.

Reosti, J. (2020, December 23). New stimulus package clears path for increased SBA lending. American Banker. https://www.americanbanker.com/news/new-stimulus-package-clears-path-for-increased-sba-lending.

Schmidt, M. (2020, December 31). Small Business Owners Get More PPP Relief, Expanded Loan Options. https://www.fa-mag.com/news/new-stimulus-package-offers-more-relief-for-small-business-owners-59592.html.

Snell, K. (2020, March 26). What’s Inside The Senate’s $2 Trillion Coronavirus Aid Package. https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package.

Terrell, K. (2020, December 28). Congress Passes New Stimulus Relief Bill. AARP. https://www.aarp.org/politics-society/advocacy/info-2020/covid-stimulus-relief.html.