Important Changes to the EIDL and PPP
The challenges presented by a year-long struggle against the COVID-19 pandemic continue to persist for New Jersey and Pennsylvania-area individuals and businesses. Although significant progress has been made with the expanded distribution of the vaccine and the declining number of cases, many companies’ return to normal will take more time and require more support. Over the past months, there have been changes made to popular federal relief programs such as the Paycheck Protection Program (PPP), Economic Injury Disaster Relief Loans (EIDL), and the Employee Retention Credit to help accelerate the economic recovery for businesses.
Despite the popularity of both programs, there are still important refinements that can be made. The good news is Congress recently passed a PPP deadline extension, providing additional time to apply while the Small Business Administration (SBA) increased the maximum EIDL loan amount. To help clients and prospects, we have summarized the key details of both programs below.
The recent COVID-19 relief package, known as the American Rescue Plan Act, made several beneficial PPP-related changes, including additional funding and expanded access for certain businesses. An additional $7.25B was allocated to the program and eligibility changes allowing certain internet-only news publishers, more tax-exempt entities, and larger nonprofits to participate.
On March 30, 2021, President Biden signed into law the Paycheck Protection Program (PPP) Extension Act of 2021, which extends the application deadline through May 31, 2021, and gives the SBA an additional 30 days to process applications received by the May 31 deadline. No new applications will be accepted during this time. The limited extension means those businesses considering a first draw (PPP1) or second draw (PPP2) loan need to act quickly to review application requirements. While the PPP has been extended several times, it is unclear if future extensions will be granted.
EIDL Loan Maximum Increase
Simultaneously, the SBA has increased the loan amount, which can be received through the EIDL program. Under prior regulations, an applicant could receive a loan equal to 6 months of economic injury with a maximum of $150,000. It has been increased to 24 months of economic injury with a maximum of $500,000. This change is effective starting the week of April 6, 2021.
For businesses that received a loan under the lower limit, it is unnecessary to request an increase. The SBA has announced they will reach out via email to current borrowers during the week of April 6, 2021, to provide additional details on requesting an increase. It is important to note if an applicant received a loan for less than the amount initially offered, they have up to two years (from the date on the promissory note) to request additional funds. Also, these borrowers may continue to request additional funding after the application deadline expires on December 31, 2021.
The changes made to the EIDL and PPP provide additional relief options for New Jersey and Pennsylvania-area businesses. Those companies currently considering applying to the PPP must act quickly. Given the complexities of the application process and loan calculation requirements, it is important to work with a qualified advisor to guide you through the process.
If you have questions about the information outlined above or need assistance with another tax or accounting-related issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.
©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.