The Paycheck Protection Program is getting a Biden administration makeover, the Treasury Department announced Monday—changes that could help many of the country’s struggling independent restaurants.
Core to the update, it will exclude businesses with more than 20 employees for a two-week period starting Wednesday.
Additionally, self-employed, sole proprietors, and independent contractors will qualify for more money, effective the first week of March. Business owners with non-fraud related felonies and some non-citizen residents, such as Visa holders, will now qualify as well.
The Biden administration’s goal, it said, is to funnel additional funding toward small businesses. One of the loudest criticisms of the first PPP was how it appeared to favor larger companies. In the restaurant space, brands like Shake Shack and Ruth’s Chris were criticized on social media for receiving loans. Both brands, among others, ultimately gave loans back.
Monday’s announcement did not say whether or not the program will be extended. It’s slated to end March 31.
President Biden criticized the PPP’s first round Monday in a press conference. He said it was designed for companies with banking connections. Biden added “mom-and-pop businesses got muscled out of the way by bigger companies that jumped in front of the line.”
“These changes will bring much-needed, long overdue help to small businesses who really need help staying open, maintaining jobs and making ends meet,” Biden said.
The PPP offers loans at an interest rate of 1 percent, with guidelines to have them forgiven if funds are used to keep employees on.
The SBA published a release Monday that said, under Biden’s administration, share of funding for businesses with fewer than 10 employees increased nearly 60 percent in this third round, which kicked off a month ago. The share of funding going to small businesses in rural areas rose nearly 30 percent, and the share of funding distributed through Community Development Financial Institutions and Minority Depository Institutions lifted more than 40 percent.
The first program closed in August. Funding was added in December, when the PPP reopened. Fresh loans were aimed at companies with fewer than 300 employees that had seen drops of at least 25 percent of their revenue during the first, second, or third quarters of 2020.
Since that date, roughly $134 billion has been doled out to 1.8 million small business owners.
For restaurants, complaints about the first edition mirrored the overall sentiment. The “Accommodation and Food Services” sector received just 8.1 percent of PPP dollars.
However, the group received more than 134,166 loans in the latest round, according to February data from the SBA. This time, the hospitality sector was the leading borrower across the board with 18 percent of the $101 billion, or $18 billion or so.
Small businesses account for 44 percent of U.S. GDP, according to a White House release Monday. They create two-thirds of net new jobs and employ nearly half of America’s workers.
“The 14-day exclusive application period will allow lenders to focus on serving these smallest businesses,” the release said. “The Biden-Harris administration will also make a sustained effort to work with lenders and small business owners to ensure small businesses take maximum advantage of this two-week window.”
With other changes, the Biden administration said it wanted to help sole proprietors, independent contractors, and self-employed individuals. These types of businesses, include home repair contractors, beauticians, and small independent retailers.
“Of these businesses, those without employees are 70 percent owned by women and people of color. Yet many are structurally excluded from the PPP or were approved for as little as $1 because of how PPP loans are calculated,” the administration said.
In turn, the loan calculation formula has been revised so it offers more relief, and establishes a $1 billion set aside for businesses in this category without employees located in low- and moderate-income areas.
