Less than half of PPP’s more than $ 284 billion in current financing has been used since the January 11 relaunch, with little concern that it would run out. But the program has been plagued by concerns, since its creation last year, that it was failing to reach the most affected employers, especially minority-owned companies that have no relationship with the banks responsible for processing PPP applications.
Although the Small Business Administration, which manages the PPP, saw improvements in funds reaching smaller companies, government officials told reporters on Sunday night that they were limiting access to the program to pressure creditors to do even more to work with smaller employers. Ninety-eight percent of small businesses have fewer than 20 employees, according to the Biden administration.
“During this two-week period, we want creditors to be really focused on serving existing customers who are in the category of under 20 employees and then go out proactively to find new small businesses with less than 20 employees to help,” said an administration official.
The announcement marks Biden’s first major move to put his brand on the show and reflects his promise to make economic equity a priority. It is also the most recent turnaround in the PPP operation, which has made more than $ 662 billion available to companies since its creation last March. The program was extremely popular, but it faced a series of controversies related to loans that initially went to large companies, unclear rules for creditors and significant fraud.
More recently, the SBA has faced complaints that the anti-fraud measures it imposed in the last iteration of the program in response to criticism last year were too strict, forcing it to rethink its safeguards against scammers so that legitimate companies would not face delays in receiving aid. .
In addition to the window for small employers to apply, management will take steps to expand PPP access to underprivileged companies.
The changes include revising eligibility calculations so that individual owners, independent contractors and self-employed individuals receive more funds. The government said it also plans to allocate $ 1 billion to companies that are in this category and are located in low- and moderate-income areas.
The move disappointed some small business owners who had already signed up and received PPP funds. A SBA spokesman said the agency was not able to retroactively review the amounts on PPP loans that had already been approved.
In addition, the SBA will eliminate restrictions on business owners with convictions for crimes unrelated to fraud and defaulters in their federal student loans. The agency will also clarify that business owners who are not US resident citizens can use individual taxpayer identification numbers to apply for relief.
Although many companies are banned from applying during the two-week period planned by the SBA, government officials said they hope that major employers will have enough time to apply for PPP loans before the loan authorization expires on March 31. They also said that orders submitted by larger businesses before Wednesday would continue to be processed and would not face delays.
The $ 1.9 trillion financial aid account that Biden is seeking would provide another $ 7 billion for PPP, but it does not extend the life of the program. A government official told reporters on Sunday that if Congress wanted to seek an extension, “we will consider it then”.
PPP lenders, who were not informed about the plan before its announcement, will be instrumental in implementing the changes. The government plans to inform them today. Some bankers have already expressed skepticism about how the changes would work and whether they would be needed.
Creditors say they are not facing an overwhelming demand that prevents them from helping small borrowers. There is also evidence that the businesses highlighted by Biden are receiving loans. Bank of America, one of the biggest lenders, said that 93 percent of the 87,000 PPP loan applications processed this year were for companies with fewer than 20 employees.
Consumer Bankers Association President and CEO Richard Hunt said the reform will make “a little easier” for the country’s smallest companies, including those in low and moderate income areas, but that the government needs to do more to reduce the bureaucracy.
“However, without addressing the issues raised by creditors since the reopening of the program, how to simplify some of the accounting requirements imposed by Congress and addressing issues with the SBA’s internal processing systems, this two-week window will not fundamentally change the obstacles facing companies are facing ”. he said. “It’s like giving everyone a train ticket on an unfinished railway.”