Biden Administration Changes PPP Again, Announces Exclusive Window for Small Businesses, Sole Proprietors, and Independent Contractors

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The Biden Administration announced further changes to the Payroll Protection Program (PPP). These changes are aimed at increasing lending to small business and independent contractors, removing barriers to borrowing, enhancing transparency, reducing fraud, and increasing the program’s engagement with other would-be borrowers.

Beginning this Wednesday, February 24, only businesses with fewer 20 employees can apply for PPP loans (first and second draw) for a period of 14 days (until March 10) to increase access by the smallest businesses.

The Administration also announced that it will implement a revised loan-calculation formula to allow sole proprietors, independent contractors, and self-employed individuals to access higher loan amounts. As of this writing, new regulations haven’t been issued with the new formulas.

Other changes announced by the Administration include elimination of the bars against borrowers with prior non-fraud felony convictions within the past year when the owner is not incarcerated and against borrowers who are delinquent on federal student loans. In an effort to help independent contractors and sole proprietors, many of whom do not have business entities, the announcement also clarifies that non-citizen lawful residents (such as green card holders) can apply using Individual Taxpayer Identification Numbers (ITIN). This is not a change of the law, but, instead, is designed to remove any confusion that exists under prior communications about the program.

The Administration also announced additional affirmative steps to investigate possible waste, fraud, and abuse and to increase transparency. To that end, it announced that the Small Business Administration (SBA) is doing manual loan reviews of the largest loans (no threshold is specified) and a random sampling of other loans. Note that the announcement is not specific, but this appears to be at the application stage, rather than the forgiveness stage, where SBA previously announced it is auditing all loans over $2 million and a sampling of other loans as well. The PPP application has been revised to encourage self-reporting of demographic data and better illustrate the impact of the loans. Borrowers who have not yet applied should use the Revised Application Form and Revised Second Draw Application Form. Finally, the Administration will be asking the SBA to improve its website and outreach efforts with lenders and others.

With changes to the program continuing, those who wish to participate in the program should continue to check for updates to the program requirements and guidelines. See our PPP Overview for a summary of program and forgiveness requirements and our Guide to Loan Forgiveness when you are ready to seek forgiveness.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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