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After Resounding Calls for Crucial Refinements, Small Business Relief Program Tuned to Better Serve Microbusinesses, Many Owned by People of Color

Monday, February 22, 2021
Ashley Harrington

WASHINGTON, D.C. – Today, President Biden and the Small Business Administration announced several important improvements to the Paycheck Protection Program (PPP) designed to help small businesses survive the pandemic economy. The $800 billion PPP had structural flaws since its inception that favored larger, more well-resourced businesses. Nearly 95% of Black-owned firms and 91% of Latino-owned firms have no employees beyond the owners, as compared to 78% of white-owned firms.

Starting this Wednesday, February 24, PPP approvals will be restricted to businesses with 20 or fewer employees for two weeks in order to target smaller businesses with relief. The SBA will also implement new rules in the coming days that will lessen barriers for small businesses in several areas.

Center for Responsible Lending Director of Federal Advocacy Ashley Harrington made the following statement:

We are pleased the Biden Administration, the Department of the Treasury, the Small Business Administration, and the Department of Education have heeded calls for improvements to the Paycheck Protection Program to allow it to better serve the smallest businesses.

Many Black, Latino, Asian and immigrant business owners are sole proprietors and independent contractors and are vital to their communities. Businesses owned by people of color account for 8.7 million jobs, with an annual payroll totaling $280 billion.

Congress should make the increased loan amount eligibility for sole proprietors and independent contractors retroactive, as they did when the rule changed for small farmers and ranchers. We must ensure all vulnerable businesses have equitable access to the relief they need to weather this crisis.

Given the heavy impact of the student debt crisis on people of color, the removal of the barrier to accessing PPP relief for those with defaults and delinquencies is especially welcome. Business owners who are already bearing the burden of debt created by federal policies should not be subject to additional challenges to getting the relief they need.

In fact, all SBA and other federal loan programs should remove restrictions that further penalize struggling student loan borrowers who have default or delinquency. Moreover, lawmakers should work to provide more affordable pathways for borrowers to manage their student loans and eliminate the negative impact of default. As a first step to addressing the crisis and making debt more manageable, the Biden Administration must cancel up to $50,000 in student debt per borrower by executive action to lift the undue burden and jumpstart the economy.

Summary of Changes

  • After calls by 100-plus organizations, the SBA will determine the dollar amount businesses are eligible for based on gross income rather than net profit, which gives a truer representation of their business relief needs. This fix was made for small farmers and ranchers with the latest round of funding but not for sole proprietors and independent contractors. Congress can make this rule retroactive, as it has already done for small farmers and ranchers.
  • Student debt defaults and delinquency will no longer affect eligibility for business owners. Over 800,000 self-employed people were behind on their student debt before the pandemic and may have been ineligible or had the perception that they are ineligible for the relief they need to survive in a faltering economy. Because of structural inequities, 500,000 self-employed student loan borrowers of color may have been unable obtain the PPP relief funds they need to carry them through the pandemic before this change.
  • Eligible immigrant business owners will be able to apply for PPP relief. These business owners pay taxes and their businesses are vital to their communities.
  • Barriers for business owners who have had involvement with the criminal justice system will be less restrictive, and will apply only to people with fraud-related felony convictions going back five years, or who are presently incarcerated.
  • The SBA also recently improved its practices around collecting demographics, encouraging reporting and transparency by moving up questions on its application.

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Press Contact: carol.parish@responsiblelending.org