PPP changes aim to help minority-owned and small businesses

Impact uncertain given tight deadline, confusion over guidelines

THE BIDEN ADMINISTRATION this week has made a series of changes to the federal Paycheck Protection Program aimed at helping more businesses struggling to stay afloat one year after the pandemic began.

In an effort to target small and minority-owned businesses, Biden said that for a two-week period starting February 24, only businesses with fewer than 20 employees will be able to apply for the forgivable loans. The move is intended to keep the businesses from being crowded out of the program by large companies, a criticism leveled at earlier rounds of the program. 

On March 10, the program will open back up to everyone else, with applications due by March 31 when the program is due to sunset. 

Some business leaders in Massachusetts, however, are skeptical of how much impact the new targeted program will have. “I just think that in some ways it might be a little too late,” said Greg Reibman, president of the Newton-Needham Regional Chamber of Commerce. “It’s trying to help some really vulnerable businesses that may have already given up.” He said a deadline extension could encourage many small businesses who need the extra time to get their applications in order.

PPP eligibility requirements were also changed so applicants delinquent on student loans and those with prior felony convictions can apply, along with noncitizen immigrants who pay taxes with ITIN numbers. The loan calculation formula was adjusted so independent contractors and the self-employed can be eligible for larger amounts.

In Massachusetts, nearly 118,000 businesses received PPP loans in earlier rounds in 2020.

“This is a very welcome change, because unfortunately in the first rounds, a lot of Latino businesses got left out,” said Eneida Román, co-founder of the nonprofit advocacy group Amplify Latinx.

“Super small microbusinesses couldn’t get PPP loans because they didn’t qualify in the sense that they weren’t generating enough income,” she said. 

But Román said there have been problems in communicating all the eligibility changes to banks   and, as a result, there is confusion over which small businesses will end up getting funds.

The Paycheck Protection Program was first introduced last March by the Trump administration to help businesses continue to pay workers after the pandemic hit. The program received an infusion of $284 billion during the second stimulus package in December. Some businesses that are low on funds can apply again during each round if they can prove need.

The loans are forgiven if 60 percent of the funds are used for payroll. For those not eligible for forgiveness, the interest rate on loans is 1 percent. 

On Monday, Biden said 400,000 small businesses have closed due to the pandemic, and millions more are at risk. The federal Small business Administration, which is administering the program, said the first two PPP rounds helped 5.2 million small businesses keep 51 million workers employed.

About a fifth of loans in the new round are going to the lodging and food services sector, more than double the amount of last spring, an indication that hotels and restaurants continue to be hard hit.

A December 2020 study of revenue among small businesses in Massachusetts showed there was a 55 percent decrease in the number of small businesses that remained open in the leisure and hospitality sector from January to December 2020.

Local banks have been flooded by hundreds of requests every time a new shift or infusion of cash is added to the federal program. 

Last April, the National Small Business Association reported that 52 percent of small businesses with 20 employees or more received approval for their PPP loan, while only 18 percent of enterprises with 10 or fewer employees received approval. That breakdown has shifted significantly since then. Since January, the SBA has approved about $134 billion in loans to about 1.8 million small businesses, with 80 percent of loans going to businesses with 10 or fewer employees.

Whether or not this week’s changes will have much impact remains to be seen. Reibman, the Newton-Needham chamber of commerce leader, thought the two-week window carved out for only small business applicants was too short and he wondered whether large banks, such as Bank of America, will be “suddenly bending over backwards” to help tiny businesses.