Biden Puts Two-Week Limit on PPP Loan Applications to Help Small Businesses

Statistics released this week by the U.S. Small Business Administration suggest a larger share of funding under the federal Paycheck Protection Program is going to small businesses.

For instance, according to the SBA, the share of funding to small businesses with fewer than 10 employees is up nearly 60% and the share going to small businesses in rural areas is up nearly 30%.

In an effort to “further target small businesses and those that have been left behind,” the White House announced earlier this week a two-week period where only businesses with fewer than 20 employees can apply for PPP loans.

That two-week period started Wednesday, Feb. 24, and runs through 5 p.m. Eastern, March 9.

“Along with giving lenders and community partners this dedicated time to work with the smallest businesses to submit their applications, it also ensures larger PPP-eligible businesses still have plenty of time to apply for and receive support before the PPP ends on March 31,” said Matt Coleman of the U.S. Small Business Administration.

It should also be noted, Coleman pointed out, that all applications already submitted by lenders to the SBA before the start of the exclusivity period will still be processed by the SBA and that once the exclusive period ends, lenders will be able to submit PPP loan applications for all eligible businesses and nonprofits again through March 31, 2021, when the program ends.

According to the White House, 98 percent of small businesses have fewer than 20 employees.

“They are Main Street businesses that anchor our neighborhoods and help families build wealth,” the release read. “And while the Biden-Harris administration has directed significantly more relief to these smallest businesses in this round of PPP than in the prior round, these businesses often struggle more than larger businesses to collect the necessary paperwork and secure relief from a lender.”

The 14-day exclusive application period will “allow lenders to focus on serving these smallest businesses,” the release read, while pledging the Biden administration will “make a sustained effort to work with lenders and small business owners to ensure small businesses take maximum advantage of this two-week window.”

Other plans the administration has for the PPP program:

  • Help sole proprietors, independent contractors, and self-employed individuals receive more financial support. These types of businesses, which include home repair contractors, beauticians, and small independent retailers, make up a significant majority of all businesses.

Of these businesses, those without employees are 70 percent owned by women and people of color. Yet many are structurally excluded from the PPP or were approved for as little as $1 because of how PPP loans are calculated.

To address this problem, the Biden-Harris administration will revise the loan calculation formula for these applicants so that it offers more relief, and establish a $1 billion set aside for businesses in this category without employees located in low- and moderate-income (LMI) areas.

  • Provide relief for non-fraud convicted felons. The current program excludes a business if it is at least 20% owned by an individual who has either an arrest or conviction for a felony related to financial assistance fraud within the previous five years or any other felony within the previous year.

The White House said it’s adopting reforms from the PPP Second Chance Act, a bipartisan bill co-sponsored by Senators Ben Cardin (D-MD), Rob Portman (R-OH), Cory Booker (D-NJ), and James Lankford (R-OK), which would eliminate the restriction on anyone with any felony conviction within the last year unless the applicant or owner is incarcerated at the time of the application.

  • Include business owners who are delinquent on student loans. The new reforms will eliminate an exclusion that prevents small business owners who are delinquent on their federal student loans from obtaining PPP loans. Currently, the PPP is not available to any business with at least 20% ownership by an individual who is currently delinquent or has defaulted within the last seven years on a federal debt, including a student loan. Biden noted that “millions of Americans are delinquent on student loans, including a disproportionate number of Black borrowers.”
  • Provide PPP to non-citizen lawful residents. While the PPP statute does permit all lawful U.S. residents like green card and visa holders to access the program, a lack of guidance from the SBA has created some confusion.

Many such businesses owners use Individual Taxpayer Identification Numbers to pay their taxes, and there is a lack of clarity whether they can use their ITIN to apply for PPP.

The White House said, “The SBA will issue clear guidance in the coming days that otherwise eligible applicants cannot be denied access to the PPP because they use ITINs to pay their taxes.”

The SBA reported Monday that it approved more than 1.9 million PPP loans for a total of $140 billion from Jan. 11 through Feb. 21. The application window for the current, $284 billion iteration of PPP is scheduled to close March 31.