President Biden today announced changes to the COVID-relief business loans program aimed toward the small and minority-owned businesses left out in previous rounds of aid. The changes make it easier to qualify, and includes an exclusive 14-day window for small business owners to apply for loans, starting Wednesday. Here’s what you need to know.
Changes to the Paycheck Protection Program
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Of the $284 billion that Congress allocated to another round of Paycheck Protection Program (PPP) loans in December, only $134 billion has been awarded to small businesses, according to USA Today. As Biden has previously criticized the PPP program for not reaching its intended recipients, the following reforms are intended to bridge the gap.
- Starting Wednesday, small businesses with fewer than 20 employees (which accounts for 98% of all small businesses) will have an exclusive 14-day window to apply for loans. Businesses with more than 20 employees will be blocked from making a loan application during this time.
- The program’s loan calculation formula will be adjusted so that independent contractors, sole proprietors and the self-employed will have a better chance of getting the loans. The Biden administration says that many repair contractors, beauticians and small independent retailers were either excluded from the program or approved for very low loan amounts, sometimes as little as $1.
- President Biden will dedicate $1 billion in funding exclusively for sole proprietors without employees located in low- and moderate-income areas. Of these businesses without employees, 70 percent are owned by women and minorities.
- Biden will also do away with restrictions that prevent small business owners from applying for loans if they have non-fraud-related felonies, were delinquent on their federal student loans, or were Green Card holders or in the country on visas.
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How PPP loans work
As part of the CARES Act, the PPP program was designed to help small businesses cover costs during the pandemic. First-time loans are capped at 2.5 times average monthly payroll costs, with a maximum of $10 million, at a fixed 1% interest rate, according to the Small Business Administration (SBA). However, loans can be forgiven if a company spends at least 60% of the money on payroll expenses like wages or health insurance, and a maximum of 40% on other qualifying expenses, such as rent or utilities.
The program expires at the end of March and further renewal of the program is not included in Biden’s $1.9 trillion relief plan currently winding its way through Congress.
To apply, visit the SBA’s PPP webpage on Wednesday, when applications for small businesses will be accepted. For more general information about PPP loans, visit here.