Companies with less than 20 employees can apply within two weeks.
The paycheck protection program is getting a facelift with the Biden administration, the Treasury Department said on Monday, changes that could help many ailing independent restaurants nationwide.
At the heart of the update, it will exclude companies with more than 20 employees for a two-week period starting Wednesday.
In addition, self-employed, sole proprietors, and independent contractors will be eligible for more money, starting the first week of March. Business owners who have committed non-fraud crimes and certain non-citizen residents, such as visa holders, will now also be eligible.
The goal of the Biden administration, he said, is to funnel additional funds to small businesses. One of the harshest criticisms of the first PPP was how it seemed to favor large companies. In the restaurant business, brands like Shake Shack and Ruth’s Chris have been criticized on social media for receiving loans. The two brands, among others, eventually repaid loans.
Monday’s announcement did not say whether the program will be extended or not. It is scheduled to end on March 31.
President Biden criticized the first round of the PPP at a press conference on Monday. He said it was designed for businesses with banking connections. Biden added that “family businesses have been sidelined by larger companies that have jumped in front of the line.”
“These changes will provide much needed and long overdue help to small businesses that really need help staying open, maintaining their jobs and making ends meet,” Biden said.
The PPP offers loans at an interest rate of 1%, with guidelines for having them canceled if the funds are used to retain employees.
The SBA released a statement on Monday saying that under the Biden administration, the share of funding for companies with less than 10 employees increased by nearly 60% in this third round, which began a month ago. The share of funding going to small businesses in rural areas has increased by almost 30 percent, and the share of funding distributed by community development finance institutions and minority depositories has increased by more than 40 percent.
The first program ended in August. The funding was added in December, when the PPP reopened. The new loans were aimed at companies with fewer than 300 employees who had experienced a decline of at least 25% in their revenues in the first, second or third quarters of 2020.
Since that date, approximately $ 134 billion has been distributed to 1.8 million small business owners.
For restaurants, complaints about the first edition reflected general sentiment. The “Accommodation and food services” sector received only 8.1% of PPP dollars.
However, the group received over 134,166 loans in the last round, according to February data from the SBA. This time around, the hospitality sector was the biggest borrower across the board with 18% of the $ 101 billion, or around $ 18 billion.
Small businesses account for 44% of U.S. GDP, according to a Leaving the White House Monday. They create two-thirds of net new jobs and employ nearly half of American workers.
“The exclusive 14-day application period will allow lenders to focus on servicing these smaller businesses,” the statement said. “The Biden-Harris administration will also make a sustained effort to work with lenders and small business owners to ensure that small businesses make the most of this two week window.”
With other changes, the Biden administration has said it wants to help sole proprietors, independent contractors and self-employed people. These types of businesses include home repair contractors, beauticians, and small independent retailers.
“Of these businesses, those that do not have employees are 70% owned by women and people of color. Yet many are structurally excluded from PPP or have been approved for as little as $ 1 because of the way PPP loans are calculated, ”the administration said.
In turn, the formula for calculating loans has been revised to provide more relief and establishes a reserve of $ 1 billion for companies in this category without employees located in low and modest income areas.