The Washington Post
The Biden administration has made changes to the Paycheck Protection Program to help the smallest of firms.
Businesses with over 20 employees will be shut out of PPP for 2 weeks
The Treasury Department announced Monday that it will make targeted changes to its Paycheck Protection Program pandemic relief loans in an attempt to direct more funding toward the smallest of small businesses.
Among other changes to the loan program, businesses with more than 20 employees will be shut out of the PPP for a two-week period starting Wednesday, officials said.
The Biden administration has not said whether it will seek to extend the program after the current tranche of funding expires March 31. But Monday’s announcement signaled that the Treasury Department will continue to support the program at least in the short term, while instituting relatively minor changes designed to tame its excesses.
In a news conference Monday, President Biden criticized the PPP’S early rollout for privileging those with banking connections at the expense of the smallest borrowers.
“When the Paycheck Protection Program was passed, a lot of these mom-and-pop businesses got muscled out of the way by bigger companies that jumped in front of the line,” Biden said, adding that the new rules are meant to make sure the program “looks out for mom-and-pop businesses even more than it already has.”
Biden did not say whether his administration would seek additional funding for the PPP, opting instead to pitch the American Rescue Plan economic stimulus package his administration is proposing.
“The program ends at the end of March, but for the next two weeks, the only folks who can apply for that PPP money are businesses with fewer than 20 employees,” Biden said.
The PPP is a subsidized loan program meant to see small businesses through temporary closures and revenue shortfalls caused by the coronavirus pandemic. It offers loans at an interest rate of 1 percent that can later be forgiven. It was designed to incentivize small-business owners to keep paying their employees temporarily rather than furlough or fire them.
The program became a central component of the Trump administration’s efforts to resuscitate a business community that was shellshocked by sudden closures across the United States starting in March of last year.
It contributed to a surprise drop in the unemployment rate over the summer, but its limitations became clear when many recipients conducted mass layoffs as soon as their loans expired.
A news release published Monday by the Small Business Administration credited the Biden administration with several improvements to the loan distribution. The release noted that the share of funding that went to businesses with fewer than 10 employees jumped nearly 60 percent in the third round of PPP funding that opened a month ago. The release also pointed to sizable increases in the share of funds going to rural communities and Community Development Financial Institutions, which tend to serve lowerincome and minority communities.
However, those improvements may have been caused by an SBA decision to conduct a phased rollout that gave CDFIS a first crack at distributing the funds. That phased rollout was announced about a week before Biden took office.
Republicans who have supported the program since its inception highlighted the progress that has already been made in issuing loans to minorityowned businesses. Sen. Marco Rubio (R-fla.), who has been an outspoken advocate for the PPP since last April, encouraged the White House to work closely with Congress as it considers further changes to the program.
“No other federal relief program has done more to help our smallest businesses, especially those in underserved and underbanked communities,” Rubio said in a statement. “I urge the Biden Administration to work with Republicans and Democrats in Congress as it considers changes to this incredibly successful and overwhelmingly bipartisan program.”
The program also drew controversy for its exceptionally broad eligibility criteria, which allowed publicly traded companies, fast-food restaurants and an array of questionably small or otherwise wealthy businesses to benefit from funding. After loanlevel data was released in full — which did not happen until after the 2020 election because the Trump administration sought to avoid disclosing most of the data — it was revealed that more than half of PPP funding before December went to just 5 percent of the recipients.
Aside from shutting out the larger firms, the Treasury Department announced Monday that it 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 Treasury Department also plans to change its application procedures to make it easier for noncitizen business owners to receive loans. It will eliminate rules that shut out borrowers with past felony convictions and people who have defaulted on student loans, changes that were spelled out in the most recent bipartisan relief bill.
Although small businesses still have five weeks to apply for PPP loans, the changes announced Monday may ultimately have a relatively small impact on the program. Those with more than 20 employees have already had more than a month to apply for another loan, and many did so.
The loan program has approved roughly 6.8 million loans worth about $648 billion since it started in April.
Since the third round of the PPP began in mid-january, about 1.8 million loans adding up to $133.5 billion had been approved as of Friday, according to data maintained by the SBA. Most of them were “second-draw” loans given to businesses that already received loans last year.
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