Opportunity Knocks Twice with the Second Round of Federal Support

With the recent passing of the Consolidated Appropriations Act, in December of 2020, small businesses will be receiving unprecedented levels of support from the U.S Federal Government. This assistance comes in the form of the revival of many programs started by the CARES Act. This continuation of resources creates the ideal scenario to receive the funding that many need present an unprecedented opportunity both current business owners and for those wishing to become business owners.

More Support

Although frontline workers and other essential members of our nation are receiving the vaccine, the pandemic is still affecting a majority of Americans.  To further combat the virus’ harmful effects, Congress passed the Consolidated Appropriations Act, 2021 on December 21st. Taking effect on December 27th, this act will continue the economic assistance provided by the CARES Act, including $325 billion being allocated to help small businesses through loans assistance programs and restarting of the Paycheck Protection Program (PPP).

The New Rules for Loans

As the nation saw the implementation of the PPP, there are numerous rules and regulations in the Consolidated Appropriations Act, 2021that lendees need to take into consideration prior to apply for and taking the loans.

  • The PPP is now accepting loan applications until March 31, 2021. Businesses that were not in operation by February 15, 2020, are not eligible for PPP loans.
  • Deductions are allowed for deductible expenses that are paid for by the capital provided by a PPP loan that is forgiven.
  • The forgiven portion of either a 1st round or 2nd round PPP loan shall not be considered part of a borrower’s gross income.
  • Tax attributes will not be reduced by the PPP loan.
  • Those who have been approved for a first round PPP loan may apply for a 2nd round loan if the following criteria have been met:
    • Have fewer than 300 employees.
    • Have used the full amount of the original loan.
    • Be able to demonstrate a 25% reduction in gross receipts of first, second, or third quarter of 2020 as compared to the same quarter in 2019.
  • For those who receive 2nd round PPP loans, the following will be provided:
    • A total capital amount of 2.5 times the average monthly payroll costs of the borrower
    • Some borrowers many receive 3.5 times the average monthly payroll costs of the borrower if they operate in certain accommodation and or food service industries
    • The amount of these loans spent on eligible payroll costs are eligible for full forgiveness
  • 60% of PPP loan proceeds or more must be spent on payroll costs to apply forgiveness
  • Borrowers must maintain full-time equivalent of employees and salaries/wages to apply for forgiveness with PPP loans.
  • SBA 7(a), 504, and microloans that were made before the enactment of the CARES Act will have their payments of principal and interest be paid for by the SBA for an additional 3 months.
  • $2 billion has been authorized to the SBA, allowing them to waive borrower and lender fees for SBA’s 7(a)s, 504s and Microloans.

For more information, please visit the official U.S. Small Business Administration website with the following link: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

What this Could Mean for Potential Business Buyers

As seen in March of last year, the government is attempting to provide financial support to American small businesses.  This provides prospective entrepreneurs, who are looking to buy a pre-owned business, a unique opportunity.  By applying for the loans offered and covered by the discussed programs, new business owners can finance their newly purchased small business with guaranteed financial assistance from the Federal Government.

This makes buying a business much less expensive and less risky, therefore more desirable for a variety of reasons which are listed below:

  • SBA 7(a), 504, and microloans are at a lower cost than in the past due to several monthly payments being covered by the federal government.
  • Standard guarantees can be raised from 75% to 90% for 7(a) loans, thus decreasing the financial damage of a loan default.
  • Many traditional borrower and lender fees are waived for SBA’s 7(a)s, 504s and Microloans further reducing the costs of loans.
  • The PPP can provide a major source of funding for employment and overhead costs that come with running a business, with the total amount of a provided PPP loan to be fully forgivable if the loanee fulfills certain obligations.

Typically, many people are dissuaded from owning a business due to their concerns of the major risks and investments involved. Add a pandemic that has majorly shifted the economy and job market, and it’s understandable why most would shy away.  However, as the nation is seeing, there is a magnitude of support from both federal and state governments along with the idea that when businesses thrive, our economy will thrive.

The Liberty Group of Nevada understands the idea of purchasing a business can be daunting. Our business brokers are dedicated to making the process of purchasing a business an informed and efficient experience with no surprises. They bring industry knowledge and expertise to each transaction and are able to assist the buyer with their purchase. If you are interested in purchasing a business or would like more information, please visit http://thelibertygroupofnevada.com/.

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