Less than half of the PPP’s current funding of more than $ 284 billion has been used since it was relaunched on Jan. 11, with no fear of it running out. But since its inception last year, the program has been concerned that it is failing to reach the hardest-hit employers, especially minority-owned businesses that lack relationships with banks responsible for handling claims. PPP requests.
While the Small Business Administration, which runs the PPP, has seen an improvement in funds for small businesses, administration officials told reporters on Sunday evening they were limiting access to the program to push lenders to do so. 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 lenders to really focus on serving existing clients under the under 20 category and then proactively go out to find new small businesses. less than 20 employees to help, ”said an administration official. .
The announcement marks Biden’s first major initiative to put his mark on the program and reflects his promise to make economic equity a top priority. It is also the latest twist in the operation of the PPP, which has made more than $ 662 billion available to companies since its inception last March. The program was hugely popular but faced a series of controversies relating to loans initially given to large companies, unclear rules for lenders, and significant fraud.
More recently, the SBA has faced complaints that the anti-fraud measures it imposed in the latest version of the program in response to last year’s criticism were too strict, forcing it to rethink its safeguards. against fraudsters so that legitimate businesses do not face delays in receiving assistance.
In addition to the window for small employers to apply, the administration will take steps to expand access to P3s to underserved businesses.
The changes include revising the eligibility calculations so that sole proprietors, independent contractors and self-employed people receive more funds. The administration said it also plans to set aside $ 1 billion for businesses in this category and located in low- and moderate-income areas.
The change disappointed some small business owners who had previously applied for and received P3 funds. A spokesperson for the SBA said the agency was unable to retroactively revise loan amounts on PPP loans that had already been approved.
Additionally, the SBA will remove restrictions on business owners with non-fraud felony convictions and delinquents on their federal student loans. The agency will also clarify that business owners who are not U.S. citizens can use individual tax identification numbers to request relief.
While many companies will not be eligible to apply during the SBA’s two-week window, administration officials have said they expect large employers to have enough time to apply. PPP loans before the loan authorization expires on March 31. They also said that applications submitted by large companies before Wednesday would continue to be processed and not face any delays.
The $ 1.9 trillion economic aid bill Biden is seeking would provide an additional $ 7 billion for the PPP, but not extend the duration of the program. An administration official told reporters on Sunday that if Congress wanted to pursue an extension, “then we will consider it.”
PPP lenders, who had not been made aware of the plan before it was announced, will play a key role in implementing the changes. The administration plans to inform them today. Some bankers were already expressing skepticism about how the changes would work and whether they were even needed.
Lenders say they don’t face an overwhelming demand that prevents them from helping small borrowers. There is also evidence that the companies highlighted by Biden receive loans. Bank of America, a major lender, said 93% of the 87,000 PPP loan applications it processed this year were from businesses with fewer than 20 employees.
Consumer Bankers Association president and CEO Richard Hunt said the overhaul would make it easier for smaller businesses in the country, including those in low and moderate income areas, but the administration needed to do more to reduce red tape.
“However, without addressing the issues lenders have raised since the program reopened, such as streamlining some of the accounting requirements imposed by Congress and resolving issues with the SBA’s internal processing systems, this window of two weeks will not fundamentally change the hurdles businesses face, “” It’s like giving everyone a train ticket on an unfinished railroad. “