Biden Administration Expands PPP Eligibility for Small Businesses

On February 22nd, the White House announced updates to the Paycheck Protection Program (PPP) involving PPP eligibility for small businesses. For example, in the new fact sheet (Fact Sheet), the Biden Administration (Administration) outlines a proposal that includes the following:

• 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, however, does not provide many details on when many of the proposed changes will become effective. Additionally, as of the publication date of this post, all current PPP funding expires on March 31st, 2021. Judging by the release of this Fact Sheet, we may see an extension of that date in the near future. The new release follows a large number of Executive Orders that President Joseph Biden put into effect after entering office.

Small Business Application Exclusivity

One of the Administration’s goals is to make sure that all eligible small businesses have an equal chance at funding. Accordingly, the guidance institutes a 14-day period where only businesses with fewer than 20 employees can apply for PPP relief. That period begins on February 24th, 2021. Now, lenders can focus on serving the smallest businesses, which often struggle with the paperwork needed to qualify.

Increasing Financial Support to Specific Individuals

As mentioned earlier, the Fact Sheet proposes changes to PPP loan calculations for certain individuals. These changes would increase the amount of loans available to:

• sole proprietors;
• independent contractors; and
• self-employed individuals.

There are no specific details on the changes, however, in the Fact Sheet. These new calculations will be available at a later date.

Expanding PPP Eligibility

The Fact Sheet also suggests that the changes to PPP eligibility for small businesses would:

• First, eliminate eligibility restrictions applied to specific business owners. This includes individuals who own at least 20 percent of the business and were previously arrested/convicted of a non-financial-related felony. The felony had to have occurred within the previous year. Currently incarcerated applicants or owners, however, are not eligible.
• Second, eliminate the restriction preventing small business owners who are delinquent on their federal student loans from obtaining PPP funding.
• Third, ensure access for non-citizen, resident small business owners by allowing the use of Individual Taxpayer Identification Numbers to apply.

 Employer Takeaways

In conclusion, this Fact Sheet signals that changes to the PPP will be occurring sooner rather than later. This is especially true in the realm of PPP eligibility for small businesses. Small businesses previously denied eligibility, or failed to qualify for a PPP loan, might now be able to receive funding. Employers need to watch for any information released by the Small Business Administration or U.S. Treasury for further application instructions.