Photo of business owners discussing federal relief for their business.

2021 federal relief available to business owners

Updated March 31, 2021

The $1.9 trillion American Rescue Plan Act (ARPA) of 2021 , signed into law on March 11, brings a third round of economic relief to businesses still battling the pandemic as they work to protect employees and adapt to better serve customers.

It updates the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed in March 2020, and the Consolidated Appropriations Act (CAA), 2021, passed on December 27, 2020, adding more relief for small businesses through a number of targeted incentives, additional funding for the Paycheck Protection Program (PPP), and myriad adjustments to Small Business Administration (SBA) programs and procedures.

One of the main goals of this legislation is to provide targeted relief for minority-owned and economically disadvantaged business owners.

“The more the federal government can provide relief that’s understandable, easy to administer, and provides clarity, the better for businesses and communities,” says Amy Friedrich, president of U.S. Insurance Solutions at Principal®.

To dive deeper into the ARPA updates, see our detailed rundown of new relief provisions for businesses (PDF).

Expanded PPP access and larger loans for the self-employed and other business owners

The White House on February 22 announced it would put PPP funds (potentially forgivable loans) within reach of more business owners:

  • Self-employed: Sole proprietors, independent contractors, and other self-employed individuals can benefit from a revised PPP loan calculation to access larger PPP loan amounts.
  • Arrested or convicted of a non-fraud felony: Unless currently incarcerated, these owners now have access to PPP.
  • Defaulted on a federal student loan: Business owners delinquent on federal student loan payments can now access PPP.
  • Non-citizen lawful residents: Green card or visa holders and other legal residents are able to apply for PPP.

Simplified PPP forgiveness, and more eligible business expenses

Businesses may choose a forgiveness period anywhere between eight and 24 weeks.

Simplified forgiveness: For PPP loans of $150,000 and less, the one-page form requires only:

  • the number of employees retained thanks to the loan,
  • the estimated amount spent on payroll, and
  • the total loan amount.

Graphic of a thumbtack. Tip: Retain employment records for four years and other relevant financial records for three years in case of an SBA audit.

Additional eligible expenses for all PPP loans:

  • group insurance payments as part of PPP payroll costs (vision, dental, disability, life insurance),
  • supplier costs on existing contracts and purchase orders,
  • perishable goods purchased at any time,
  • personal protective equipment (PPE), and
  • technology expenses (such as cloud computing).

Even more flexibility for businesses most in need: Some small businesses already in bankruptcy may now be eligible for PPP loans.

PPP2: Some businesses can take a ‘second draw’ PPP

In addition to making the PPP loan more available to businesses that either missed or bypassed last year’s first round of PPP, struggling businesses are able to apply for either a first or a second loan through May 31, 2021. The PPP ‘second-draw’ loan is targeted at smaller businesses that have suffered the most economic hardship.

How you qualify:

  • Previous PPP: Must use all your original PPP loan.
  • Employees: Fewer than 300. (First-time PPP borrowers in this round still can have as many as 500 employees.)
  • Finances: Must have suffered a drop of at least 25% in gross receipts in one quarter of 2020 compared to 2019.
  • Age of business: In operation on or before February 15, 2020.
  • Type of business: Many nonprofits now are eligible. So are sole proprietors, independent contractors, and the self-employed. Business leagues (chambers of commerce, visitors’ bureaus) with 300 or fewer employees and whose business is no more than 15% lobbying also may apply.

How much you get:

  • Formula: In general, the loan amount is 2.5 times average total monthly payroll (or 3.5 times for food and lodging businesses) over the last 12 months or in 2019—up to $2 million. (Any individual annual salary used in payroll calculation must be capped at $100,000.)
  • Those who file a Form 1040 Schedule C can borrow even more than before because the loan amount may be based on gross, rather than net, income.
  • What if you returned all or part of a PPP loan in 2020? You can reapply this year for the maximum amount.

EIDL (Economic Injury Disaster Loan) updates

Deadline: EIDL is replenished and extended until December 31, 2021.

Rules: Businesses no longer must subtract EIDL advances from PPP loan forgiveness, but EIDL and PPP must cover different expenses.

Grants: A Targeted EIDL Advance (up to $10,000) may be available to businesses in low-income communities if they previously received an advance for less than $10,000, or applied but received no money due to lack of program funding.

Graphic of a thumbtack. Tip: A low-income community is defined by Census tract: The poverty rate for the tract where the business is located must be at least 20%, or its median family income must not be more than 80% of metro or statewide median family income.

Taxes: Employee retention tax credits and more

Employee retention tax credit: Extended through December 31, 2021.

Main parameters:

  • Type of business: Educational (colleges, universities) and medical (hospitals, clinics) institutions are now eligible.
  • Formula: Starting January 1, 2021, the maximum credit for wages is $7,000 per employee per quarter. Qualifying businesses must have suffered a partial or full business shutdown because of a COVID-19 shutdown order, or at least a 20% reduction in business compared to the same quarter in 2019 .Certain startup businesses that launched after February 15, 2020, may be allowed a credit of up to $50,000 per quarter.
    • > 500 employees: Credits apply only to wages paid to employees not working.
    • 500 or fewer employees: Credit available for all wages paid, regardless of whether the employee is working.
    • Severely distressed business: An employer of any size with more than a 90% drop in gross receipts during the quarter can have all wages for that quarter covered by the credit.
  • PPP compatibility: PPP recipients are eligible if PPP didn’t pay the wages in question.
  • Deduct meals: The entire cost of a business meal provided by a restaurant is deductible in 2021 and 2022—doubling the current 50% write-off.
  • PPP loans: Not only are forgiven PPP loans themselves tax-free, but the eligible expenses they pay for also are deductible business expenses.

SBA loan subsidies, limits

Limits: The maximum SBA express loan amount was boosted to $1 million from $350,000—until October 1, 2021. Afterward, the maximum remains somewhat higher, at $500,000.

Subsidies: The CAA also extends the CARES Act provision that the SBA pays the principal, interest, and fees on a loan for six months, starting on the due date of the next payment (or even after the end of a deferral period on a loan).

Most businesses can expect to have these expenses covered for an additional three months (for a total of nine months), while some smaller and harder-hit businesses will receive an additional five months of coverage (for a total of 11 months, capped at $9,000 per month).

Graphic of a thumbtack. Tip: For new SBA loans approved from February 2021 through September 2021, the SBA is required to pay principal and interest for the first six months (capped at $9,000 per month).

‘Save Our Stages’

The “Save Our Stages” portion of the CAA and ARPA, the Shuttered Venue Operators Grant, makes available billions of dollars in grants to struggling performance venues (live music, theater), museums, and zoos to be used for expenses similar to PPP—but may be reduced by a previously received PPP loan.

Restaurant Revitalization Fund

The ARPA established the Restaurant Revitalization Fund, a new grant to be administered by the SBA, specifically targeted to privately held restaurants, bars, caterers and similar businesses with 20 or less physical locations. The grant amount covers pandemic-related revenue loss calculated by comparing 2020 versus 2019 annual revenues, up to $5 million per location (limited to $10 million). (The value of the grant is reduced by any amount received under the PPP program). Guidance is provided for businesses that did not operate the full year of 2019 or 2020.

The grant may be used to cover eligible expenses (similar to those covered by the PPP loan) incurred from February 15, 2020, through the end of 2021. The act prioritizes smaller establishments with gross receipts in 2019 of less than $500,000 and small businesses owned by women, veterans, or socially and economically disadvantaged individuals in the initial three weeks of the program. This grant is available to establishments that elect to take the employee retention tax credit (as long as not used for the same expenses), but not to those that receive a Shuttered Venue Operators Grant.

The ARPA provides that this grant is not treated as federally taxable income, and the expenses paid with the funds continue to be deductible.

How additional new federal relief helps individual taxpayers

Stimulus checks

Taxpayers receive as much as these amounts based on status and adjusted gross income:




Married, filing jointly


Per dependent

This tax-free stimulus phases out rapidly over these ranges of adjusted gross income:

Single$75,000 to $80,000
Head of household$112,500 to $120,000
Married, filing jointly$150,000 to $160,000

Graphic of a thumbtack. Tip: Adjusted gross income is based on 2020 returns if filed, otherwise 2019 tax returns.

Unemployment benefits: $300 more per week in unemployment is extended to September 6, 2021 (longer in some cases). Up to $10,200 is received free of federal income tax for those with adjusted gross income of less than $150,000 (though states have their own rules about taxation of these benefits). And states can now forgive overpayment of benefits.

Retirement savings: Select workers in the building and construction industry now can begin phased withdrawal (“in-service distribution”) of retirement savings as early as age 55. The CAA also allows victims of a federally declared disaster (not COVID-19-related) to access more of their retirement savings (if the plan allows) and avoid the early 10% withdrawal penalty under age 59½, until June 26, 2021. They can also spread the taxes over three years, or avoid income tax if it’s repaid in three years.

COBRA continuation coverage credit

The ARPA provides a new 100% COBRA (Consolidated Omnibus Budget Reconciliation Act) subsidy for premiums paid by the business for coverage between April 1 and September 30, 2021, to employees who lost their jobs or had significantly reduced hours and are eligible for COBRA coverage. To offset this expense to businesses, the ARPA allows the business to take a quarterly tax credit (against the Medicare payroll tax) corresponding to the amount of the COBRA premiums the business would have received from eligible recipients. The business must provide numerous notifications to individuals eligible for assistance.

What's next?

This communication is provided as education only with the understanding that Principal® is not rendering legal, accounting, investment advice, or tax advice. You should consult with appropriate counsel or other professionals on all matters pertaining to legal, tax, investment, or accounting obligations and requirements. 

Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, IA 50392.