PPP Changes to Help Underserved Borrowers

On Monday, President Joe Biden announced a series of changes to the Paycheck Protection Program designed to make the program more accessible to underserved borrowers, including a two-week period beginning on Wednesday (February 24, 2021) where only businesses with fewer than 20 employees can apply for loans.

The effort builds on several recent changes and comes after criticisms that the program's $659 billion first round last year benefited larger, more affluent and connected businesses at the expense of the disadvantaged businesses for which it was designed.

The changes announced Monday:

• Starting Wednesday, only businesses with fewer than 20 employees can apply for loans for a two-week period.
• The way loans are calculated will be revised so businesses without employees get more relief. The previous calculation — based on payroll — made the program ineffective for sole proprietors and independent contractors, including many businesses of color. The Biden administration also will set aside $1 billion in PPP loan funds for businesses without employees in low- and moderate-income areas.
• The elimination of an exclusion that prevents business owners with non-fraud felony convictions from accessing the program.
• The elimination of an exclusion that prevents business owners who are delinquent on federal students loans from accessing the program.
• Non-citizen small-business owners who are lawful U.S. residents will be able to apply for loans using individual taxpayer identification numbers.
• Aside from shutting out the larger firms, the Treasury Department will permanently change the loan calculation formula it applies to independent contractors such as Uber drivers and real estate agents, some of whom received minuscule sums of money under the earlier rules. The new rules are designed to increase their payouts.

The Small Business Administration is set to revise the rules to match the approach used to allow small farmers and ranchers to receive aid.

The officials said the program would also set aside $1 billion for businesses without employees in low- and moderate-income areas, mostly owned by women and people of color.

The SBA plans to provide new guidance making it clear that legal US residents who are not citizens, such as green-card holders, cannot be excluded from the program. The Biden administration said it would eliminate exclusions that prohibit a business owner who is delinquent on student loans from participating in the program.

Business owners with non-fraud felony arrests or convictions in the previous year are excluded from the program, but Biden administration officials said they would adopt bipartisan Senate proposals to remove this restriction, unless the applicant is currently incarcerated.

Please reach out to Brixey & Meyer to help navigate the Paycheck Protection Program. We are committed to keeping our clients, friends and families posted on the latest developments. You can simply comment below, visit our website or call us at 866.760.0940.