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New federal relief package offers slew of new financial options to North Bay businesses hit by new lockdowns

Federal and state aid

Businesses seeking to apply for that latest round of Paycheck Protection Program loans are asked to contact their financial institutions. As of Dec. 29, the Small Business Administration has not determined a date to accept applications.

In the meantime, Rep. Mike Thompson is hosting a webinar on Jan. 5 at 9 a.m. Pacific Time to help prospective recipients make sense of it all. The first 500 to email SBAHelp.Thompson@mail.house.gov will be registered to attend.

On the state level, the application period for California Small Business COVID-19 Relief Grants opens Dec. 30 and closes Jan. 8, 2021. A total of $475 million will be available in two rounds in increments of $5,000 to $25,000 based on annual revenue.

Like a belated, creative Christmas stocking, the $900 billion federal relief package graces the North Bay with a little bit of everything — from $284 billion in loans to $110 billion in tax benefits.

“In Congress, they call this Christmas tree legislation,” said David Colgren, spokesman for CalCPA, a 45,000-member accountant association with 14 chapters across California.

The long-awaited stimulus — signed Sunday — features another round of the Paycheck Protection Program business loans and excise tax credit extensions that benefit wine, beer and distilled spirit producers.

It also includes $15 billion in arts and entertainment funding to help devastated music venues and cultural institutions. Museum of Sonoma County Executive Director Jeff Nathanson pledged to look into that. The museum has been closed since March.

“We will hopefully benefit from the new relief package,” he said. “We’re thrilled this type of support has been approved because this cultural sector has long been ignored. I’m sure we’ll qualify for this grant.”

The $2.3 trillion federal spending package that also averts a shutdown and funds the federal government by $1.4 trillion may not represent the end-all answer to COVID-19 suffering, but it’s a good start for the Wine Country region, according to Rep. Mike Thompson, D-St. Helena.

“I view this as a bridge to get to where we want to be,” Thompson told the Business Journal. “When you’re legislating, you never let perfect be the enemy of the good. We needed to act. It’s just sad it took so long.”

The Fifth District congressman noted “a big disappointment” that disaster relief didn’t make this latest relief bill, especially since tax breaks for corporate meal expenses called the “three-martini lunch” did.

“This was never the answer. These restaurants are closed,” he said.

Tax money pouring in

Thompson pushed and endorsed an extension to excise tax credits that benefits wineries and breweries, something Russian River Brewery President Natalie Cilurzo said she’s “super excited” about.

The tax breaks that came to pass three years ago and made permanent now provides a $1 and 90 cent tax credit for every gallon manufactured up to 30,000 and 100,000, respectively. Small brewers may keep the $3.50 per barrel tax rate on their first 60,000 barrels. The prior rate was twice that amount, representing “a 50% savings” to Cilurzo.

Russian River Brewery produced almost 40,000 barrels this year, said Cilurzo.

“We’re closed and just rolling with the punches. Downtown, we’re just doing takeout, and we’ve furloughed 42 people,” she said.

Still, Cilurzo is passing on the PPP funding this time.

“We got $2 million on the first round. I feel strongly this money needs to go to small business,” she said, further considering her business as mid-sized. “I hope (others) take my lead.”

On the flipside, Judd Wallenbrock, CEO of C. Mondavi & Family, which runs Charles Krug Winery in the Napa Valley, plans to apply for another PPP loan.

The wine business received $1.9 million in the first round of the $660 billion program as one in more than 4,100 federally supported, low-interest loans. Around $1.4 billion was processed over half a year ago in Napa, Sonoma, Marin, Mendocino and Solano counties.

“We’ll absolutely file for it. It was a good thing we did in the first round. We’re not making a profit, and it kept people employed,” Wallenbrock said.

C. Mondavi & Family’s economic hit may be two-fold with the pandemic and wildfires.

“We’re quite uncertain about the impact of the fires,” he said.

The whites and lighter reds are OK, but the verdict is still out on the Napa Valley winery’s robust, signature reds.

Filing for forgiveness on the first PPP loan is also questionable, Wallenbrock added.

If so, C. Mondavi & Family wouldn’t be alone in declining. Some companies which received the PPP loans through the U.S. Small Business Administration passed on applying for forgiveness. Many said the forms and process were confusing and the Internal Revenue Service put a damper on tax benefits.

When all was said and done, the SBA improved the forms to make the process simpler.

And the IRS — which warned companies to refrain from claiming forgiveness and writing off expenses as “double-dipping” — was overruled by the new rules in this relief package. This time, the bill offers a tax deduction on expenses associated with forgiven PPP loans.

Another major milestone in the package, loan recipients with fewer than 300 employees may apply for PPP funding a second time. But the business will need to show it experienced a 25% drop in revenue in any 2020 quarter compared to 2019’s.

Federal and state aid

Businesses seeking to apply for that latest round of Paycheck Protection Program loans are asked to contact their financial institutions. As of Dec. 29, the Small Business Administration has not determined a date to accept applications.

In the meantime, Rep. Mike Thompson is hosting a webinar on Jan. 5 at 9 a.m. Pacific Time to help prospective recipients make sense of it all. The first 500 to email SBAHelp.Thompson@mail.house.gov will be registered to attend.

On the state level, the application period for California Small Business COVID-19 Relief Grants opens Dec. 30 and closes Jan. 8, 2021. A total of $475 million will be available in two rounds in increments of $5,000 to $25,000 based on annual revenue.

“They knew that clarification was needed. Otherwise, (companies) couldn’t use the write-off,” Santa Rosa accountant Jon Dal Poggetto said.

Oddly enough, the state is not taking the same position as the federal government and requires companies to meet a different reporting standard on federal and state returns.

“Well, it’s good though that the federal tax rate is higher than the state. I think Congress has the right idea,” he said.

At any rate, Thompson believes California may change that rule, while advocacy groups and banks still predict an outpouring of interest in a business community reeling from shutdowns that have closed the door on income sources.

“I think small businesses will be applying. It’s been a struggle, but we’re doing our best. The longer (the economic downturn) goes on, the more it dips into the bottom line,” Healdsburg Chamber of Commerce spokeswoman Tallia Hart said. “I do think people are grateful for new PPP funding.”

Many businesses standing in line for relief are restaurants, which received a special provision in the PPP portion of the bill. Restaurants may apply for a forgivable employee-based loan set by 3.5 times its monthly payroll costs. Other businesses get 2.5 times.

With 110,000 eateries closed across the United States, the National Restaurant Association lobbied hard to receive special relief. Its efforts for a separate bill with more aid fell a little short in Congress, but the officials were grateful for any concession made.

“We’re pleased with this particular package,” association spokeswoman Vanessa Sink told the Business Journal.

Her comment was backed by a statement from the advocacy group’s president, Tom Bene, who declared the action taken by Congress “will keep tens of thousands of restaurants from closing in the coming months.”

Banking on a surge of apps

North Bay banks stand ready to handle applications from a multitude of dining establishments.

“Restaurants — that’s where we’re expecting a lot of applications,” Bank of Marin Chief Operating Officer Tim Myers said.

Bank of Marin processed 1,800 loans valued at $308 million in the first round of PPP funding.

“We don’t expect the volume to be as high as last time,” said Myers, whose Novato-based bank expects many clients to be “on the smaller side” of the financial scale.

Myers took solace in knowing that even though the qualification methodology behind demonstrating a loss in revenue may be stricter, the new PPP round comes with an easier process for companies applying for loans under $150,000.

Exchange Bank is preparing for much interest in PPP loan funding.

Chief Credit Officer and Executive Vice President Michael Sullivan said the Santa Rosa-based bank is getting its application portal ready since it processed more than 1,700 loans during the last round. About a third have filed for forgiveness.

With 76% of its loans processed classified as under $150,000, Sullivan has geared up the staff for a spike in applications — especially since the process is less convoluted for businesses that fit that category.

“We generally expect a lot of requests. What that looks like is to be determined,” he said.

As it awaits an opening date, Exchange Bank has written to its customers a warning on how to avert fraud. These fraudulent intrusions may take the form of email attachments, phishing schemes and mock web pages pretending to be the SBA.

There’s no known application date provided yet by the SBA, which told the Business Journal it’s working with the U.S. Treasury Department to roll out the plan and note any changes since the first round of the loan program.

In the meantime, the American Bankers Association has also issued its pledge to review the almost 5,600-page legislative text to prepare its membership.

“The bipartisan agreement reached by congressional leaders will provide much-needed relief to families, workers and businesses still struggling from COVID-19,” ABA President and CEO Rob Nichols stated.

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