December 2020 Federal Stimulus Package
Small Business Assistance

Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act providing $900 billion in additional relief to individuals and businesses (the “12/20 Relief Law”) was signed into law on December 27, 2020. $325 billion of such funds are directed to assist small businesses through the Small Business Administration.  Small business funding is distributed primarily through the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan Program (“EIDL”), established through the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) (3/27/20) and revised in The Paycheck Protection Program and Health Care Enhancement Act (H.R. 622) (4/4/2020).  This article focuses on the PPP and EIDL as revised by the 12/20 Relief law.

Paycheck Protection Program

A total of $284 billion has been appropriated to the Paycheck Protection Program for forgiveness loans to small businesses.  Of such sums, $20 billion is reserved for very small businesses and community lenders.  Applications will be accepted directly by the Small Business Administration or through participating lenders through March 31, 2021.  Winne Banta has successfully assisted clients to secure PPP funding in 2020 and has built upon its relations with community banks in assisting smaller businesses to secure critically needed funds.  Given the limited amount of funds and the fact that small businesses may secure a second PPP loan, the demand is anticipated to be significant.

Eligibility is limited to small businesses, nonprofits, veterans organizations, tribal business concerns, agricultural business concerns and certain 501C(6) organizations as well as sole proprietors, self-employed individuals, and independent contractors having 300 or fewer employees.  The business must be prepared to demonstrate that the funds are necessary to support the ongoing operations of the business.

PPP Loans aren’t necessarily limited to first-time PPP borrowers.  Prior PPP Loan recipients are eligible to secure a second PPP Loan (Second Draw Program), provided they comply with the above, have expended all prior PPP loan proceeds, and can demonstrate revenue shortfalls of 25% in a 2020 quarter relative to 2019.

Funds in the form of forgivable loans will be available in the amount of the lesser of $2 million or 2.5 times annualized average monthly payroll costs (salaries capped at $100k) for most borrowers (3.5 for businesses in the food service industry (NAICS 72).

The 12/20 Relief Law continues to recognize those expenses deemed eligible in the Cares Act: payroll costs up to $100,000 per full time employee (minimum of 75% of MLA); costs related to group health care benefits (during period of paid, sick, medical or family leave, and insurance premiums); employee salaries, commissions or similar compensation; payments of interest on mortgage obligations (excluding principal and prepayment of principal); rent; and utilities (“Eligible Expenses”). The 12/20 Relief Law expands Eligible Expenses to include covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures. For a detailed discussion about Eligible Expenses, click here.  Note: a minimum of 60% of loan proceeds must be utilized for payroll costs to qualify for forgiveness. Conversely, loan amounts in excess of 40% utilized for non-payroll costs will not be forgiven.

PPP loans are available for a term of 5 years at a 1% annual interest rate with no collateral or personal guarantee requirements. 100% of Eligible Expenses incurred and expended during the 8-week period commencing upon loan origination may be forgiven (“Loan Forgiveness” or “LF”). Note however, that Loan Forgiveness will be reduced if staffing levels during the covered period are less than the Average Monthly Payroll and/or reductions are made in individual employee compensation in excess of 25% (except for those employees who received annualized salaries in excess of $100,000). Borrowers may utilize the non-LF portions of their loans for Eligible Expenses incurred during the covered period. Note however that safe harbors exist for employers when employees leave on their own volition, employee pay is restored, and other circumstances. Payments of principal and interest commence 10 months after the end of Covered Period.

Please contact the COVID-19 Recovery team for guidance regarding your circumstances. We have developed a detailed discussion of Safeguarding Loan Forgiveness.

Economic injury Disaster Loan Program

The Initial $70 billion in CARES Act EIDL funding was exhausted by mid-2020. The 12/20 Relief Law makes a total of $20 billion available to small businesses through EIDL.  Although EIDL is a source of low-interest loans to small businesses, it is most commonly recognized as a source of grants of up to $10,000.

Material considerations include the following:

  1. Any small business with less than 300 employees, including sole proprietorships that operate with or without employees, independent contractors and self-employed persons, private non-profit organizations or 501(c)(19) veterans organizations, tribal businesses, cooperatives, Employee Stock Ownership Plans, and agricultural enterprises may apply for an EIDL;
  2. Eligibility is limited to businesses located in low-income communities;
  3. The small business applicant must have been in business by January 19, 2020;
  4. The small business applicant must realize a 30% reduction in gross receipts during an 8-week period between 3/2/2020 and 12/31/2020 due to the Pandemic;
  5. The net worth of the small business applicant cannot exceed $15,000,000;
  6. The average net income of the small business applicant after federal taxes for the two years prior to application cannot exceed $5,000,000;
  7. The maximum principal amount for an EIDL is $2,000,000;
  8. The interest rate for not-for-profit organizations is 2.75% and the interest rate for for-profit small businesses is 3.75%;
  9. Amortization is over 30 years;
  10. Repayment period is 10 years;
  11. Payments are deferred for 1 year,
  12. There is no principal forgiveness, except for the emergency grant cash advance up to $10,000 that may be forgiven;
  13. A personal guarantee is required for EIDLs with a principal amount greater than $200,000;
  14. There is no collateral requirement for EIDLs with a principal amount less than $25,000; and
  15. Borrowers may be eligible to receive up to $10,000 in an emergency grant cash advance that can be forgiven if SBA spending conditions are met.

Eligibility and documentation requirements are more stringent in comparison to the PPP Loans. Despite the stringent requirements and the lack of principal forgiveness, an EIDL may be right for your business. You may apply for both a PPP Loan and an EIDL; provided, the funds from both loans are not used for the same purpose.

Entertainment Venues

A total of $15 billion has been made available to entertainment venues including live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives. Such entities are also subject to the PPP gross receipts test.  Grants to such entities are available in the amount of the lesser of $10 million or 45 percent of 2019 revenues. Funds may be utilized for PPP Eligible Expenses discussed above.


The 12/20 Stimulus Law provides an opportunity for certain small businesses to gain access to critically needed capital during this difficult time.  As stated, the availability of funds is extremely limited given the demand for the funding during 2020, and you are strongly encouraged to move quickly to navigate these programs to apply to address your continuing business needs as funding is again anticipated to be exhausted quickly.

The complexities of these federal programs are such that a failure to closely follow the statutory parameters may result in the obligation to repay disbursed funds due to ineligibility or failure to comply with program requirements. If you are concerned about the financial health of your business during the COVID-19 Pandemic, the attorneys at Winne Banta Basralian & Kahn, P.C. are available to answer your questions and guide you through your tough business and financing decisions.

Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. We will be monitoring and providing updates as new information becomes available.

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