Understanding the American Rescue Plan
There has never been a more challenging time for small and mid-sized businesses. The pandemic and subsequent lockdowns in the last year have rocked businesses and left them battered. With the pandemic not yet under control, economic recovery could be lengthy. In a mid-December poll from the U.S. Chamber of Commerce, forty-eight percent of small businesses cited their fiscal health as average or poor. With a dual economic and public health crisis facing the country, it’s no surprise that one of the main focuses of the new administration’s 100-day plan includes the proposed “American Rescue Plan.” While many specifics of the plan are still unclear, it does highlight the fact that containing the virus and economic recovery are intertwined, and both must be addressed.
While President Joe Biden has reassured hometown entrepreneurs that “taxes on small businesses will not go up,” what changes might be coming from the new administration?
Moving forward, the new administration is likely to initially focus their American Rescue Plan and small business policy on economic recovery through refocused PPP regulations, additional funding options, and low-interest loans.
Possible New PPP Regulations
If your business struggled to get relief through PPP loans, you weren’t alone. Many problems plagued the first round of Paycheck Protection Program (PPP) loans. Although designed to rescue small companies struggling to make payroll or pay benefits and utilities, many beneficiaries turned out to be larger businesses or those without a strong financial need.
During the initial round of PPP funding, guidelines stated that businesses were allowed to apply for aid as long as they had 500 employees or less per location. At that time, Biden called on the Trump administration to reserve half of the money to go to businesses with 50 employees or less.
As funding dwindled during the first round of PPP loans, businesses were essentially pitted against each other, racing to get the help they needed. Further complicating the process was the fact that many business owners were confused about what the loans could be used for and whether they would end up in a position where they would need to pay back the loan. This is possibly why the new administration has put forth the idea of distributing PPP funding by qualification rather than a set budget. Changing the guidelines in this way could also go a long way in ensuring that any business that qualifies would receive the help they need.
Underscoring the confusion over PPP distribution, according to the U.S. Chamber of Commerce, nearly three out of four small business owners say that they need further government assistance to continue operations. While the second round of PPP funding has recently opened, allowing applicants to apply as long as they have 300 or fewer employees, it’s reasonable to assume that the new administration would encourage or advise any future PPP funding to include a change in guidelines to focus relief efforts on businesses with even fewer employees as well as other possible changes to PPP regulations.
What if your business doesn’t qualify for PPP funding or is looking for loans to help in other areas? Biden has previously proposed that additional funding needs to be more flexible, stating “It’s no use paying for payroll if a small business can’t keep the lights on.” Along with the potential PPP changes, the proposed “American Rescue Plan” also calls for providing $15 billion to create a new grant program for small business owners, separate from the Paycheck Protection Program (PPP).
Some small business owners have said that the PPP loans contain too many strings, not allowing them to use the money in the ways that they might find best for their business. With this in mind, another aspect of the new administration’s proposed plan includes leveraging $35 billion in government assistance into $175 billion in small business lending and investment. The funds would get invested in some successful state, local, tribal, and nonprofit financing programs that make low-interest loans and provide venture capital to entrepreneurs. These funds could be used to create and maintain jobs, innovate, and build wealth.
Increased Minimum Wage
While a primary focus of the plans is on grants and loans to aid in the economic recovery of small and mid-sized businesses, additional proposals could affect business owners, most notably a push to increase the minimum wage.
One change that could affect many small businesses is a call to more than double the minimum wage. The new administration has proposed raising the federal minimum wage to $15 an hour, up from the current $7.25, while also ending the tipped minimum wage and the sub-minimum wage for people with disabilities. While Biden previously called for gradually boosting the minimum wage, his current plan does not include a timeline.
Small businesses provide nearly half of the private-sector jobs in America. As the pandemic hit small businesses hard, it’s natural for the new administration to focus their small business policies on economic recovery for those businesses through grants and loans. Just remember that passage of any of these plans as proposed is hardly guaranteed.
No matter what changes the future administration might bring, there is one thing your business can always depend on, and that is your Safeguard Advisor. Trusted for over 64 years, your advisor has the expertise necessary to reduce costs and drive your business forward. Set your goals, and then let your Safeguard Advisor help make you even more successful. Call 855.778.3124 to get started.
- A main focus of the new administration’s 100-day plan includes the proposed “American Rescue Plan.”
- There has never been a more challenging time for small and mid-sized businesses.
- Moving forward, the new administration is likely to initially focus their small business policy on economic recovery through refocused PPP regulations, additional funding options, and low-interest loans.
- No matter what changes the future administration might bring, there is one thing your business can always depend on, and that is your Safeguard Advisor.