The federal government has announced new rules for Paycheck Protection Program loans intended to help more small businesses obtain them.
Starting Wednesday, only businesses with 20 or fewer employees can apply for PPP loans during a two-week period. The 14-day exclusive application period will allow lenders to focus on serving small businesses, President Biden’s administration announced.
The administration also announced plans to assist sole proprietors, independent contractors, and self-employed individuals receive more financial support. Many were structurally excluded from the PPP or were approved for as little as $1 because of how PPP loans are calculated.
To address this problem, loan calculation formulas are being revised for these applicants. The government is also setting aside $1 billion for sole proprietors, independent contractors, and self-employed individuals without employees located in low- and moderate-income areas.
The Biden administration also announced these additional changes for PPP loans:
- Eliminating a restriction preventing small business owners with prior non-fraud felony convictions from obtaining loans.
- Eliminating a restriction preventing small business owners delinquent on federal student loans from obtaining loans.
- Allowing non-citizen small business owners who are lawful U.S. residents to use Individual Taxpayer Identification Numbers to apply for loans.
More information on the changes can be found here.
Most banks can help businesses apply for PPP loans or the U.S. Small Business Administration has information to help match businesses and lenders here.
The U.S. is currently in its second round of PPP loans, totaling $284 billion in funding. The second round loans have some different rules than the previous PPP loans, including:
- Interested businesses must show a significant revenue reduction through providing documentation of a 25% reduction from the gross receipts during any one quarter of 2020 compared to 2019.
- A maximum loan amount of $2 million compared to the previous $10 million.
- An eligibility requirement of 300 or fewer employees.
- Hotels, restaurants and other businesses with NAICS 72 codes can get up to 3.5 times their average monthly payroll costs instead of the standard 2.5 times.