Paycheck Protection Program changes bring relief to self-employed and non-employment businesses

PPP+and+small+businesses

Marco Virch | Flickr

Gabriel Rivera, Science & Technology Editor

The Biden Administration announced a series of alterations to the Paycheck Protection Program to accommodate small businesses in greater need of federal aid in February..

Changes to the program included adding a two-week window for businesses with fewer than 20 employees to apply for federal loans and a more equitable method of loan calculation for sole proprietors, according to a statement released by the White House. The window has since ended on March 3.

“These changes will bring much-needed, long overdue help to small businesses who really need help staying open, maintaining jobs and making ends meet,” President Joe Biden said in a February speech, according to CNN.

“Getting our economy back means bringing our small businesses back. And that’s what we’re going to do and that’s what I’m doing today,” the president added.

The Payment Protection Program was a cornerstone of the CARES Act, the COVID-19 relief package former President Donald Trump approved at the end of March 2020,which originally promised $350 billion dollars to small businesses in peril.

The program was immediately beset with serious issues as financially-thriving businesses that were not in financial turmoil received loans, while smaller businesses in danger of closing their doors permanently didn’t receive the needed aid.

In fact, last summer, small businesses owned by people of color often lagged behind in receiving loans through PPP.

This was because PPP originally entrusted large banks with the task of loaning out money, leaving out many business owners, predominantly people of color, from having access to loans because they were not existing customers, according to data from the Brookings Institution.

Although the program received another $284 billion for businesses to borrow last December, the smallest businesses that are most vulnerable to suffering unrecoverable losses continued to have a hard time getting loans, according to The New York Times.

According to the U.S. Census Bureau, inequitable distribution of PPP loans has also left nonemployer businesses, small businesses with no paid employees, and the self-employed struggling to receive a cent in federal aid, with some reported to be approved for just a $1 loan through the program.

A large number of nonemployer business owners also come from minority backgrounds. Four in 10 nonemployer businesses are owned by women and almost one-third are owned by minorities, according to data from the U.S. Small Business Administration.

Although the program received another $284 billion for businesses to borrow last December, the smallest businesses that are most vulnerable to suffering unrecoverable losses continued to have a hard time getting loans, according to The New York Times.

The new reforms were tailored toward these small businesses receiving the aid they desperately need, allowing the administration to fulfill one of its top priorities, according to the statement made by the White House.

“I was cleaning, and I said, ‘Thank God,’” Sinelia Louis, a sole proprietor in St. Louis, told CNBC about the new changes to the Paycheck Protection Program. “That gives me some hope to keep going, some hope that my business will not die right here, right now.”

In addition to the loan window, there will now be a new method for calculating loans for nonemployer businesses to ensure they receive appropriate aid and an exclusive $1 billion fund “for business in this category without employees located in low- and moderate-income areas,” according to the White House.

Biden emphasized in his February remarks about the program that the reforms are “a starting point, not the ending point.”

“We need Congress to pass my American Rescue Plan. It deals with the immediate crisis facing our small businesses,” Biden said.

The $1.9 trillion COVID-19 relief plan, which is expected to be signed into law in the upcoming days, will most notably give all Americans $1,400 stimulus checks, but it will also allocate $7 billion dollars to the Paycheck Protection Program and make a larger percent of non-profit organizations eligible to receive a loan, according to CNN.

Although many sole proprietorships and nonemployer businesses have been able to breathe a sigh of relief with the new changes to the program, some owners are still not sold. They point out that the recent reforms have done little to fix the program’s biggest flaws, such as not receiving enough in loans or struggling to borrow money due to long wait times and paperwork.

“This two-week window will not fundamentally alter the roadblocks businesses are facing,” said Richard Hunt, the president and CEO of the Consumer Bankers Association, according to The New York Times. “It is like giving everyone a train ticket on an unfinished railroad.”