Biden Administration Announces Measures to Target PPP Loans to Smallest Firms

The White House today announced several measures to ensure the smallest firms have access to Paycheck Protection Program loans, including an exclusive application window for firms with fewer than 20 employees, a revised loan calculation and funding set-aside for sole proprietors and self-employed individuals and new eligibility for businesses owned by those with certain felony convictions. Five weeks after the PPP reopened, roughly $150 billion—more than half of the amount authorized for the 2021 round of PPP—remains available. The current round of funding expires on March 31.

Specifically, the White House said that the Small Business Administration would:

  • Provide an exclusive 14-day window, starting Wednesday, Feb. 24, when only businesses with fewer than 20 employees are eligible to apply.
  • Set aside $1 billion for PPP loans for sole proprietors, independent contractors and self-employed individuals in low-to-moderate-income areas and revise the loan calculation formula for these applicants. (According to press reports, the revised formula would only be available to new applicants, not retroactive.)
  • Eliminate a rule restricting businesses at least 20% owned by an individual who was arrested for or convicted of a felony related to financial assistance fraud in the previous five years or any other felony within the previous year; the restriction will only apply to businesses with applicants or owners who are incarcerated from receiving PPP loans.
  • Eliminate a rule restricting businesses at least 20% owned by an individual who is delinquent on student debt from receiving PPP loans.
  • Clarify that non-citizens may apply using individual taxpayer identification numbers.

To prompt more applicants to self-report demographic data, SBA has already updated the loan application form to include demographic data on the front page, the White House said. Meanwhile, “SBA is launching a new initiative to deepen its relationships with lenders,” the White House added. “This model will increase opportunity for lenders to provide recommendations and ask questions about the PPP and drive resolution of open questions and concerns in a more streamlined way.”

American Bankers Association President and CEO Rob Nichols expressed the industry’s continued commitment to ensuring that PPP loans are widely available. “Since the start of the pandemic, banks of all sizes have stepped up to provide more than 87% of all PPP loans, reaching more than 4.6 million small businesses and supporting more than 48 million jobs,” Nichols said. “More than 86% of PPP loans made by banks in 2020 were for less than $150,000, with an average loan size of $108,235. In the current round alone, 81% of PPP loans have gone to businesses with fewer than 10 employees.”

Nichols added that banks stand ready to implement the changes announced yesterday, “just as they have adjusted to the myriad of PPP changes over the past year. We remain hopeful that as this program enters its final weeks, SBA will work with lenders in addressing the many administrative issues that are still hindering some small businesses from fully utilizing the program. Clear and transparent guidance on exactly which businesses are eligible for PPP loans during the upcoming restricted access period is absolutely essential.”

ABA continues to encourage banks to reach out to all eligible small businesses and sole practitioners who may need PPP funds. The association will soon launch an ad campaign in underserved areas to promote PPP availability.