President Biden signed the American Rescue Plan in early March. This new round of coronavirus relief includes several provisions designed to aid businesses.
“The American Rescue Plan Act enables the SBA to continue to lift up the cornerstones of our communities; the mom-and-pop businesses and nonprofits that provide essential services for our everyday lives, hire from within neighborhoods, and more,” says U.S. Small Business Administration’s Senior Advisor Michael Roth in a released statement. “Our nation’s more than 30 million small businesses are the economic engine of this country and, in alignment with the Biden-Harris Administration’s focus on equitable treatment, the SBA will work tirelessly to ensure eligible borrowers will get access to this critical economic relief.”
State small business credit initiative (SSBCI)
The pandemic has disproportionately impacted small businesses across the country. Nationally, small business revenue is down 32%, and at least 400,000 companies have permanently closed, according to the U.S. Department of the Treasury. Within this law are plans to provide critical assistance to small businesses across the country, facilitating the urgent deployment of capital and support to help these organizations recover.
The American Rescue Plan provides $10 billion to state and Tribal governments to fund small business credit expansion initiatives. This program includes $1.5 billion for states to support businesses owned by socially and economically disadvantaged people; $1 billion for an incentive program to boost funding tranches for states that show robust support for such businesses; and
$500 million to support small businesses with fewer than 10 employees. It also injects capital into state small business support and capital access programs, provide collateral support, facilitate loan participation, and enable credit guarantee programs. It’s designed to boost state venture capital programs and provide funding for technical support and assistance.
“Policies like SSBCI recognize the importance of economic dynamism in lifting struggling communities and activate the power of private funding in regions underserved by venture capital, incubate entrepreneurial ecosystems by supporting small businesses, and promote an equitable, place-conscious economic recovery from the pandemic recession,” says Catherine Lyons, director of policy and coalitions, at Economic Innovation Group.
Employee retention credit and paid leave credit programs
In addition to the SSBCI, the American Rescue Plan extends several critical tax benefits to small businesses that are intended to help businesses through to the recovery while keeping up their payrolls and still taking steps to protect health outcomes for employees.
The American Rescue Plan extends the availability of the Employee Retention Credit for small businesses through December 2021 and allows businesses to offset their current payroll tax liabilities by up to $7,000 per employee per quarter. This credit of up to $28,000 per employee for 2021 is available to small businesses who have seen their revenues decline, or even been temporarily shuttered, due to COVID.
The American Rescue Plan also extends through September 2021 the availability of paid leave credits for small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine, or caregiving. Businesses can take dollar-for-dollar tax credits equal to wages of up to $5,000 if they offer paid leave to employees who are sick or quarantining. Paid Leave Credits are a powerful incentive to encourage the offer of paid sick and family leave, which will help keep the virus under control by ensuring sick employees can stay home.
The emergency paid leave is still voluntary, according to Colin Thompson, vice president of human resources at Stratus.hr. When the Families First Coronavirus Response Act (FFCRA) passed in March 2020, it required employers to provide employees with paid sick leave for specific reasons related to COVID-19. Employers with fewer than 500 employees were required to offer this leave, which they could then claim for reimbursement via tax credits. Then the Consolidated Appropriations Act (CAA), which was passed in December 2020, changed the mandate to a voluntary option. Employers who wanted to provide paid sick leave for the same qualifying reasons could do so and still receive federal tax credits for paid leave through March 31, 2021. The FFCRA tax credits were expanded and are now effective through the end of September 2021. For more information, visit https://stratus.hr/2021/03/11/american-rescue-plan-what-employers-should-know/.
Economic Injury Disaster Loan (EIDL)
Small businesses in low-income communities that have been most affected by the pandemic will be eligible for up to $10,000 each from the EIDL grant program. The program is designed to roll out in a series of exclusive periods, starting with businesses that did not get the full amount they applied for initially -- $1,000 per employee, up to $10,000, according to the National Small Business Association. Eligible businesses must have no more than 300 employees and have suffered a loss of gross receipts of more than 30% during an eight-week period between March 2, 2020 and December 31, 2021, compared with an eight-week period prior to March 2. The second window is for those who have endured losses of 50% and have fewer than 10 employees. The third period is for those who have had losses of between 30-50% and have fewer than 10 employees.
The EIDL program is administered through the Small Business Administration to help qualifying businesses meet financial obligations and operating expenses that could have been met had the disaster not occurred. Priority funding will be allocated to businesses with less than 10 employees that the pandemic has severely impacted. More information is available at sba.gov/coronavirusrelief.
Funding for cities and counties
The NSBA reports that the bill restores $10 billion in direct aid to cities and counties, which had been cut from the initial Senate substitute amendment to the House-passed aid bill. The restored funds bring the total for local governments to $130.2 billion, while preserving a $10 billion fund for state broadband infrastructure projects that the earlier amendment made room for. In addition, the final amendment would create a new $1 billion annual program, championed by for communities and tribal governments that have historically been harmed by federal government policies.