Biden Bill Helps N.J. Businesses (We Hope)

Last Thursday, March 11, President Biden signed the $1.9 trillion American Rescue Plan Act of 2021 into law. The Rescue Plan Act will provide another round of stimulus checks to individuals and families, extend federal supplemental unemployment benefits, provide more funding for state and local governments, expand subsidies for healthcare insurance, and provide additional funding for COVID-19 testing, vaccination, and treatment, among a slew of other provisions that will affect many industries, businesses, and individuals. It is among the largest economic stimulus packages in U.S. history.

More than $10.2 billion is heading to New Jersey to help the state come back financially after a year of battling the coronavirus. That’s 8th out of the 50 states. In particular, the bill means another $50 billion in small business aid, as well as grants for bars and restaurants and shuttered venues. The provisions in the American Rescue Plan intended to help small businesses include:

• Expanded access to the Paycheck Protection Program and a $7.25 billion boost to PPP coffers, although it is still set to end on March 31, and is largely expected to have money left over.
• $28.6 billion in grant money for hard-hit food service businesses, dubbed the Restaurant Revitalization Fund.
• $15 billion in targeted aid for businesses seeking Economic Injury Disaster Loan (EIDL) Advance grants.
• $1.25 billion for shuttered venue operators, sweetening the existing Shuttered Venue Operators Grant (SVOG) program first authorized by the last $900 billion stimulus package.
• A provision that allows businesses to participate in both SVOG and the PPP.
• An extension, through the end of the year, of the Employee Retention Credit, the refundable tax credit aimed at helping employers keep workers on the payroll.

Paycheck Protection Program – What to Expect

The Paycheck Protection Program (PPP) is a $953-billion business loan program established by the 2020 US Federal government Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help certain businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses continue paying their workers. The Paycheck Protection Program allows entities to apply for low-interest private loans to pay for their payroll and certain other costs.

The amount of a PPP loan is approximately equal to 2.5 times the applicant’s average monthly payroll costs. In some cases, an applicant may receive a second draw typically equal to the first. The loan proceeds may be used to cover payroll costs, rent, interest, and utilities. The loan may be partially or fully forgiven if the business keeps its employee counts and employee wages stable. The program is implemented by the U.S. Small Business Administration.

Through the Rescue Plan Act of 2021, the Paycheck Protection Program will receive an additional $7.25 billion in funding – for a total of $813.7 billion since its establishment last year. Eligibility rules are broadened to cover more tax-exempt groups, including 501(c)(5) labor organizations, 501(c)(7) social and recreation clubs, and 501(c)(8) fraternal benefit societies, as well as religious educational groups that might otherwise be barred under the Small Business Administration (SBA) rules. The tax-exempt groups can’t employ more than 300 employees per location or spend more than $1 million annually or 15% of their time on lobbying activities.

It is important to know that the $7.25 billion in funding, which offers forgivable loans to small businesses and other organizations hurt by the pandemic, will only be forgiven if at least 60% of the money is used to support payroll expenses and the remainder goes to mortgage interest, rent, utilities, personal protective equipment or certain other business expenses. The additional money is intended to expand eligibility for the loans to include more nonprofit organizations than were eligible before, as well as digital news services providing local news and public health guidance during the pandemic.

Despite the added funds, however, the legislation doesn’t actually extend the program, which is currently set to expire on March 31. That’s a confusing issue because there is already a backlog of applications still pending approval by the Small Business Administration. And, under current rules, any loan that hasn’t been approved by March 31 will not be funded.

That means banks must decide how much longer they want to accept new applications, since it now takes 24 to 48 hours for a bank to hear back from the SBA on whether a submitted loan application has been approved. In cases where applications haven’t been approved, the SBA may request more information, or flag a business owner as ineligible. Clearing up those issues can take days or weeks longer. Banking associations, the American Institute of CPAs and others have been calling on Congress to extend the program beyond March 31, or to at least allow the SBA to continue processing loan approvals for applications submitted before March 31. As of March 7, the SBA has made 7.6 million PPP loans totaling $678.4 billion since Congress created the program last spring, according to data from the federal agency.

State Small Business Credit Initiative

Hopefully more straightforward is the State Small Business Credit Initiative, which provides funding for state-run small business financing programs, will receive $10 billion to provide support to small businesses responding to the economic effects of the pandemic and ensure business enterprises owned and controlled by socially and economically disadvantaged individuals have access to credit and investments. Of the $10 billion, $1.5 billion will be for states to support businesses owned by socially and economically disadvantaged people; $1 billion will be for an incentive program to boost funding for states that show robust support for such businesses; and $500 million will be to support very small businesses with fewer than 10 employees.

Economic Injury Disaster Loan:

The Economic Injury Disaster Loan (EIDL) program will receive $15 billion to provide additional payments to eligible entities, including:

• $10 billion for covered entities – recipients with 300 or fewer employees and with economic losses of at least 30% over eight weeks compared with a similar period before the pandemic – that didn’t receive their full eligible advance payments under the December COVID-19 relief package; and
• $5 billion to be set aside to make new supplemental payments of $5,000 to covered entities with 10 or fewer employees that had economic losses of more than 50% during the covered period.

Restaurant Revitalization Fund

Of special importance to New Jersey businesses is the $28.6 billion Restaurant Revitalization Fund, which the SBA will administer for eligible recipients that include restaurants, bars, food trucks, and caterers. State or local government-operated businesses, businesses with more than 20 locations or that are publicly traded companies are not eligible for the grant funding. Grant funds can be used on eligible expenses such as payroll, paid sick leave, mortgage, rent, utilities and supplies.

Staff Writer Zhen Liu is a recent graduate from Seton Hall Law School, where she was a member of the Asian Pacific American Lawyers Association. She specializes in Family Law and serves as research assistant to associate reporters of The American Law Institute.