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PPP Loan Changes Should Open Doors For Smaller Businesses

Business owners and independent contractors are expected to have increased access to repayable pandemic loans under upcoming rule changes announced on Monday.

Currently, entrepreneurs, sole proprietors and the self-employed must calculate their paycheck protection program loans. using their bottom line, which reduces the amount to which they are entitled.

The Small Business Administration will soon release an interim final rule allowing these people, whose entities make up the vast majority of U.S. businesses, to instead use their gross income to calculate their loans, a White House official told Monday. Bloomberg Tax. Earlier, the White House announced several adjustments to the paycheck protection program intended to extend the reach the loan program, which offers government guaranteed loans that can be canceled.

The SBA will provide details throughout this week and implement the change by the first week of March, the official said in an email. The planned rule change, which would allow affected businesses to qualify for larger loans, follows a recent request dozens of small business and business organizations.

“It only makes sense,” said Keith Hall, president and CEO of the National Association for the Self-Employed.

So far into the pandemic, Hall noted, “By definition, the net income of these companies is going to be worse. “

Another chance

A December relief law changed the loan program to allow small farmers and ranchers to apply using gross income, but left out businesses without employers. The PPP reopened with new funding in january and nearly 2 million loans had been approved this round, as of Sunday.

Employer-less companies with a net loss have been “excluded from the program” so far, according to Michael Greenwald, a partner at Friedman LLP in New York. The rule change “will certainly allow them to try to survive the economic uncertainty a little longer,” he said.

The change would be a game-changer for minority-owned business owners, said Dafina Williams, senior vice president of Opportunity Finance Network, an association of financial institutions catering to underserved areas and businesses.

Minority business owners tend to be sole proprietors or independent contractors, and under the rules of origin, they would have qualified for loans as small as $ 50 to $ 100, Williams said.

While advocacy groups have welcomed the Biden administration’s announcement, they have indicated they will push for further changes to the PPP. A few groups, such as the Main Street Alliance and the National Association for the Self-Employed, said they plan to pressure lawmakers to have the change retroactive for people who have already applied for loans.

“We call on Congress to act just as quickly to make the adjustment retroactive, so that businesses that lacked the level of relief they previously needed can survive this perilous time and thrive as we move forward,” Ashley Harrington, Federal Director of Advocacy and Senior. the attorney for the Center for Responsible Lending said in a statement.

Margarita W. Wilson

The author Margarita W. Wilson