Biden Tweaks PPP to Better Target the Nation’s Smallest BusinessesFebruary 24, 2021
WASHINGTON – A federal program that provides loans to businesses to help them stay afloat during the coronavirus pandemic is undergoing some changes to allow more money to be directed at small businesses that need it most.
President Joe Biden announced several revisions Monday to the Paycheck Protection Program, which Congress approved last year as part of a nearly $2 trillion COVID-19 relief bill.
“Small businesses are the engines of our economic progress,” Biden said. “They’re the glue in the heart and soul of our communities. But they’re getting crushed.”
About 400,000 small businesses have shuttered amid the coronavirus pandemic. Though the Paycheck Protection Program delivered urgent relief to many, “a lot of these mom-and-pop businesses got muscled out of the way by bigger companies who jumped in front of the line,” Biden said.
To address those concerns, Biden announced that only businesses with fewer than 20 employees will be allowed to apply for the program over a 14-day period that begins Wednesday. About 98% of small businesses have fewer than 20 employees, and the 14-day application period will allow lenders to focus on serving them, administration officials said.
The administration is revising the program’s loan calculation formula, so independent contractors, self-employed individuals, and sole proprietors will have a better chance of getting the loans. Under the current formula, many of these businesses, which include home repair contractors, beauticians, and small independent retailers, were excluded from the program or approved for as little as $1.
Biden is eliminating provisions that bar small-business owners from participating in the program if they have a felony conviction or are delinquent or have defaulted on their federal student loans in the past seven years.
Another change makes it easier for small business owners who aren’t U.S. citizens but documented residents of the country to access the loans by using their individual taxpayer identification numbers to apply for the program.
Biden said the changes to the program will bring long overdue help to small businesses that need it to stay open. “This is the starting point, not the ending point,” he said, calling again on Congress to pass his $1.9 trillion COVID-19 relief package.
More than 5 million businesses got loans totaling $525 billion through the Paycheck Protection Program last year. Congress allocated $284 billion for another round of loans in December, $134 billion of which has been awarded to 1.8 million small businesses.
The loans can be forgiven if a company spends at least 60% of the money on payroll expenses, such as wages, salaries, or group health insurance, and a maximum of 40% on other qualifying expenses.
The program expires at the end of March.