Biden’s New PPP Guidelines Could Help Small Restaurants Qualify For Additional Aid


President Joe Biden announced yesterday that he would refine the Paycheck Protection Program – the central program of the federal government, though defective lifeline for restaurants and other small businesses – with the goal of targeting underserved borrowers, independent contractors like food delivery people and struggling homeowners.

Yesterday’s policy change comes as a Small Business Administration report shows that even though aid is now distributed more equitably than before – with the hard-hit hotel industry in particular – large disparities still exist. Small businesses in low- and moderate-income areas received only a small portion of the funds, and most of the aid recipients reported being white. Black, Asian and Latin American borrowers appeared to receive a significantly smaller portion of the paycheck funds.

Starting tomorrow, Biden will limit PPP to businesses and nonprofits with fewer than 20 employees. “This will give lenders and community partners more time to work with smaller businesses to submit their claims,” ​​says SBA website.

The government is also adjusting the loan formula for individual homeowners, a move that should give, for example, small food vendors or chefs operating pop-ups access to larger forgivable loans.

Generally speaking, the Paycheck Protection Program offers help to businesses hard hit by the pandemic, with loans converting into grants if applicants use most of the funds to rehire employees – often a challenge for operating restaurants. under strict pandemic guidelines.

The first round of PPP last April impoverished its $ 349 billion in funds in a matter of weeks, but the current program’s reserves for small business and first-time borrowers appear to be slowing the lending rate. The PPP had $ 284 billion to lend when it was relaunched on January 19; it still has about $ 150 billion in funds.

Legislative legislation re-authorizing the program allocated $ 15 billion to small businesses in low- and moderate-income communities, but only disbursed about $ 2.4 billion to this group. The reason for this discrepancy, according to the SBA, is that the bulk of funding in wealthy and underserved areas goes to large corporations. Biden’s two-week exclusivity period is designed to address this issue.

Another major development is that Biden is changing the PPP formula to allow sole proprietors (like food stall operators) and independent entrepreneurs (like ride-share drivers and food deliverers) to receive more funding. Previously, these people had to base their loans on the bottom line, which was often a pittance for struggling businesses. The new formula, CNBC reports, will be based on gross income and should allow an increase in aid.

A catch: people who have already applied under the old profit formula are out of luck New York Times. “The SBA will not retroactively modify loans that have been disbursed, and it will not allow those who have already obtained loans to repay them and reapply, according to an agency official familiar with the plan, who was not allowed to speak publicly, “the newspaper reports. .

by Biden rules also increase the eligibility of people previously convicted of non-fraudulent crimes or who are behind on their federal student loans.

So far, the paycheck protection program appears to be effective singularize the entire hospitality industry, as expected by the legislators who drafted the bill. The accommodation and food services industry, which includes bars, restaurants and hotels, has so far received $ 25.37 billion in aid, or 18% of all available funds according to the SBA. The next closest industry is construction, which took 13 percent of paycheck funds.

As part of the previous PPP funding cycle that ended last August, accommodation and catering establishments received only about 8 percent funds available – even though these companies suffered some of the largest job losses during the pandemic.

The increase in aid to hotels and restaurants is probably due to a new improved formula. Hospitality-related businesses can now apply for loans up to 3.5 times their monthly payroll, compared to 2.5 times for other businesses. Here, it should be noted that a version of the Restaurant Act currently packed with the largest Democrat-backed relief bill would specifically target restaurant establishments with $ 25 billion in funding. direct help, although these funds are grants with less conditions than PPP loans.

Most of the paycheck funds appear to go to white business owners, who have received $ 19.22 billion in aid, compared to $ 2.35 billion for blacks, $ 3.42 for Asians and 4 .04 billion dollars for the Latinx community. These data, however, are incomplete; the program disbursed an additional $ 110 billion in aid to businesses that did not disclose their demographics.

The average loan amount this year is $ 73,000, with only 17.6% of loans exceeding $ 1 million. This is a big change from last year’s program, when the average loan size was $ 101,000, with over a third of loans exceeding $ 1 million.

So far in 2021, New York City businesses have received $ 11.17 billion in small business assistance, the second-largest all-state PPP fund after California, which has received nearly $ 18.2 billion. of dollars in the same category.

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