Tuesday, November 29, 2022
News for Independent BusinessThe New Paycheck Protection Program Details

The New Paycheck Protection Program Details


After waiting months for the passage of the new stimulus package, it has finally been approved. Small businesses that are struggling can now take advantage of the designated $284 billion opportunity and get the needed money to continue operations. As before, the Paycheck Protection Program (PPP) loans are forgivable when used for salaries and basic needs such as rent, mortgage payments, utilities, and other necessary operating costs.


The size of businesses that can apply has been reduced in this round. The business must have less than 300 people in a single location. The purpose is to enable smaller businesses that either missed out on the first rounds or did not apply to get money this time. Minority-owned businesses in poorer communities are especially welcome to apply, as well as businesses with less than 10 employees.

Companies that have received money already from the program are welcome to apply again. However, the money from earlier loans must be used up. They will also need to be able to show that one-quarter of 2020 saw a 25% loss compared to that same quarter in 2019.

The banks that will be offering the loans at first will be smaller ones in under-served communities. This will give better opportunities to obtain a loan to small businesses in those areas. The bigger banks will be able to provide loans later.

Federally Tax-Free

One thing that stopped many businesses from applying for earlier money was an announcement from the IRS that the money would be taxable. Since then, Congress has reversed this decision and has declared that the money is tax-free on Federal taxes. Nothing was decided for state and local taxes, however, and it will depend on your location.

A new feature of the PPP loan related to taxes is a nice tax break. When the money from the loan is used for salaries and operating expenses, the money is deductible on your taxes.

Usage of the Loan Money

The stipulations on how the money is to be used in this round are very similar to the earlier provisions, but some things have been added. In order for the loan to be forgiven, at least 60% of the money must be used for salaries.

The difference is in the remaining 40%. As before, the money is to be used to pay for rent or mortgage payments and utilities. Now, businesses can add the cost for personal protective equipment and for adding safety measures for Covid-19. It can also be used for the cost of supplies for normal operations and to cover property damage.

The Loan Period

Loans from the PPP must be used 8 to 24 weeks from the time the loan is received. Money that is not used for the designated purposes will be charged a one percent interest rate, which is the same as earlier loans.

Sufficient Funding

Although the first round of funds in the Paycheck Protection Program was quickly exhausted, the added funds had money left over. Officials at the Small Business Administration believe that this round will also have money left over. This means that if you have thought about applying for a PPP loan, you should do it as soon as the doors are open – which should be after January 13th.

Another addition to the stimulus package is the new discounts for business meals for freelancers. Instead of the usual 50% deduction, 100% of the meal is now tax-deductible. It will be in place for two years. Self-employed individuals can also get additional unemployment benefits of $300 for up to 11 weeks, but the money is taxable.

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