Temporary PPP Application Window for Small Businesses Coming

The White House has put forward a series of Paycheck Protection Program changes targeted at small businesses and those not able to take advantage of the earlier relief efforts. 

According to the Feb. 22 announcement, the Administration will establish a two-week period, starting Wednesday, during which only businesses with fewer than 20 employees can apply for relief through the program. Noting that 98% of small businesses have fewer than 20 employees, the administration suggests that the 14-day exclusive application period will allow lenders to focus on serving these smallest businesses. 

To help those businesses that may have been “structurally excluded” from the PPP or were approved for as little as $1 because of how PPP loans are calculated, the administration also says it will revise the loan calculation formula for these applicants so that it offers more relief, and establish a $1 billion set-aside for businesses in this category without employees located in low- and moderate-income areas.

Additional changes to the program include:  

• Eliminating a restriction that prevents small business owners with prior non-fraud felony convictions from obtaining relief through the PPP. Currently, a business is ineligible for PPP if it is at least 20% owned by an individual who has 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. 
• Eliminating a restriction that prevents small business owners who are delinquent on their federal student loans from obtaining relief. The PPP is currently not available to any business with at least 20% ownership by an individual who is currently delinquent or has defaulted within the last seven years on a federal debt, including a student loan. 
• Ensuring access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Numbers (ITINs) to apply for relief. Here, the administration contends that the PPP statute is clear that all lawful U.S. residents may access the program, but a lack of guidance from the SBA has created inconsistency in access for ITIN holders. The announcement advises that the SBA will address this by issuing guidance in the coming days. 

In addition to these changes, the Administration says that it will continue to take steps to:

• address waste, fraud and abuse within the program; 
• promote transparency and accountability by improving the PPP loan application; 
• update key areas of SBA websites to help more applicants find resources for understanding relief options and completing applications; 
• continue to conduct stakeholder outreach; and 
• enhance the current lender engagement model by increasing opportunities for lenders to provide recommendations, ask questions about the PPP and drive resolution of open questions in a more streamlined way.

The latest round of PPP funding—enacted Dec. 27, 2020, as part of the Consolidated Appropriations Act, 2021—sought to prioritize the needs of those employed by small businesses by authorizing up to $284 billion toward job retention (including retirement plan contributions) and certain other expenses through March 31, 2021. 

It also allows certain existing PPP borrowers to apply for a second draw PPP loan. The program reopened in early January and updated PPP guidance outlining program changes was released Jan. 6 in accordance with the legislation.