PPP Loan Changes Should Open Doors For Smaller Businesses

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Business owners and independent contractors are expected to get increased access to pandemic relief loans with forgiveness under the upcoming rule changes announced on Monday.

Right now, entrepreneurs, sole proprietors and the self-employed need to calculate their paycheck protection program loans. using their bottom line, which reduces the amount to which they are entitled.

The Small Business Administration will soon release an interim final rule allowing these people, whose entities make up the vast majority of U.S. businesses, to instead use their gross income to calculate their loans, a White House official told Bloomberg. Monday night tax. Previously, the White House announced several changes to the paycheck protection program intended to extend the reach the loan program, which offers government guaranteed loans that can be canceled.

The SBA will provide details throughout this week and implement the change by the first week of March, the official said in an email. The planned rule change, which would allow affected businesses to qualify for larger loans, follows a recent request dozens of small business and business organizations.

“It only makes sense,” said Keith Hall, president and CEO of the National Association of Self-Employed Workers.

So far in the pandemic, Hall noted, “By definition, the net income of these companies is going to be worse.”

Another chance

A December relief law changed the loan program to allow small farmers and ranchers to apply using gross income, but left out non-employer businesses. The PPP reopened with new funding in january and nearly 2 million loans had been approved this round, as of Sunday.

According to Michael Greenwald, partner at Friedman LLP in New York City, non-employer companies with a net loss have been “excluded from the program” so far. The rule change “will certainly allow them to try to survive the economic uncertainty a little longer,” he said.

The change would be a game-changer for minority business owners, said Dafina Williams, senior vice president of Opportunity Finance Network, an association of financial institutions serving underserved areas and businesses.

Minority business owners tend to be sole proprietors or independent contractors, and under the rules of origin, they would have qualified for loans as small as $ 50 to $ 100, Williams said.

While advocacy groups have welcomed the Biden administration’s announcement, they have indicated they will push for further PPP changes. A few groups – like the Main Street Alliance and the National Association for the Self-Employed – said they plan to lobby lawmakers to have the change retroactive for people who have already applied for loans.

“We call on Congress to act just as quickly to make the adjustment retroactive, so that businesses that lacked the level of relief they previously needed can survive this perilous time and thrive as we move forward,” Ashley Harrington , federal director of advocacy and senior counsel for the Center for Responsible Lending, said in a statement.

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