Since the first round of PPP loans, there has been much confusion and debate surrounding the eligibility requirements. Much of the debate focused on getting funding to the small businesses who need it to survive the economic impact caused by the COVID pandemic. The latest round of relief funding opened a month ago and contains significant changes to the PPP loan eligibility requirements. However, in a White House statement on Monday, February 22, 2021, the Biden-Harris administration released a statement containing further revisions to these requirements.
New PPP Loan Eligibility Guidelines
The latest revisions to PPP loan eligibility are designed to promote further equitable access to relief funding. The goal is to get PPP funding to the smallest businesses, many of which were passed over the first time around. These new guidelines are as follows.
14 Day Application Period for Small Businesses with 20 Employees or Less
This exclusive 14-day application period begins on Wednesday, February 24, 2021. According to the White House statement, 98% of small businesses meet the requirement of having 20 or fewer employees. These are the small ‘Main Street’ businesses that make each town unique and provide a livelihood for the owners and their families. Even with the less stringent requirements of the latest round of PPP funding, these small ‘Main Street’ businesses often struggle more to gather the necessary paperwork and secure relief funding from a lender. The purpose of the 14-day exclusive application period is to allow lenders to give their undivided attention to helping the smallest of businesses to secure the funding they need. The Biden-Harris administration has stated it will also make a sustained effort to work with lenders and small business owners to make sure small businesses truly benefit from this exclusive two-week window.
More Financial Support for Non-employee Businesses
Non-employee businesses include sole-proprietors, independent contractors, and self-employed individuals such as home repair contractors, beauticians, and small independent retailers. These types of businesses represent a large portion of all businesses, however, they are structurally excluded or approved amounts as little as a single dollar due to the way PPP loans are calculated. To address this issue and provide non-employee applicants with more relief funding, the Biden-Harris administration will revise the loan calculation formula and establish a $1 billion set aside for businesses in this category without employees located in low- and moderate-income (LMI) areas.
Eliminate the Exclusionary Restriction for Owners with Non-fraud Felony Convictions
Previously, business owners with non-fraud felony convictions were excluded from PPP loan eligibility. If at least 20% of the business is owned by an individual with either: (1) an arrest or conviction for a felony related to financial assistance fraud within the previous five years; or (2) any other felony within the previous year the business would not be eligible for a PPP loan. In an effort to expand PPPloan eligibility and access, the Biden-Harris administration will adopt bipartisan reforms included in the PPP Second Chance Act. This would exclude the second restriction mentioned above about having a felony in the previous year unless the applicant or owner is incarcerated at the time of the application.
Eliminate the Exclusionary Restriction for Owners with Delinquent Student Loans
In the initial round of PPP funding, a business with at least 20 percent ownership by an individual with a currently delinquent federal debt, including a student loan, wasn’t eligible. Unfortunately, there are millions of Americans with delinquent student loans. According to the White House statement, the SBA is working with the Departments of the Treasury and Education to remove the student loan delinquency restriction and broaden PPP loan eligibility.
Ensure Access for Lawful U.S.Resident (Non-citizen) Small Business Owners
Although the PPP statute is clear that all lawful U.S. residents may access the program, there has been inconsistency in access. This was caused by a lack of guidance from the SBA that those with Individual Taxpayer Identification Numbers (ITIN) could qualify for PPP loan eligibility. ITIN holders include those individuals with Green Cards or who are in the U.S. on a visa. According to the White House statement, the SBA will address this issue, providing clear guidance going forward that applicants who are otherwise eligible cannot be denied access to PPP relief because ITINs are used to pay their taxes.
Additional Steps for Ensure Equitable Access to Relief
In the White House statement issued by the Biden-Harris administration, the President and Vice President outlined future efforts to make sure PPP relief funding is reaching those small businesses that need it most. These include the following and are detailed in that statement.
- Addressing waste, fraud, and abuse across all federal programs.
- Promoting transparency and accountability by improving the PPP loan application.
- Improving the Emergency Relief Digital Front Door.
- Continuing to conduct extensive stakeholder outreach to learn more about challenges and opportunities in the implementation of current emergency relief programs.
- Enhancing the current lender engagement model.
In addition to providing alternative business funding options, CapFlow Funding Group is making every effort to provide our clients with the information they need to navigate the economic impact of the COVID pandemic and prosper despite it. Contact us today to find out how we can help.