SAN JOSE, Calif. (KRON) — Some much-needed financial assistance is on the way for small businesses impacted by COVID-19 after a second stimulus bill has been signed.
Local financial expert Sam Gaeta from Defined Financial Planning tells KRON4 News how the latest relief package aims to help small businesses in the Bay Area.
“I think this stimulus is definitely needed especially in the Bay Area and I think there is some opportunity for small businesses, mom-and-pop shops, in particular, to take advantage right now,” said Gaeta.
Since the start of the pandemic, many small businesses throughout the state have been finding ways to stay afloat while others have been forced to close their doors for good.
Luckily for some small business owners, this second stimulus package dedicates $284 billion to the Paycheck Protection Program (PPP) by giving federal, forgivable loans to hard-hit small businesses.
“The initial program, the CARES Act was kind of broad in nature and kind of just blanketed a lot of stimulus because I don’t think they realized what industries will be affected and not affected,” said Gaeta. “That’s changed.”
“They’ve been much more targeted with industries that we know have been impacted. Those industries have a much more streamlined application process and those industries have more flexibility with how they use the resources that this new bill provides,” Gaeta added.
A recent report reveals that since March, San Francisco and San Jose are having one of the highest rates of businesses closures.
As of Aug. 31, 8.9 out of every 1,000 businesses in San Jose have permanently closed since March along with 11.3 per 1,000 closing their doors temporarily.
San Francisco recorded the second-most with 10.1 permanent closures for every 1,000 businesses along with 11.8 temporary closures.
“One of the things from a planning perspective we’ve been communicating with our small business owner clients is really around uncertainty in 2021,” said Gaeta. “We’ve seen a tick up in some business revenue which I think is strong and that’s good but I don’t think we should count on that.”
“I think small business owners especially mom and pop shops, this is a great opportunity to use resources to make sure you keep maintain your savings, maintain the balance sheet, the assets on your balance sheet to be able to support something else happening in 2021,” Gaeta added.
You can still apply for a PPP loan even if you already received one in 2020.
Borrowers are able to get loans for up to two and half times their average monthly payroll expenses.
How to qualify:
- You need to have been in business before February of last year.
- You must have fewer than 300 employees.
- Your income must have dipped by 25% or more from any quarter in 2019 to 2020.
- The deadline to apply for this round of PPP loans for business owners is March 31st, 2021.
The federal relief program through the CARES Act was designed to provide small businesses with forgivable loans, but the program drew criticism after hundreds of millions of dollars were claimed by large, publicly traded companies.
Loans made through the CARES Act topped out at $10 million, but now, the most a business could get is $2 million.
PPP funds are also now tax deductible. Previously, businesses could not deduct expenses to qualify for forgiveness, but this new bill changes that.
“I would say seek some advice, see the different opportunities you have, the different benefits that you can get and take advantage of all of them,” said Gaeta.
“These are designed for small businesses, the first go around we saw a lot of larger organizations taking PPP loan money that had the resources to develop a strategy around this stimulus,” Gaeta added.
“Well the government has seen that and now this bill has kind of re-addressed that and really designed for a small business owner.”
In addition, business owners can now choose the time period they need to use up the PPP funds to qualify for forgiveness. To be fully forgiven, you need to use at least 60% of the loan on the payroll.
Loan money can be used for safety upgrades at businesses for things like sanitation stations and to fix property damage not covered by insurance caused to stores during widespread civil unrest in 2020.
There is still much left to be determined on how much money each American will receive through the new stimulus bill after Senate Majority Leader Mitch McConnell rejected the house bill boosting checks to $2,000.
If the Senate decided to make changes like McConnell is proposing, the House would be required to vote again.
To learn more, click here.
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