Why Biden halted PPP loans for companies with more than 20 employees
The Biden administration earlier this week suspended the paycheck protection program for businesses with more than 20 employees, in an effort to secure more loans for very small businesses.
Why is this important: The implementation of the PPP has taken a lot of arrows since its initial launch last April, but the move seems to be widely applauded. Although no one really knows if he will achieve his goal.
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Background : The PPP was reauthorized at the end of last year with an additional $ 284 billion, but several key rules have changed. Most importantly, second-draw loan applicants must be able to demonstrate a loss of income of at least 25% in 2020, either for the entire year or for a single quarter (compared to the same quarter in 2019).
The U.S. Small Business Administration reports that more than 140 billion dollars of PPP 2 have been paid to more than 1.9 million companies. Since last April, there have been more than 7 million PPP loans, for a total of 663 billion dollars.
The problem: When the PPP was first rolled out, many large companies got loans before small businesses, not least because they had closer relationships with lenders and had more access to lawyers and accountants.
What is happening now: A White House official explains that the two-week moratorium on major candidates should allow more than 5,000 lenders to signal that there are still more than $ 100 billion in PPP loans. Plus, lenders will have more time to work with small businesses that might have poorly organized records.
Bill Briggs, who was the SBA’s deputy associate administrator in the Trump administration, told me that “it’s important to remind small businesses that the PPP still exists.”
He adds that lenders must overcome levels of institutional mistrust among some potential applicants – including religious nonprofits – and that the key to the changes is that it gives lenders and the SBA a certain time lag in order to that they can both catch up operationally.
The bottom line: We should have an idea of how many jobs on Main Street have been supported by this extra effort at any given time next month, or if it was already a lost cause.
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