The American Rescue Plan: Everything Small Businesses Need to Know

When the American Rescue Plan Act landed on President Biden's desk in March 2021, it brought $1.9 trillion in relief—with over $50 billion earmarked specifically for small businesses battling the economic fallout of the pandemic. Yet many business owners never fully tapped into these resources, either because they didn't know what was available or couldn't navigate the maze of programs and deadlines.

Whether you're still catching up on relief options or simply want to understand how this historic legislation shaped the small business landscape, this guide breaks down everything you need to know about the American Rescue Plan and its impact on entrepreneurs across America.

What Is the American Rescue Plan?

The American Rescue Plan Act (ARPA), signed into law on March 11, 2021, represented one of the most comprehensive economic relief packages in U.S. history. Beyond direct stimulus checks to individuals, the plan included targeted support for small businesses struggling through pandemic-related shutdowns, revenue losses, and workforce challenges.

The legislation extended and expanded several existing programs while creating entirely new funding mechanisms designed to reach businesses that fell through the cracks of earlier relief efforts.

Key Small Business Programs Under the American Rescue Plan

Paycheck Protection Program (PPP) Expansion

The American Rescue Plan added $7.25 billion to the already-massive PPP, which provided forgivable loans to help businesses keep workers on payroll.

What changed:

• Expanded eligibility to internet publishing organizations (NAICS code 519130)
• Opened access to certain nonprofits with fewer than 300 employees
• Extended application deadlines to give more businesses time to apply

The PPP became a lifeline for millions of small businesses. If you kept employees on payroll and used at least 60% of the loan for payroll costs, the entire loan could be forgiven—essentially turning it into a grant.

How to use it: Even though the main PPP program has closed, understanding its structure helps contextualize other relief programs. Many businesses still deal with forgiveness paperwork or loan repayment, and the lessons learned from PPP informed subsequent relief initiatives.

Economic Injury Disaster Loan (EIDL) Advances

The EIDL program received a major boost: $15 billion in targeted advances specifically for hard-hit businesses in low-income communities, plus $5 billion for supplemental grants to "severely impacted" small businesses.

Qualifying criteria for supplemental grants:

• Experienced 50% or more revenue loss
• Employed 10 or fewer people
• Located in a low-income community

Key benefit: EIDL advance grants became tax-exempt under the American Rescue Plan, meaning you didn't have to report them as taxable income. This was a significant improvement over earlier rules.

Real-world impact: According to Treasury Department data, the State Small Business Credit Initiative reached over 3,600 small businesses in its first 17 months, supporting nearly 3,900 loan and investment transactions expected to create or retain over 46,200 jobs.

Restaurant Revitalization Fund (RRF)

Recognizing that restaurants and food service businesses were among the hardest hit, the American Rescue Plan created a dedicated $28.6 billion grant program exclusively for the industry.

Grant amounts:

• Up to $10 million per company
• Maximum of $5 million per physical location
• Calculated based on pandemic-related revenue loss

Eligible expenses:

• Payroll costs (including benefits)
• Mortgage, rent, or lease payments
• Utilities
• Supplies and food costs
• Covered supplier costs
• Operational expenses
• Outdoor seating construction

Priority period: The first 21 days of the program prioritized applications from businesses owned by women, veterans, and socially and economically disadvantaged individuals.

The RRF was administered by the Small Business Administration (SBA) and operated on a first-come, first-served basis after the priority period ended. Demand far exceeded available funding, with many eligible businesses unable to receive grants before the program closed.

Shuttered Venue Operators Grant (SVOG)

While technically established before the American Rescue Plan, the Act provided an additional $1.25 billion for venues and operators—live music clubs, theaters, museums, and performing arts organizations—that experienced significant revenue losses.

Grant size: Eligible applicants could receive grants equal to 45% of their 2019 gross earned revenue, with a maximum award of $10 million.

Who qualified:

• Live venues and performing arts organizations
• Theatrical producers
• Live performing arts organization operators
• Museum operators
• Motion picture theater operators
• Talent representatives

Tax Credits That Kept Businesses Afloat

Beyond grants and loans, the American Rescue Plan extended and enhanced critical tax credits that helped businesses manage payroll costs during the recovery.

Employee Retention Credit (ERC)

The ERC allowed businesses to offset payroll tax liabilities—a dollar-for-dollar tax credit for keeping employees on staff during difficult times.

Credit amount:

• Up to $7,000 per employee per quarter
• Maximum of $28,000 per employee for 2021

Who qualified: Businesses that experienced either:

• Full or partial suspension of operations due to government orders
• Significant decline in gross receipts (50% reduction compared to the same quarter in 2019)

Extension: The American Rescue Plan extended the ERC through December 31, 2021, giving businesses additional months to claim the credit.

Why it mattered: The ERC provided immediate cash flow relief. Rather than waiting for forgiveness or repayment schedules, businesses could reduce their payroll tax deposits right away—or receive refunds if they'd already paid taxes.

Paid Family and Medical Leave Credit

The Act extended the Paid Leave Credit through September 30, 2021, and increased the wage threshold from $10,000 to $12,000.

How it worked: Small and midsize businesses could claim dollar-for-dollar tax credits for providing paid sick and family leave to employees affected by COVID-19. This included leave for:

• Quarantine or isolation orders
• Caring for individuals subject to quarantine
• Experiencing COVID-19 symptoms and seeking diagnosis
• Caring for children whose schools or childcare facilities were closed

Benefit: Businesses could offer generous leave policies without bearing the full cost, supporting both employee wellbeing and business continuity.

Support for Workers and Families

While not direct business funding, several provisions of the American Rescue Plan had significant indirect impacts on small businesses by supporting their employees and customer bases.

Extended Unemployment Benefits

The Act extended enhanced unemployment benefits through September 6, 2021, with a $300 weekly supplement. Additionally, the first $10,200 of 2020 unemployment benefits became tax-free for households earning $150,000 or less.

Impact on businesses: This cushion allowed many workers to weather job transitions without immediate financial crisis, which helped stabilize the labor market as businesses reopened and ramped up hiring.

Direct Stimulus Payments

Households received $1,400 direct payments ($2,800 for couples), plus an additional $1,400 per dependent.

Indirect business benefit: These payments injected billions into consumer spending, helping small businesses—especially retail, restaurants, and service providers—see increased demand as the economy reopened.

Enhanced Child Tax Credit

The American Rescue Plan increased the Child Tax Credit to:

• $3,600 per child under age 6
• $3,000 per child ages 6-17

How this helped businesses: By reducing financial pressure on working parents, the enhanced credit supported workforce participation and consumer spending—both critical to small business recovery.

State and Local Fiscal Recovery Funds

The American Rescue Plan allocated $350 billion to state, local, and tribal governments through the State and Local Fiscal Recovery Funds program.

How it helped small businesses: Many communities used these flexible funds to create local grant programs, business improvement initiatives, and infrastructure investments that directly supported small businesses.

Example: In Royal Oak, Michigan, the city provided $1.1 million in grants to 92 small businesses using proceeds from a land sale, supplemented by American Rescue Plan funding. This local approach helped businesses that had difficulty accessing federal programs.

State Small Business Credit Initiative (SSBCI)

The American Rescue Plan allocated $10 billion to the SSBCI, which funnels funding through state development finance agencies to capitalize small business support and investment programs.

Focus areas:

• $1.5 billion set aside for businesses owned by socially and economically disadvantaged individuals
• $1 billion state incentive fund to encourage additional support
• $500 million specifically for businesses with 10 or fewer employees

How it works: Rather than direct federal grants, SSBCI empowers states to create loan programs, venture capital funds, and other financing mechanisms tailored to local business ecosystems.

Common Mistakes and How to Avoid Them

Missing Application Deadlines

Many business owners discovered programs too late or assumed they weren't eligible.

Lesson learned: Stay informed about available relief programs through the SBA, your state's economic development agency, and trusted business advisors. Programs often have short application windows.

Incomplete Documentation

The most common reason for denied applications or delayed forgiveness was inadequate documentation.

Best practice:

• Keep meticulous records of payroll, rent, utilities, and other eligible expenses
• Document revenue declines with bank statements, accounting records, and tax returns
• Save all correspondence and confirmations from relief programs

Not Understanding Tax Implications

Some business owners didn't realize that certain relief funds had tax consequences, while others missed tax credits they were eligible for.

Solution: Work with a qualified accountant or tax professional to:

• Understand which relief is taxable and which is tax-exempt
• Claim all available credits (ERC, paid leave credit, etc.)
• Properly report relief funds on tax returns

Overlooking State and Local Programs

While federal programs received the most attention, state and local initiatives often provided faster, more flexible support.

Strategy: Check with your:

• State economic development office
• Local chamber of commerce
• Small Business Development Center (SBDC)
• City or county government website

Long-Term Impact: What the Data Shows

The American Rescue Plan's investments helped create remarkable economic momentum:

• Job growth: 2021 and 2022 became the fastest two years of job growth on record
• Business formation: New small business applications surged to historic levels
• Unemployment: The unemployment rate fell to its lowest level in over 50 years by early 2023

These statistics don't just represent numbers—they reflect millions of entrepreneurs who kept their businesses alive, workers who stayed employed, and communities that preserved their economic foundations through an unprecedented crisis.

What Comes Next?

Most American Rescue Plan programs have now closed to new applications. If your business received funding:

Focus on compliance:

• Complete any outstanding forgiveness applications (PPP, RRF)
• Maintain documentation in case of audits
• Report spending and outcomes as required by program terms

Prepare for the future:

• Build cash reserves using lessons learned during the pandemic
• Diversify revenue streams to reduce vulnerability to disruptions
• Develop contingency plans for different economic scenarios

Stay informed: New relief programs, tax credits, and economic support initiatives continue to emerge. Subscribe to SBA updates, follow business associations, and maintain relationships with financial advisors who can alert you to new opportunities.

Simplify Your Financial Management

Whether you received American Rescue Plan funding or not, one lesson stands out from the pandemic: businesses with clear, organized financial records navigated relief programs far more successfully than those scrambling to compile documentation.

Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data. Track every grant, loan, and expense with precision. Generate reports instantly when opportunities arise. No black boxes, no vendor lock-in—just clear financial visibility when you need it most. Get started for free and take control of your business finances today.

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The information in this article is for educational purposes and reflects programs as they existed under the American Rescue Plan Act. Program availability, terms, and deadlines have changed. Consult with qualified financial and legal advisors for guidance specific to your situation.