To assist tiny corporations, the Biden administration adjusts the foundations for pandemic loans.
Aiming to steer more federal aid to the smallest and most vulnerable businesses, the Biden government is changing the rules of the paycheck protection program, increasing the amount that sole proprietorships are entitled to, and applying loans to businesses with 20 or more employees for 14 days .
The freeze will take effect on Wednesday, with the Small Business Administration scheduled to announce on Monday. In December’s economic aid package, Congress allocated $ 284 billion to restart the aid program. Banks and other financiers who provide the government-sponsored loans have paid out $ 134 billion to 1.8 million companies since lending resumed last month. The money is said to be awarded if the recipients adhere to the program rules.
Companies with up to 500 employees are generally eligible for the loans, although second-draw loans – available to those whose sales have dropped 25 percent or more in at least one quarter since the coronavirus pandemic began – to companies with 300 or more fewer employees are restricted. The 14-day moratorium is designed to draw lenders’ attention to the smallest of deals, according to administrative officials who spoke to reporters at a press conference on Sunday on condition that they are not named.
Most small businesses are sole proprietorships that only employ the owner. For such companies, including sole proprietorships and independent contractors, a major barrier to raising aid was a program rule whose loan size was based on the annual profit they had on their taxes. This made unprofitable companies ineligible for aid and left thousands of applicants for tiny loans – some as low as $ 1.
The new formula, which Small Business Administration officials said will be released soon, will instead focus on gross income. This calculation, performed before many expenses are deducted, enables unprofitable businesses to qualify for credit.
The agency is also changing a few other program rules to increase eligibility. Individuals with recent convictions of non-fraudulent offenses can now file a petition, as can individuals who are in default or are in default if they have a federal student loan debt. The agency also updated its guidelines to clarify that business owners who are not U.S. citizens but legal residents are eligible for loans.