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

- BY AARON GREGG aaron.gregg@wash­post.com Business · Finance · U.S. News · Infectious Diseases · Health Conditions · Joe Biden · U.S. Treasury · Donald Trump · United States of America · Republican Party (United States) · Marco Rubio · White House · Congress of the United States · Democratic Party (United States) · Uber · Pakistan Peoples Party · Small Business Administration

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.

 More at wash­ing­ton­post.com/busi­ness

 ?? JABIN BOTSFORD/THE WASH­ING­TON POST ?? Pres­i­dent Bi­den said he wants to make sure the Pay­check Pro­tec­tion Pro­gram “looks out for mom-and-pop busi­nesses.”
JABIN BOTSFORD/THE WASH­ING­TON POST Pres­i­dent Bi­den said he wants to make sure the Pay­check Pro­tec­tion Pro­gram “looks out for mom-and-pop busi­nesses.”

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