For the past few months, America has been waiting for a new COVID relief package. On Dec. 20, negotiators finally agreed upon a $900 billion package with $320 billion going towards the PPP (Paycheck Protection Program) for small business.
The new package will provide PPP loan forgiveness funding for businesses. It will also provide financial support for businesses that are showing significant losses in 2020 as compared to their 2019 revenue.
The new bill also addressed the issue of the deductibility of expenses paid for with the forgivable loan. Previously, the guidelines stated that you could not deduct expenses paid for with the PPP because the loan is forgivable and not taxable. The business community wanted to see this reversed fearing it would lead to adverse tax consequences. It has since been corrected.
Benefits of the New Tax Package
Here are some of the ways the tax package will benefit small businesses.
· It will provide funds for businesses that received the first round for PPP but need additional funding due to significant losses as compared to 2019
· Funding is now available for businesses that weren’t eligible in the first round such as non-profits and news outlets
· $15 billion is earmarked for live venues, independent movie theaters and cultural institutions that are struggling during these difficult times
· $20 billion has been set aside as targeted grants through the SBA’s Economic Injury Disaster Loan program
· Tax deductions will be provided for business meal expenses
· Funds will be set aside for very small businesses and lending through community-based lenders like Community Development Financial Institutions (DDFIs) and Minority Depository Institutions (MDIs). $9 billion in U.S Treasury capital investments in CDFIs and MDIs and $3 billion for the CDFI fund will support low-income communities.
What This Means for Lenders
While the new stimulus package is good news for Americans, banks, lenders and financial institutions are bracing for another round of loan processing that can be costly and stressful.
Lenders have 60 days to process each loan. While this might seem like ample time, there are many factors that make loan processing take longer than lenders would like. For instance, the SBA keeps changing its rules and regulations making it difficult for financial institutions to update their systems accordingly.
Fraud prevention also takes time as each lender must provide explainable information that prevents the need for scrutiny.
With all the hoops lenders have to go through, each application takes around four hours to process. And when you multiply that by the many, many businesses that are submitting loan applications, you’re looking at time consuming work that can cost lenders millions of dollars.
Fortunately, Cleareye.ai has a solution.
Cleareye provides software that automatically extracts information from applications and classifies expenses. It reconciles application information to easily transfer it to third party documents. It integrates lender review and submission into one seamless process. The end result is a process that reduces approval times by 70% saving banks stress, time and money.
The new stimulus package will provide financial relief to countless businesses. The right technology can help lenders process applications quickly and easily to get them the aid they need. The world is looking brighter already!