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SBA Touts More Equitable PPP Access as Lenders Struggle With Changes

  • SBA fact sheet illustrates effect of changes made by Biden administration to the Paycheck Protection Program
  • Tens of thousands of businesses gained access to the program after certain restrictions were lifted and a two-week exclusivity period was announced
  • However, lenders have also struggled with the changes and are facing challenges in processing applications before the PPP’s March 31 deadline

Summary by Dirk Langeveld

The U.S. Small Business Administration has released data indicating that changes to the Paycheck Protection Program rules helped improve access to the program for tens of thousands of people. At the same time, lenders are continuing to struggle with the rule changes, backlogs in applications, and other challenges as the program’s March 31 deadline approaches.

President Joe Biden announced a suite of changes aimed at improving equitable access to the program on Feb. 22. These included a two-week period where applications were only open businesses and nonprofits with fewer than 20 employees, allowing legal non-citizen business owners to use their Individual Taxpayer Identification Number to apply, and lifting restrictions on business owners convicted of non-financial felonies and those who have defaulted or are delinquent on federal student loans.

The administration also updated the loan formula for non-employer firms such as self-employed individuals, independent contractors, and sole proprietors. This formula, issued last Thursday, allows these entrepreneurs to receive a loan based on their gross income rather than net income, with a cap of $20,833.

The SBA says a total of 400,000 businesses were serviced during the exclusivity period as of March 7, including 200,000 businesses applying for a PPP loan for the first time. A comparison of the average daily rate of loans during the exclusivity period and the average rate 10 days earlier showed a 20 percent increase in loans to minority-owned businesses, a 14 percent increase for women-owned businesses, and a 12 percent increase for small businesses.

The SBA also said the changes resulted in 30,000 small businesses being eligible to apply after they were no longer flagged for delinquent student loans, as well as “tens of thousands” of new applications from non-employer businesses.

However, the changes have also been criticized for going into place with just weeks to go before the SBA stops approving PPP applications on March 31. Some lenders have said they won’t be implementing the new formula for non-employer businesses before they stop taking applications.

Although businesses technically have until the end of the month to apply for a PPP loan, some lenders are closing to applications well in advance of this date as error codes and other issues create a substantial backlog of submissions. Bank of America, one of the largest lenders participating in the program, stopped taking applications on Tuesday.

Several bankers and financial industry trade groups have lobbied Congress to extend the PPP deadline to allow lenders to process these applications. The Federal Reserve has already extended its liquidity facility supporting PPP loans through June 30.

It remains to be seen how much money will be disbursed before the current deadline, but the most recent SBA data shows that tens of billions of dollars remains available. Of the $284.5 billion approved for the latest round of PPP loans in the Economic Aid Act, 2.4 million loans totaling approximately $165 billion had been approved as of March 7.

Another $7.25 billion would be added to the program if the American Rescue Plan is approved. The House of Representatives is currently deliberating the $1.9 trillion proposal after it was modified and narrowly approved by the Senate.

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