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Latest Updates on Small Business PPP and EIDL Loan Programs

Latest Updates on Small Business PPP and EIDL Loan Programs

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The latest developments in the CARES Act small business aid package contain both good news and not so good news for small businesses. Let’s expand on what we know at this point.

The PPP Loan Program – The Good News

On April 30th, the IRS determined that expenses that result in the forgiveness of a PPP loan are not tax deductible to prevent a “double tax benefit”. Lawmakers are pushing back stating that this goes directly against the intent of the aid package. On May 6, 2020, lawmakers introduced a bill that would effectively nullify the IRS notice. The Small Business Expense Protection Act would clarify the PPP so small businesses could still deduct the expenses they have paid with a forgiven PPP loan from their taxes. Under the bill, the receipt and forgiveness of coronavirus assistance through the PPP would not affect the deductibility of ordinary business expenses.

“When we developed and passed the Paycheck Protection Program, our intent was clearly to make sure small businesses had the liquidity and the help they needed to get through these difficult times,” Senate Finance Committee chairman Chuck Grassley said in a statement. “Unfortunately, Treasury and the IRS interpreted the law in a way that’s preventing businesses from deducting expenses associated with PPP loans. That’s just the opposite of what we intended and should be fixed. This bill will do just that.”

Let’s hope this one pushes through quickly and we can get back to the business of running our businesses, maintaining our current staff and recovering from this pandemic.

It does appear that demand for the PPP is slowing down. The first 5 days of this second wave of funding resulted in $175 billion in loans while this week, so far, has only seen an additional $8 billion in loans. Total funding in this round as of May 6th is $183 billion.

The EIDL Program – The Not So Good News

The Economic Injury Disaster Loan (EIDL) program was replenished with $50 billion in additional loan funding and an additional $10 billion in “advance” grant funding. This is good news. Unfortunately because the Small Business Administration (SBA) still had a lot of applications in the pipeline when the first round of money ran out, it reopened the EIDL program on a limited basis to agricultural businesses, who just became eligible for the loans and advance grants. This limits the businesses that can apply now for this second round of money. We are hopeful that the EIDL application will be re-opened to all small businesses in the future but that truly is unknown at this point.

If you have already submitted your EIDL application, you should have received a confirmation number and you can check on the status of your loan by calling SBA’s Disaster Customer Service at 1-800-659-2955. It appears that the SBA is inundated with applications and is taking quite a while to process applications on a first-come first-served basis.

The SBA’s most current figures on EIDL loans (dated April 24, 2020) shows that nearly $8 billion in loans have been approved for a total of 38,984 loans.  $4.8 billion in advance grants have been processed for a total of nearly 1.2 million grants. The advance grant, which is basically free money for small businesses whether their EIDL is approved or funded, appears to be the most popular option.

We would love to help you navigate these programs. Feel free to schedule a meeting with one of our experts if you have additional questions.

 

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