For Two Weeks, Only the Smallest of Businesses May Apply for PPP Loans

Chris Gaetano
Published Date:
Feb 22, 2021

Starting this Wednesday, and going on for two weeks after that, only businesses with fewer than 20 employees may apply for Paycheck Protection Program (PPP) loans, the White House announced on Monday. The two-week period ends on March 9. As the overall program ends March 31, this means there will only be about three weeks for other businesses (with between 20 and 500 employees) to file applications, after that period.

The change is meant to address a major critique of the last program, namely that much of the money meant for small businesses wound up going to large corporations, which claimed the funds through a variety of methods such as counting individual franchises as separate borrowing entities.

As the White House seems to be focused solely on a business's number of workers, it is unknown the degree to which wealthier businesses will be deterred from claiming funds anyway, specifically those that technically fall within the headcount limit but are generally not what one thinks of when envisioning a small business, such as hedge funds, since the whole point of their business model is to have few employees so that managers can keep most of the profits themselves. While the Small Business Administration (SBA) does have standards for what counts as "small" in many different industries, and while such standards do factor in profits versus headcount in certain cases, these thresholds can be in the tens of millions.

Beyond the two-week window in which only businesses with very few employees can apply, the administration said it will also:

* Remove the restriction that prevents small business owners with prior non-fraud felony convictions from obtaining relief through the Paycheck Protection Program;

* Remove the restriction that prevents small business owners who are delinquent on their federal student loans from obtaining relief through the Paycheck Protection Program;

* Ensure access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Numbers (ITINs) to apply for relief;

* Make loan guaranty approval contingent on passing SBA fraud checks, the Treasury Department’s Do Not Pay database, and public records;

* Revamp the application itself to make it easier to understand and fill out;

* Improve the SBA website to make it easier to find programs;

* Continue stakeholder outreach; and

* Launch  a new initiative to deepen its relationships with lenders.

The PPP has, so far this year, disbursed about $134 billion of $284 billion allocated funds, but many business owners are facing unacceptable delays from both administrative errors as well as fraud checks, reported the New York Times. The White House's changes are meant to at least partially address these issues as well.

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