FACT SHEET: Biden-Harris administration increases lending to needy small businesses, announces PPP changes to further promote equitable access to relief
Small businesses represent 44 percent of US GDP, create two-thirds of net new jobs and employ nearly half of American workers. Today, millions of small main street businesses – especially small businesses owned by blacks and Maroons – are struggling to make ends meet in the wake of the COVID-19 pandemic and the economic crisis that result.
The Biden-Harris administration has made providing fair aid to hard-hit small businesses a top priority. The last paycheck protection program (PPP) funding round opened just over a month ago and represents a significant marked improvement in the previous cycle of the program last year. Compared to the same point in the program last year:
- The share of funding for small businesses with less than ten employees is up to almost 60 percent
- The share of funding for small businesses in rural areas is up to almost 30 percent
- The share of funding distributed by community development finance institutions and minority depositories is up over 40 percent
The Biden-Harris administration is announcing several reforms to build on this success by focusing the PPP more on smaller businesses and those that have been left behind in previous relief efforts. While these efforts are not a substitute for adopting the US bailout, they will expand the resources needed to help small businesses survive, reopen and rebuild. Specifically, the Biden-Harris administration:
- Institute a 14-day period, starting Wednesday, during which only companies with fewer than 20 employees can request relief under the program. 98 percent of small businesses have fewer than 20 employees. These are Main Street businesses that anchor our neighborhoods and help families build wealth. And although the Biden-Harris administration has given these smaller companies much more relief in this PPP cycle than in the previous cycle, these companies often have more difficulty than large companies in collecting the necessary documents and obtaining using a lender. The exclusive 14-day application period will allow lenders to focus on serving these smaller businesses. 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.
- Help sole proprietors, independent contractors and the self-employed receive more financial support. These types of businesses, which include home repair contractors, beauticians, and small independent retailers, represent a significant majority of all businesses. Among these companies, those without employees are 70 percent 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. To remedy this problem, the Biden-Harris administration will revise the formula for calculating loans for these applicants to provide more relief, and establish a reserve of $ 1 billion for businesses in this category with no employees located. in low and middle income (LMI) areas.
- Under a bipartisan bill, remove an exclusionary restriction that prevents small business owners who have previously been convicted of a non-fraud felony from obtaining redress through the Paycheck Protection Program. Currently, a business is not eligible for PPP if it is at least 20 percent owned by someone who has either: (1) an arrest or conviction for a crime related to financial aid fraud during the previous five years; or (2) any other crime during the previous year. To expand access to PPPs, the Biden-Harris administration will pass bipartisan reforms included in the PPP Second Chance Act, co-sponsored by Senators Ben Cardin (D-MD), Rob Portman (R-OH), Cory Booker (D -NJ)) and James Lankford (R-OK), which would remove the second restriction (the one-year retrospective) unless the applicant or owner is incarcerated at the time of the application.
- Eliminate an exclusionary restriction that prevents small business owners who are behind on their federal student loans from getting relief through the Paycheck Protection Program. Currently, P3s are not available to any business 20% or more owned by someone who is currently past due or has defaulted for the past seven years on federal debt, including a student loan. Millions of Americans are behind on student loans, including a disproportionate number of black borrowers. In collaboration with the Treasury and Education departments, the SBA will remove the delay restriction on student loans in order to expand access to PPP.
- Ensure access to non-citizen small business owners who are legal residents of the United States by specifying that they can use Individual Tax Identification Numbers (ITINs) to request relief.. The status of PPPs makes it clear that all legal residents of the United States can access the program, but a lack of guidance from the SBA has created an inconsistency in access for ITIN holders such as cardholders. green or those who have a visa. The SBA will remedy this unfair inconsistency by issuing clear indications in the coming days that eligible applicants will not be able to be denied access to the PPP because they use ITINs to pay their taxes.
In addition to these five changes, the Biden-Harris administration has taken – and will continue to take – steps to ensure a fair distribution of relief that values every taxpayer dollar. These steps include:
- Fight waste, fraud and abuse in all federal programs. Unlike the previous cycle of the PPP, approval of the loan guarantee is now contingent on the successful completion of fraud checks by the SBA, the Treasury’s Do Not Pay database, and public records. The SBA now also performs manual loan reviews for the largest loans in the PPP portfolio and random sampling of other loans. The SBA has worked and will continue to work with its lending partners to create streamlined processes to resolve issues as quickly as possible, while ensuring that taxpayer dollars are spent wisely.
- Promote transparency and accountability by improving demand for PPP loans. To encourage self-reporting of demographics and better illustrate the impact of PPP on various segments of the population, the Biden-Harris administration revamped the PPP app.
- Improved digital emergency rescue entry door. The Biden-Harris administration is working to update key areas of SBA websites to help more applicants find resources to understand relief options and complete applications.
- Continue to conduct a broad stakeholder outreach to learn more about the challenges and opportunities in implementing current emergency relief programs. The President has spoken with several small business owners in recent weeks to understand their concerns about the relief program. And as part of the administration’s efforts to support small U.S. businesses, especially those in LMI communities, the vice president spoke with CEOs of major banks last week, to highlight the critical period ahead, the vital role that lenders must play during this period. and the Authority’s emphasis on PPP loans to underserved small businesses. Over the past few weeks, the vice president has also virtually met with small business owners and black chambers of commerce to discuss the challenges small businesses currently face and how adoption of the US bailout will bring about. critical help during a difficult time. At all levels and in all agencies, the administration will continue to work with communities to inform the design and implementation of vital programs that meet their needs.
- Improve the current model of lender engagement. As part of the Biden-Harris administration’s commitment to further improve access to capital for small businesses, the SBA is launching a new initiative to deepen its relationships with lenders. This model will increase the ability for lenders to provide recommendations and ask questions about the P3 and promote the resolution of outstanding questions and concerns in a more streamlined manner.