Treasury Tweaks PPP Loan Rules to Focus on Smaller Businesses

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Michael Rainey
·2 min read
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The Treasury Department said Monday that it will alter the rules for the Paycheck Protection Program to get more aid to small businesses. For a two-week period starting Wednesday, the program will limit its loans to companies with 20 or fewer employees.

President Joe Biden said Monday that the intent was to help mom-and-pop firms that may have been unable to get help from the government so far. “These small businesses — not the ones with 500 employees, but these small businesses that, with a handful of folks, they are 90 percent of the businesses in America,” Biden said at a news conference. “But when the Paycheck Protection Program was passed, a lot of these mom-and-pop businesses just got muscled out of the way by bigger companies who jumped in front of the line.”

Established by the Cares Act last March, the PPP provides subsidized loans that are intended to help small businesses keep employees on their payrolls, and companies that meet the program’s requirements can have their loans forgiven. But some larger companies, including many that operate on a franchise model such as fast-food chains and car dealerships, have also benefited from the PPP, which has received $953 billion in funding from Congress.

In its effort to get money to smaller and more independent businesses, some of which may lack the banking connections and bureaucratic savvy to get federal assistance, the program is also relaxing some of its rules. Self-employed workers, sole proprietors and independent contractors now qualify for larger loans, despite having no employees, and the program is now open to those who are delinquent on their student loans and to Green Card holders.

The bottom line: Scheduled to expire on March 31, the PPP still has about $140 billion in unclaimed funds, but Biden’s $1.9 trillion relief plan would extend the program. The Small Business Administration, which operates the PPP, said Monday that smaller businesses are already beginning to receive a larger portion of the loans, and the more relaxed eligibility rules are expected to drive a new surge of loans in the coming weeks.

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