The Biden administration has announced updated regulations for the Paycheck Protection Program in order to ensure funding reaches small business owners. The new regulations will limit loan applications under the program to businesses with fewer than 20 employees for the first two weeks of the new application period, which begins on February 24.
The new rules will also alter some eligibility requirements for applicants with felony records, outstanding student loans and uncertain citizenship status.
In a statement released by the White House, the administration said the revamped program is aimed at ensuring “equitable relief to hard-hit small businesses,” as well as rooting out waste, fraud, and abuse.
Last year, the Small Business Administration and Trump administration officials came under criticism for approving loans to large corporations while blocking assistance to so-called “Main Street” businesses.
The PPP is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion aid program ratified by Congress last March to provide relief to business owners who have suffered significant drops during the corona crisis.
The campaign for the Democratic nominee for president of the United States, Joe Biden, will create an initiative to deploy an advisory council on small businesses and entrepreneurship. The initiative includes John Hickenlooper, who is running for the Senate in Colorado; Andrew Yang, who, along with Hickenlooper, participated in the Democratic primaries; and the owner of a Miami-based empanada company.
Biden’s campaign will also place a group of four advertisements throughout Arizona, North Carolina, and Pennsylvania that will focus on business owners who have been hurt and are struggling due to the coronavirus pandemic.
The initiative and the ads are designed to contrast Biden’s concern with the actions of the Trump administration which the campaign believes did not do enough to help small business and handled the Covid-19 pandemic poorly.
Biden has often pointed to Trump’s mishandling of the pandemic and brought attention to the difficulties small businesses are facing with an emphasis on the challenges procuring Paycheck Protection Program loans.
“The fact is that we’re in a situation where right now an awful lot of small businesses, 50 or fewer employees, are going out of business because the $2 trillion in the acts that are passed by the Congress aren’t getting to them at all,” Biden explained at a fundraiser.
PayNet President William Phelan said last Monday that there is good reason to be hopeful about the economy as he sees that small businesses have increased borrowing so that they can re-tool themselves during the lean years of the recession. These small businesses are now more confident, profitable, showing lower-risk loan profiles, and are spending more in anticipation of expansion.
Phelan was speaking at the 2011 Reuters Manufacturing and Transportation Summit. He said that there is increased borrowing for new investment among small businesses. They have consolidated, added technology to increase their efficiency, and outsourced many tasks so as to keep hiring down to a minimum.
“What we’ve been undergoing is a new economic order,” he said. “The economy is adaptable, and it’s adapted to the new reality.”
Trend of Double-Digit Gains
The borrowing statistics are based on the Thomson Reuters/PayNet Small Business Lending Index. This index measures the general amount of financing to small businesses and it has shown 15 months of double-digit gains, with a 20% increase this past October.
“There’s underlying strength in the U.S. economy that’s not being reported by stock market indices,” said Phelan. “Profits drive confidence, and we’re not seeing that profitability reported anywhere because these are privately owned companies.”
Betting the Barn on Better Days to Come
Phelan added that small businesses which are borrowing now are essentially making a four year bet; they would not take such a chance if they did not feel that there are important signs of consumer demand going up and an economic recovery in sight.
PayNet is a Chicago based firm providing risk management tools to the commercial banking industry. The data it presents are based on commercial leases and loans of over 19 million contracts whose value is about $900 billion.