Administration Outlines Changes in PPP Loans – Focuses on Small Businesses

On February 22, 2021, the Biden Administration announced its intentions to assist primarily small businesses through the PPP loan. This focus will take effect this week under the guidance and direction of the Small Business Administration (SBA). Specifically, the SBA will restrict PPP loan application only to small businesses for a two-week period beginning on Wednesday, February 24, 2021 (at 9:00 AM EST) and ending on March 9, 2021. A “small business” is defined for this purpose as employers (businesses and not-for-profits) with fewer than 20 employees. On March 10, 2021, employers with over 20 employees will be able to again apply for PPP loans.

Background

The PPP loan was a cornerstone feature in the CARES Act enacted at the onset of the pandemic last March. It focused on keeping people working as the country dealt with the unfolding situation. Many businesses signed up for their PPP loans to provide critical liquidity during these fragile times, and if they used the loans primarily for payroll, their PPP loan could be forgiven. In late December, Congress enacted the Consolidated Appropriation Act, 2021 (CAA), which extended the PPP loan through March 31, 2021 and made several other changes – some retroactive to when CARES was passed.

Latest Directive on PPP Loans for Small Businesses

As noted above, the Administration and SBA announced directives emphasizing small businesses. Among the provisions are the following:

• A two-week exclusive PPP loan application period for employers (businesses and not-for-profits) with fewer than 20 employees;
• Changes to permit sole proprietors, independent contractors, and self-employed individuals to obtain more support by changing the PPP’s formula for these borrowers. These applicants will be allowed to calculate their loan amount based on gross revenues reported as a sole proprietor on their personal income tax return. More details are still needed on this revision;
• Removes a restriction on access to PPP loans to owners of small businesses with prior non-fraud felony convictions (consistent with a bipartisan congressional proposal);
• Also removes restrictions on access to owners of small businesses who have struggled to make federal student loan payments. The changes would eliminate these student loan delinquencies as disqualifiers to be entitled to PPP loans.

We wanted to make you aware of these emerging developments and will provide more updates on these changes as information is released. Small employers should look now at the next two weeks as a time to analyze and apply for any available PPP loans while they have the attention of lenders and the SBA. Employers with more than 20 employees that are in the process of applying for a PPP loan should contact their lender now to review the timeframe on their loan and see if the loan can be submitted prior to the February 24, 2021 date.

Please contact your Sikich advisor with any questions.

Resources:

Small Business Guidance (SBA)

Borrower Application-Updated Round One

Borrower Application-Second Draw

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