Bank Notes
White House proposes significant PPP changes midstream that will expand eligibility but temporarily limit access
February 22, 2021
By: Mark A. Mangano
Today the White House announced substantial proposed changes to the Paycheck Protection Program (PPP) some of which will take effect on February 24, 2021. On February 22, 2021, The White House Posted, “FACT SHEET: Biden-Harris Administration Increases Lending to Small Businesses in Need, Announces Changes to PPP to Further Promote Equitable Access to Relief” (Fact Sheet).1 The proposal includes a period of exclusive access to the program for very small businesses, modifying the loan amount calculation for sole proprietors, independent contractors, and self-employed individuals, and expanding the eligibility rules.
The Fact Sheet does not provide many details regarding how and when the proposed changes will become effective. Given that the current PPP funding expires on March 31, 2021, we can expect a period of renewed rulemaking in the near future.
Application exclusivity period
The Fact Sheet declares that the administration will institute a 14-day period during which only businesses with fewer than 20 employees can apply for relief through the PPP. The period will begin on Wednesday, February 24, 2021. The stated goal is to allow lenders to focus on serving the smallest businesses which often struggle to collect the necessary paperwork to qualify.
The Fact Sheet does not address whether the rule will prohibit lenders from accepting applications from businesses with more than 20 employees or whether the prohibition will only extend to submitting the applications to the Small Business Administration (SBA). The proposed rule change will temporarily limit access to the PPP for businesses with more than 20 employees.
Increasing financial support for individuals
The Fact Sheet proposes changes to PPP loan calculations for sole proprietors, independent contractors, and self-employed individuals to increase the amount of loans available to them. There are no details on the changes.
Expanding eligibility
The Fact Sheet suggests that the PPP eligibility rules will be modified to:
- Eliminate the eligibility restriction applied to a business that is at least 20 percent owned by an individual who has been arrested or convicted of a non-financial assistance related felony within the previous year unless the applicant or owner is incarcerated at the time of application.
- Eliminate the exclusionary restriction that prevents small business owners who are delinquent on their federal student loans from obtaining relief through the PPP.
- Ensure access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Numbers to apply for relief.
The PPP rules will be changing soon. Small businesses that were previously denied eligibility or otherwise failed to qualify for a PPP loan due to any of the conditions discussed above should watch the SBA2 and U.S. Treasury3 websites for updates to determine if reapplication may be beneficial.
2 https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program
3 https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses