Part of our You Belong in Business podcast

Can your business benefit from more PPP loan forgiveness in 2021?

February 2, 2021

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A new year brought a wave of improvements to the federal relief program that already had been a lifeline to businesses coping with the economic effects of the pandemic.

The $2.3 trillion Consolidated Appropriations Act, 2021, added nearly $300 billion to the Paycheck Protection Program (PPP)—also fine-tuning how the money is distributed.

“The length of this pandemic has ruthlessly impacted specific segments of this economy, while leaving others relatively unscathed,” says Lance Schoening, government relations director for Principal®. “It’s pretty clear that Congress’ intent was to focus and speed relief to the businesses that really need the most help—the smaller businesses around the country.”

Schoening and Mark West, national vice president of business solutions for Principal, returned to the podcast to help small business owners assess their (new) options.

The challenge: How can small businesses take advantage of more (and more flexible) PPP and other federal relief in 2021?

Play the You Belong in Business episode for the full insights. Or refer to the time codes below to skip to parts of the conversation that apply best to your business.

(2:13) Simplified forgiveness for PPP loans of $150,000 and less

Loans of $150,000 or less will follow a simpler forgiveness process. You’ll now only document:

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

Graphic of a thumbtack. Tip:Keep employment records for four years and other financial records for three years in case of a Small Business Administration audit.

(6:39) A more flexible PPP

  • Loan periods now can be anywhere from eight to 24 weeks.
  • More types of businesses may qualify: nonprofits, sole proprietors, independent contractors, the self-employed, and business leagues (such as chambers of commerce, with 300 or fewer employees and whose business is no more than 15% lobbying).

(8:22) More eligible PPP expenses

  • Payroll costs now include group insurance payments (vision, dental, disability, life insurance) to help cover the 60% of the PPP loan that must be spent on payroll.
  • More allowable costs for the remaining 40% of the loan:
    • supplier costs on existing contracts and purchase orders,
    • perishable goods purchased at any time,
    • personal protective equipment (PPE),
    • and technology expenses.

(11:02) What about ‘second draw’ PPP?

To qualify for a second PPP loan you must:

  • use all of your original loan,
  • have 300 or fewer employees,
  • show a revenue drop of 25% in one quarter of 2020 compared to 2019 (or show a 25% year-over-year drop),
  • and stay within a $2 million maximum rather than the original $10 million.

(14:00) Other 2021 federal relief changes

  • EIDL (Economic Injury Disaster Loan): replenished and extended until Dec. 31, 2021, and the $10,000 EIDL tax-free grant doesn’t need to be deducted from PPP loan forgiveness or based on $1,000 per employee.
  • Employee retention tax credits: extended through June 30, 2021, and raised to a maximum of $7,000 in wages per employee per quarter.
  • Tax-free PPP: It’s now clear that PPP loan forgiveness doesn’t qualify as a taxable event—different from typical loan forgiveness.

(16:10) Retirement plan provisions

  • Pre-authorization for disaster withdrawals: Victims of a federally declared disaster (not COVID-19) may be able to withdraw emergency retirement savings (if allowed by their plan) while avoiding the 10% penalty under age 59 ½. They also can spread the income tax over three years or avoid tax if they repay within that time.
  • Construction workers: Certain workers in the building trades may be able to start phased withdrawal of their retirement savings as early as age 55.

(19:19) More federal relief for business in 2021?

President Joe Biden and his new administration have proposed $1.9 trillion more in federal relief and 100 million doses of distributed vaccine within their first 100 days, among other measures.

  • Schoening: “It’s very clear that President Biden as well as many members of Congress are united in reinvigorating confidence among American consumers.”
  • West: “The creativity, the initiatives that businesses are taking in many instances to reinvent themselves are pretty amazing. Although it’s an incredibly challenging time for our country, it also shows the resilience and the get-it-done attitude of business owners. They find a way.”

What's next?

This communication provides educational information only with the understanding that Principal® and its employees are not offering legal, accounting, investment or tax advice. Business owners should consult with their counsel or other professionals when making business decisions.

Guests may be compensated for their appearance and Principal does not endorse the businesses of its guests. Some guests may own Principal products or use our services. Unless noted otherwise, none of our guests are affiliated with Principal, Des Moines Iowa.