Biden Steers PPP Loans to Smallest Businesses

For two weeks, mom-and-pop businesses will move to the front of the line for Paycheck Protection Program loans.

picture of owners of small butcher shop
(Image credit: Getty Images)

The Biden administration has announced some tweaks to the Paycheck Protection Program (PPP) meant to boost access to the forgivable loans for mom-and-pop businesses.

The Small Business Administration will soon accept applications for PPP loans exclusively from businesses and nonprofits with fewer than 20 employees, for a period of 14 days. The SBA says that the share of the program's funding going to businesses with fewer than 10 employees is up nearly 60% when compared with the same point in the program last year. But the Biden administration wants to further target the PPP to the smallest businesses. The 14-day period will start on Wednesday, February 24, 2021, at 9:00 am.

The SBA will also allow sole proprietors, independent contractors and self-employed individuals to receive more financial support. These types of businesses, which include home repair contractors and small independent retailers, make up a significant share of all businesses. The SBA will revise the PPP's calculation formula for these applicants so that it offers more relief.

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The SBA is eliminating the restriction that prevents small-business owners who are delinquent on their federal student loans from getting a PPP loan. Currently, the PPP is not available to any business with at least 20% ownership by an individual who is currently delinquent or has defaulted within the past seven years on a federal debt, including a student loan.

The agency will also eliminate the restriction that disqualifies small-business owners with prior non-fraud felony convictions from getting a PPP loan – a move with broad bipartisan support. The SBA has also clarified that small-business owners who are not U.S. citizens, but are lawful U.S. residents, may use their Individual Taxpayer Identification Number to apply for a loan. These changes will be implemented by the first week of March.

Congress provided $284 billion for the latest round of PPP loans under the coronavirus relief package passed in December. As of February 18, less than half of those funds have been used.

Rodrigo Sermeño
, The Kiplinger Letter

Rodrigo Sermeño covers the financial services, housing, small business, and cryptocurrency industries for The Kiplinger Letter. Before joining Kiplinger in 2014, he worked for several think tanks and non-profit organizations in Washington, D.C., including the New America Foundation, the Streit Council, and the Arca Foundation. Rodrigo graduated from George Mason University with a bachelor's degree in international affairs. He also holds a master's in public policy from George Mason University's Schar School of Policy and Government.