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Biden's new Paycheck Protection Program: who can claim it?

President Biden has announced changes to the PPP system which aim to make it easier for small and minority-owned businesses to claim federal loans.

Biden's new Paycheck Protection Program: who can claim it?
SAUL LOEB AFP

President Joe Biden has announced a series of changes to the Paycheck Protection Program (PP) which aim to provide a boost for smaller and minority-owned businesses. The alterations include a two-week window for businesses with fewer than 20 employees to file for loans, preventing them being crowded out by larger firms.

In a White House event to announce the changes, Biden said: "Small businesses are the engines of our economic progress. They're the glue, and the heart and soul of our communities. But they're getting crushed.”

PPP was first introduced by the Trump administration and received a $284 billion burst of funding for small business loans in December’s emergency relief bill. So far the program has approved around $134 billion worth of forgivable small business loans to 1.8 million small businesses. The average size of those loans is around $74,000, providing vital funding for cash-strapped businesses.

New PPP will overhaul how business loans are calculated

One of the key changes Biden has introduced will see the eligibility requirements altered so unprofitable businesses will no longer be excluded.

In the past small businesses that are considered ‘unprofitable’ were disqualified from receiving the loans, while large businesses were not restricted in the same way. The size of loans was also limited for business owners who try to minimise the amount of taxable income in their filings, which is typical practice for small businesses.

The new system will see business loans based instead on gross income, which allows many expenses to be deducted and therefore allows many unprofitable businesses to qualify and for successful applicants to receive bigger loans.

Changes will benefit smaller and minority-owned businesses

In the announcement, Biden said that 400,000 small businesses in the United States have gone under due to the pandemic and millions more are at risk if more support is not provided. He described the Paycheck Protection Program as:

“A bipartisan effort - Democrats and Republicans helped pass it. But Democrats and Republicans have also voiced concerns about improving it. With their input, that’s what we’re doing.”

One of those improvements is a 14-day window, starting at 9:00am ET on Wednesday 24 February, during which only businesses with fewer than 20 employees can apply to receive PPP relief.

Biden has also removed restrictions introduced by the Trump administration that prevent small business owners with prior non-fraud felony convictions from receiving PPP support. This saw some small business owners who are delinquent on their federal student loans denied access to the loans.