Howard Zangwill, CPA, Managing Director of Audit and Accounting in the Oakland office.
Howard ZangwillCPA / Partnerview bio

PPP Rules Changed to Focus on Small Businesses

President Biden announcing PPP Changes


RINA Alert --  February 23, 2021 | Volume 19, Issue 6 

Yesterday President Biden announced changes to the Payroll Protection Program (PPP) rules to send more aid to small businesses.

“When the Paycheck Protection Program was passed a lot of these mom-and-pop businesses got muscled out of the way by bigger companies that jumped in front of the line,” Biden said. To increase the government's aid to smaller operations, the Treasury Department is adopting rules to make sure the program, in the words of the President, "looks out for mom-and-pop businesses even more than it already has."

Starting Wednesday, "the only folks who can apply for that PPP money are businesses with fewer than 20 employees,” the President announced. This limitation will run for two weeks. Biden explained that this move will allow more government resources to be devoted to helping small businesses that don’t have employees dedicated to navigating the loan process.

More importantly, program rules change will let businesses that employ just the owner, like sole proprietorships and independent contractors, benefit more from the PPP. Previously, the PPP loan for these kinds of businesses was based on the business's profit which made struggling unprofitable businesses ineligible for aid. Other barely profitable small businesses received tiny amounts from PPP.

The new formula will be based on gross income. That calculation, which is made before many expenses are deducted, will make many more sole proprietors and independent contractors eligible for loans and increase the size of the loans granted to others.

The Treasury Department also will eliminate rules that stopped loans going to borrowers with past felony convictions not tied to fraud and to people who have defaulted on student loans, In addition, the Treasury's new rules will clarify that business owners who are not citizens, but are legal residents, are eligible for loans.

The changes, the President 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."

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