Aiming to steer more federal aid to the smallest and most vulnerable businesses, the Biden administration is altering the Paycheck Protection Program’s rules, increasing the amount sole proprietors are eligible to receive.
But that change — along with a 14-day freeze on loans to companies with 20 or more employees — is yet another rework that poses logistical hurdles for lenders.
The change involves a program rule that could make a P.P.P. loan far more attractive to solo ventures that employ just the owner, like sole proprietorships and independent contractors. Previously, the aid program based the size of the loan on the annual profit these kinds of companies reported on their taxes. That made unprofitable businesses ineligible for aid and left thousands of other applicants with tiny loans — some as small as $1.
The new formula, which Small Business Administration officials said would be released soon, will focus instead on gross income. That calculation, which is made before many expenses are deducted, will make many more businesses eligible for loans and increase the size of the loans available to others.
In brief remarks on Monday afternoon, President Biden cast the shifts in the program as a salve for hard-hit business owners who have struggled to benefit from the government’s aid efforts thus far.
“Getting our economy back means bringing our small businesses back,” Mr. Biden said. He also called on Congress to pass his American Rescue Plan, which is on track to pass the House this week and includes $50 billion for hard-hit small businesses — though no additional money for P.P.P.
Mr. Biden said the program would still expire at the end of March, even with the two-week pause on applications for all but the smallest businesses, which will take effect on Wednesday.
Mr. Biden said the freeze would allow more government resources to be devoted to helping the kinds of small businesses that don’t have employees dedicated to navigating the loan process.
The current edition of the P.P.P. program was approved as part of December’s economic relief package, in which Congress allocated $284 billion to restart the aid program. Banks and other financiers, which make the government-backed loans, have disbursed $134 billion to 1.8 million businesses since lending resumed last month. The money is intended to be forgiven if recipients comply with the program’s rules.
Companies with up to 500 workers are generally eligible for the loans, although second-draw loans — available to those whose sales dropped 25 percent or more in at least one quarter since the coronavirus pandemic began — are limited to companies with 300 or fewer employees.
The agency is also changing several other program rules to expand eligibility. Those with recent felony convictions not tied to fraud will now be able to apply, as will those who are delinquent or in default on federal student loan debt. The agency also updated its guidance to clarify that business owners who are not United States citizens but lawful residents are eligible for loans.
The changes, Mr. Biden said, “will bring much-needed long overdue help to small businesses who really need help staying open, maintaining jobs and making ends meet, and this is a starting point, not the ending point.”
