On Dec. 21, Congress passed a $900 billion stimulus package intended to mitigate some of the economic damage from the ongoing COVID-19 pandemic. At the time of this writing, President Donald Trump was expected to sign the bill shortly. It would be the first stimulus package signed since the $2 trillion Coronavirus Assistance, Recovery, and Economic Security (CARES) Act passed in March 2020.
How important is economic stimulus to America's small business community? In a September 2020 Vistage survey of more than 1,100 SMB leaders, 58% of respondents said economic stimulus was critical to the health of their small business.
What's inside the new $900 billion stimulus bill, and how will it benefit businesses and individuals if it passes? Read on to learn how you can take advantage of the new COVID-19 stimulus package.
What's in the $900 billion stimulus package?
The new COVID-19 stimulus package directs resources to established loan programs, extends additional unemployment benefits for up to 11 weeks, expands small business liability protections for those operating during COVID-19, and includes direct payments of up to $600 to individual taxpayers.
Here's a closer look at the most impactful provisions in the bill.
Funding for the PPP and EIDL loan programs
In March, Congress established the Paycheck Protection Program, which extended forgivable loans of up to $1 million to small businesses to help them pay wages, salaries, rent, mortgage and utilities. That program stopped accepting applications for funding in August, but the new funding would allow the Small Business Administration to issue more loans under the PPP. Of the new funding, $12 billion would be earmarked for minority-owned or very small businesses.
"The big thing is there would be more PPP money available, and it would also allow for a second forgivable loan," said Mark West, national vice president of business solutions at Principal Financial Group. "So, some of those firms that already got [a PPP loan] may have the ability to get a second one."
The new bill would also expand the size of maximum PPP loans to 3.5 times the amount of a business's payroll expenses and make PPP loan funding tax deductible.
"[The PPP] is more finely tuned than the broad swath of the original program," said Joe Galvin, chief research officer at Vistage Worldwide. "In the original program, everyone could jump in and get the money. Some folks got the money that didn't need it."
Under the new rules, small business applicants would need to demonstrate a drop of at least 25% in revenues over the past three quarters. Those who experienced a decrease of 90% or greater will get priority consideration, followed by those with a 70% or greater reduction in revenues, and so on.
"What's powerful about this program is that it has finely tuned and nuanced provisions to help those who need it most," Galvin said.
So, how can small business owners take advantage of the new and improved PPP?
"It would seem that, with PPP loans, you would need to apply again," West said. "One thing we advocated for was a simplified process for smaller businesses in getting forgiveness.
"The last thing you need to have happening for businesses that are really in a tough spot and trying to work through the time that we're in is to add complexity and red tape to their ability to get forgiveness on a loan," he added. "That's not where they need to be spending their time; they need to spend it on their business, helping employees and taking care of themselves."
Similarly, the measure includes additional funding for the SBA's Economic Injury Disaster Loan program, which is intended to relieve small businesses affected by natural disasters.
"It also looks like there is another wave of EIDL loans as well," West said. "There's another $20 billion there, it looks like."
Expanded unemployment benefits
The bill includes an expansion of unemployment insurance benefits, increasing typical benefits by $300 per week for up to 11 weeks for workers unemployed due to the COVID-19 pandemic. The expansion is the first since the Federal Pandemic Unemployment Compensation from the CARES Act expired in July.
"One of the unintended consequences of employment benefits is it impacts those businesses looking to hire workers, especially [the] low end of wage scale," Galvin said. "It means they're potentially making more than they would be at work. We saw a tremendous talent crush … for industries that are doing well; the war for talent and tactics used to recruit are aggressive as they were a year ago. That's putting pressure on CEOs to focus on employee engagement and retention."
Direct payment to individual taxpayers
The second COVID-19 stimulus package includes another round of direct payments to taxpayers, this time up to a total of $600. These payments are subject to similar limits as the first ones: Taxpayers who make more than $75,000 per year will see reduced payments.
COVID-19 testing and vaccine funding
The bill would provide $20 billion in funding for the purchase of vaccines, plus $8 billion to support distribution of the COVID-19 vaccine. It would dedicate an additional $20 billion to states to support COVID-19 testing.
Other provisions in the new COVID-19 stimulus bill
These are some additional measures in the second COVID-19 stimulus package that are tangential to small business:
- $82 billion in funding for K-12 schools and colleges, as well as $10 billion in funding for child care providers.
- An extension of eviction protections until Jan. 31, plus $25 billion in rental assistance for people who lost their income due to the pandemic.
- An expansion of Supplemental Nutrition Assistance Program (SNAP) benefits to families with children under age 6, as well as funding for low-income families with school-aged children who are no longer receiving reduced-cost or free lunches at school.
- $400 million in funding for the Emergency Food Assistance Program to replenish food banks nationwide.
- $175 million in funding for senior citizens' nutrition services.
What about small business liability protections?
When lawmakers were debating the stimulus package, liability protections for small businesses operating during COVID-19 were a sticking point. Small business liability protections would insulate operational businesses from lawsuits related to COVID-19 if they could demonstrate they were operating in good faith and following established safety guidelines.
Those liability protections did not appear in the version of the stimulus package to be voted on by Congress.
"It appears that [SMB liability protection] is not built in to this," West said. "They've left that on the sideline along with … more dollars going to state governments. It appears both of those issues were left out and will be discussed another day."
Some states have adopted small business liability protection measures, including Georgia, North Carolina and Utah. Without any federal liability protection, small businesses will have to consider the laws in the states where they operate.
You can take these measures to limit your risk of a lawsuit related to COVID-19:
- Implement CDC guidelines for employees and customers at your business.
- Only remain operational if legal under state or federal law.
- Stay transparent with customers and employees.
- Provide personal protective equipment to employees.
- Enforce social distancing.
- Encourage COVID-19 testing for employees.
[Read related article: The COVID-19 Return-to-Work Guide for Small Businesses]
How can small business owners take advantage of the new COVID-19 stimulus package?
To ensure your business has access to whatever relief or funding it might require, it's important to understand how to take advantage of the measures in the new bill.
- PPP loan/EIDL loan: The PPP and EIDL are both programs administered by the SBA. To apply for one of these loans, you must identify an SBA lending partner in your area and contact them to fill out an application. If your bank is an SBA lending partner, consider working with it to expedite the process. Read business.com's guide to learn more about the PPP loan program.
- Unemployment extension: Employers should focus on employee retention, especially those on the low end of the wage spectrum. Unemployment expansion means that, in some cases, employees would make more than they would have made while working, so company culture and employee retention remain paramount. If you are an employer furloughing or laying off employees, connect them with your state's unemployment office and explain the additional benefits available to them. Visit the U.S. Department of Labor's website for more information on how to file for unemployment regardless of your location.
- Stimulus checks: The maximum direct payment to taxpayers this time around will be $600, exactly half the amount of the first round of stimulus checks. While $600 is not a massive windfall for any entrepreneur, some customers who have continued to work remotely may see it as additional disposable income. Consider timing a promotion or discount for when checks begin to arrive, or invest in a targeted marketing campaign that could bring some more stimulus dollars to your business.
- COVID-19 vaccine and testing: Of course, the additional funding for testing and vaccine distribution improves access to both without any need for action on a business owner's part. However, employers should encourage employees to get tested frequently and stay home when sick.
Consult business experts to come up with the strategy that best suits your business.
What's next for the American economy?
While the COVID-19 pandemic rages on, there is now a promising vaccine and a hope for a post-COVID 2021. According to Galvin, the Vistage data suggests CEOs are heading into the new year with some optimism for what comes next.
"[Small businesses] were thinking 2020 was going to be a great year, but it cratered, as we all know," Galvin said, adding that SMB leaders are still bullish about their prospects in 2021. "When you look forward, 67% of CEOs expect increased revenues next year, and 55% expect increased profits. When you talk about expansion – and CEOs are trying to plan in a most uncertain economic environment – 43% plan to increase expenses, and 64% plan to increase their workforce."
This data suggests that, while many businesses remain hampered by COVID-19 and restrictions put in place by state and local governments, the fundamental economic conditions beneath the surface of the pandemic remain strong.
"The economy is not broken; it was shut down," Galvin said. "The question is, when can we open it back up?" [Read related article: How to Reopen During COVID-19: Lessons From Entrepreneurs Who Have Done It]
Until the public health situation is under control and businesses can operate without pandemic-related restrictions, Galvin suggests that SMBs focus on doing right by both their employees and customers. That includes providing the safest possible workplaces and storefronts, remaining extremely communicative and transparent, and taking proactive steps to guarantee the safety of all who interact with your business.
"Ultimately, on the other side of this, employees and customers will reward or punish employers or suppliers at the end of the pandemic," Galvin said.