Temporary Paycheck Protection Program Limits Imposed by Biden Admin

As we mentioned last month, the December 2020 COVID relief package, formally known as the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act[1], has reanimated the previously-dormant Paycheck Protection Program (PPP), originally created by the CARES Act nearly a year ago.

Last week, the Biden administration announced that the PPP will be available only to the nation’s smallest businesses between Wednesday, February 24 and Tuesday, March 9. During that time, only businesses with fewer than 20 employees will be permitted to apply for a PPP loan. The new limitation is intended to address a criticism of the program that has plagued the Small Business Administration (SBA) since the PPP’s inception—that it was not sufficiently reaching some categories of employers, like minority-owned businesses that lacked relationships with PPP lenders and had been among the hardest hit by the economic downturn. According to the administration, 98 percent of small businesses have fewer than 20 employees.

Earlier today, the SBA released a new interim final rule governing these eligibility limitations; the public comment period is open for a 30-day period, beginning when the proposed regulation is published in the Federal Register.

While larger businesses will be prohibited from applying for PPP loans during this two-week window, businesses will still have about three weeks left to apply before the program’s lending authority expires again on Wednesday, March 31, unless Congress and the administration agree to extend the program’s lending authority again. The SBA has confirmed that applications from businesses of all sizes that were submitted before February 24 will continue to be processed during the small-business window.

Other Biden administration adjustments include a revision to eligibility calculations to allow sole proprietors, independent contractors, and the self-employed to receive more money. The administration has also announced a plan to set aside $1 billion for businesses that fall into that category and are in low- or moderate-income areas. Unfortunately, the SBA has already said it will not be able to retroactively revise loan amounts of any already-approved PPP loan.

The administration’s $1.9 trillion economic package would allocate an additional $7 billion to the PPP, but at the time of this writing, the package would not extend the PPP’s loan authorization period beyond March 31.

PIA will continue to work with the SBA and Treasury Department to improve the PPP borrowing process so that it offers the support our nation’s small businesses need.

[1] The Economic Aid Act extends the authority of the Small Business Administration (SBA) to again issue PPP loans, this time until March 31, 2021. The Act allocates billions of dollars in additional federal funds to provide those loans and revises some PPP requirements. Section 311 of the Economic Aid Act even authorizes the SBA to issue additional (“second-draw”) loans using the PPP.