Biden Boosts Pandemic Lending to Smallest of Small Businesses

President Joe Biden is extending federal pandemic assistance to the smallest of the nation’s small businesses and taking steps to ensure funds reach minority and woman-owned businesses.

The steps announced Monday morning are intended to bring more equity to the Paycheck Protection Program, one of the key provisions dating back to the very first coronavirus relief package.

The administration is establishing a two-week window, starting on Wednesday, in which only businesses with fewer than 20 employees can apply for the forgivable loans.

The White House is also carving out $1 billion to direct to sole proprietors, the majority of which are owned by women and people of color. These types of businesses, which include home repair contractors, beauticians, and small independent retailers, make up a significant majority of all businesses.

Another part of the plan Biden announced Wednesday will do away with a a prohibition on lending to a company with at least 20% ownership by a person arrested or convicted for a nonfraud felony in the prior year, as well as allowing those behind on their federal student loans to seek relief through the program.

Currently, the PPP is not available to any business with at least 20% ownership by an individual who is currently delinquent or has defaulted within the last seven years on a federal debt, including a student loan. Millions of Americans are delinquent on student loans, including a disproportionate number of Black borrowers.

“Working with the Departments of the Treasury and Education, the Small Business Administration will remove the student loan delinquency restriction to broaden access to the PPP,” the White House said.

The administration is also clarifying that noncitizen legal residents can apply to the program by informing them that may use their Individual Taxpayer Identification Numbers to apply for relief.

“The SBA has created inconsistency in access for ITIN holders like Green Card holders or those here on a visa. The SBA will address this unfair inconsistency by issuing clear guidance in the coming days,” it said in a press release.

Small businesses account for 44% of the nation’s Gross Domestic Product, create two-thirds of net new jobs, and employ nearly half of America’s workers.

However, millions of these businesses are now struggling to make ends meet in the wake of the COVID-19 pandemic and the resulting economic crisis.

The PPP, first rolled out in the earliest days of the pandemic and renewed in December, was meant to help keep Americans employed during the economic downturn. It allows small and mid-size businesses suffering a loss of revenue to access federal loans, which are forgivable if 60% of the loan is spent on payroll and the balance on other qualified expenses.

The program, which began April 3 and ended Aug. 8, handed out 5.2 million loans worth $525 billion

The latest round of Paycheck Protection Program funding, opened just last month and running through the end of March, has already paid out $133.5 billion in loans.

That’s roughly half of the $284 billion allocated by Congress with the average loan coming in at just under $74,000.

The White House effort unveiled Monday is aimed at correcting disparities in how the program was administered by the Trump administration.

According to the White House, compared to the same point in the program last year:

• The share of funding going to small businesses with fewer than ten employees is up nearly 60%;
• The share of funding going to small businesses in rural areas is up nearly 30%;
• The share of funding distributed through Community Development Financial Institutions and Minority Depository Institutions is up more than 40%.

The administration said the reforms announced Monday are intended to further build on that success.

In addition to these five changes, the administration said it will continue to take steps to ensure equitable distribution of relief that values “each and every taxpayer dollar.”

These steps include:

• Addressing waste, fraud, and abuse across all federal programs. Unlike the previous round of the PPP, loan guaranty approval is now contingent on passing SBA fraud checks, Treasury’s Do Not Pay database, and public records.
• Promoting transparency and accountability by improving the PPP loan application.
• Improving the “Emergency Relief Digital Front Door: by updating key areas of SBA websites to help more applicants find resources for understanding relief options and completing applications.
• Continuing to conduct extensive stakeholder outreach to learn more about challenges and opportunities in the implementation of current emergency relief programs.
• Enhancing the current lender engagement model. To further improve access to capital for small businesses, the SBA is launching a new initiative to deepen its relationships with lenders. 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.

A further renewal of the program is not currently included in Biden’s $1.9 trillion “ American Rescue Plan,” which Congress is still working through.

In a statement released after the White House announcement, House Speaker Nancy Pelosi said the president had “extended a lifeline” that will help struggling small businesses “while promoting equity and fairness across Main Street.”

“These vital reforms will expand access to the Paycheck Protection Program to the hardest-hit businesses that anchor our low and middle-income and communities of color,” she said. “Importantly, they will ensure that sole proprietors, which are overwhelmingly women and minority-owned and also serve our immigrant communities, are not left behind.”

Pelosi also took the opportunity to urge Republicans in Congress to join Democrats in supporting the Binden relief package, calling it a “necessary releif package for families and small businesses in their communities and throughout the country.”

The Small Business Administration announced Monday borrowers can apply for the Paycheck Protection Program by downloading the First Draw PPP loan application or Second Draw PPP loan application and working with a participating PPP lender through the SBA Lender Match tool.