Small businesses to get priority under Biden administration’s new rules for PPP loans

President Joe Biden on Monday will announce adjustments to the Paycheck Protection Program that are designed to target loans for small businesses and expand access to aid.

The changes will prioritize loans for the country’s smallest businesses, eliminate some previous eligibility restrictions on small business owners, boost support for independent contractors and self-employed workers and take “steps to ensure equitable distribution of relief.”

The PPP, which launched in April under the CARES Act, was designed to provide loans to small businesses to help them “maintain their payroll, hire back employees who may have been laid off and cover applicable overhead.”

But Biden previously criticized the program for helping large businesses instead.

The Small Business Administration started accepting applications for “second draw” PPP loans last month after lawmakers authorized additional funding for the program under the second, $900 billion coronavirus relief package.

Since then, according to the White House, the share of loans going to businesses with fewer than 10 employees and the share of loans going to businesses in rural areas are up by 60% and 30%, respectively. Additionally, funding distributed through Community Development Financial Institutions and Minority Depository Institutions is up by more than 40%, it says.

Biden’s $1.9 trillion COVID-19 relief package would provide additional $7 billion for the program, ABC News reports. The White House says the changes announced Monday are “no substitute for passage of the American Rescue Plan” but will “extend much-needed resources to help small businesses survive, reopen, and rebuild.” Here’s a look at the changes:

Expanding access

▪ Prioritizing the smallest businesses: Starting Wednesday, the administration will institute a two-week period during which only businesses with fewer than 20 employees can apply for loans through the PPP to “allow lenders to focus on serving these smallest businesses.”

▪ Support for self-employed workers, independent contractors and sole proprietors: The changes include revising how loans are calculated to offer more relief and will reserve $1 billion in aid for these businesses. Previously, businesses in these categories were “structurally excluded from the PPP or were approved for as little as $1” due to how loans were calculated, the White House says.

▪ Removing restrictions for prior felony convictions: Biden will eliminate restrictions that prevent businesses owned at least 20% by a person with a felony conviction within the past year from receiving loans.

▪ Removing restrictions related to student loans: Businesses owned at least 20% by a person who is “currently delinquent or has defaulted within the last seven years” on student debt and other federal loans are not currently eligible for the PPP. The SBA will eliminate that restriction.

▪ Access for noncitizens: The SBA will issue guidance making it clear that applicants cannot be denied PPP loans because they use Individual Taxpayer Identification Numbers to pay taxes.

“The PPP statute is clear that all lawful U.S. residents may access the program, but a lack of guidance from the SBA has created inconsistency in access for ITIN holders like Green Card holders or those here on a visa,” the White House says.

‘Equitable distribution’

The Biden administration is also taking steps to “ensure equitable distribution of relief,” the White House says, including “addressing waste, fraud and abuse” in all federal programs.

The administration is working to overhaul the PPP application process to “encourage self-reporting of demographic data” and to better demonstrate the impact of the program, and it’s working to update the SBA website to make resources and relief options easier to find.

It’s also meeting with small business owners to “learn more about challenges and opportunities in the implementation of current emergency relief programs.”

Additionally, the SBA is working to improve relationships with lenders.

“This model will increase opportunity for lenders to provide recommendations and ask questions about the PPP and drive resolution of open questions and concerns in a more streamlined way,” the White House says.