The American Rescue Plan (ARP) is a $1.9 trillion economic stimulus bill passed by the 117th Congress and signed into law by President Biden on March 11, 2021. The measure contained several aid provisions for small businesses, including restaurants and minority firms. Here’s a rundown of what the ARP included for small businesses.
Paycheck Protection Program
The measure will increase funding and expand eligibility for the Paycheck Protection Program and will allow forgiveness for additional expenses.
Program Funding: The measure will increase the program’s lending authority by $7.25 billion, to $813.7 billion, and appropriate the same amount for the Small Business Administration (SBA) to guarantee additional loans.
Tax-Exempt Groups: The measure will expand the eligibility rules 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. Religious educational groups that might otherwise be barred under SBA rules would be permitted. 501(c)(4) social welfare groups, such as AARP, the ACLU, Americans for Prosperity, and the National Rifle Association, will still be prohibited. The additional tax-exempt groups cannot employ more than 300 employees per location or spend more than $1 million annually or 15% of their time on lobbying activities.
Larger Nonprofits: Some nonprofits that currently qualify for PPP loans, such as 501(c)(3) groups, cannot have more employees than the SBA’s size standards for the relevant industry and are subject to the agency’s restrictions for affiliated entities. The measure will replace those rules, allowing 501(c)(3) groups with as many as 500 employees per physical location to participate without further restrictions.
Online News Publishers: Internet-only news publishers that were previously ineligible can receive PPP loans if they have 500 or fewer employees or a size set by the SBA per location. They must certify that the funds will be used to support local news. SBA affiliation rules and a ban on publicly traded companies will be waived for online news outlets seeking loans.
Loan Forgiveness: The measure expands PPP loan forgiveness to include payments made for premiums on behalf of individuals who qualify for COBRA health insurance continuation coverage. The change applies to loan forgiveness applications received following the measure’s enactment.
The measure provides $28.6 billion for a Restaurant Revitalization Fund to be administered by the SBA. Eligible recipients include restaurants, bars, food trucks, and caterers, including businesses in airport terminals and tribally owned entities.
Disqualified businesses include those run by state or local governments, companies that manage more than 20 locations including affiliates, live venues seeking grants under the year-end Covid-19 relief package, and publicly traded companies.
For 60 days following the measure’s enactment, $5 billion will be set aside for eligible entities with gross revenue of $500,000 or less in 2019. The SBA will also prioritize awards for small businesses owned by women, veterans, and socially or economically disadvantaged individuals during an initial 21-day award period. Other grant funds will be awarded on a first-come, first-served basis.
Grant amounts will cover the difference between an entity’s revenue in 2020 compared with 2019. Awards will be reduced by amounts received through the Paycheck Protection Program. Aggregate awards made to an entity and its affiliates cannot exceed $10 million and would be limited to $5 million per location. Eligible expenses generally include payroll costs, mortgage and rent payments, supplies, normal food and beverage costs, and paid sick leave. Funds can be used through Dec. 31, or a date set by the SBA that is no later than two years after the measure’s enactment.
The measure would provide $15 billion for additional advance payments to eligible entities under the SBA’s Economic Injury Disaster Loan (EIDL) program. The SBA will allocate $10 billion to covered entities that did not receive their full eligible advance payments under the year-end relief package. Those entities include recipients with 300 or fewer employees and economic losses of at least 30% over eight weeks compared with a similar period before the pandemic.
The remaining $5 billion will 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.
The Act provides $10 billion for the State Small Business Credit Initiative. The Treasury Department will set aside:
• $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.
• $500 million to support small businesses with fewer than 10 employees.
The department can set aside an additional $500 million for states to provide legal, accounting, and financial advisory services. It can also transfer the funds to the Commerce Department’s Minority Business Development Agency to provide similar technical assistance. The department must complete all disbursements by Sept. 30, 2030. Any remaining amounts would be rescinded.