Small businesses are receiving a boost from changes to the Paycheck Protection Program‘s (PPP) rules. Only companies with fewer than 20 employees will be able to obtain loans for two weeks starting on Wednesday. President Joe Biden is expected to announce the change to the PPP rules today.
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PPP rules to be changed
The PPP provides forgivable loans to businesses to help them keep employees on the payroll so that they don't have to cut jobs. The loans are only forgivable if companies spend at least a certain percentage of the money on payroll and follow other stipulations.
According to Business Insider, Biden's move to change the PPP rules temporarily aims to reach more smaller businesses owned by minorities and sole proprietors. Many of these businesses didn't receive forgivable loans in the program's previous rounds.
The Biden administration said that starting on Wednesday, the Small Business Association will only accept applications for PPP loans from companies with fewer than 20 employees. The change in the PPP rules will ensure that more money is set aside for smaller businesses so that larger companies don't take all the money that's been set aside and crowd them out.
Plenty of money left over
When the SBA launched the Paycheck Protection Program, which was part of the CARES Act, the $349 billion initially set aside for it was used up in two weeks. Lawmakers approved an additional $320 billion for the program in May, but it expired in August with approximately $130 billion left over.
Congress approved another $248 billion for the PPP at the end of December, and the Biden administration said approximately $150 billion of that money remains available. However, the administration claims many minority-owned and very small companies in low-income areas haven't been able to secure funding form the program.
The changes to the PPP rules will supposedly make it easier for companies that don't have any employees that couldn't qualify before due to business cost deductions. Such firms include sole proprietorships, self-employed people and independent contractors.
Details on the new PPP rules
The SBA will make the PPP rules match the requirements used for small ranchers and farmers to receive financial assistance. The Biden administration also said the PPP would earmark $1 billion for businesses that don't have employees and are located in low- to moderate-income areas. Such firms are 70% owned by people of color and women.
The SBA will also clarify that legal U.S. residents who aren't citizens can also receive aid through the program. The PPP rules will also no longer exclude business owners who are delinquent on student loans. The Biden administration also wants to allow business owners with non-fraud felony convictions or arrests the previous year to receive funding unless they are incarcerated.