Biden Administration Announces Fix for Paycheck Protection Program That Will Boost Relief for Black and Latino-Owned Businesses

Today, President Biden announced several fixes to the rules of the Paycheck Protection Program (PPP), including one that will ensure a more accurate determination of the level of small business relief that sole proprietors and independent contractors need and are entitled to receive.

Over 100 organizations supporting African American, Latino and immigrant-owned businesses recently called for immediate changes to ensure that relief gets to the business owners who need it the most. This important change will help millions of small businesses owners across the country, in rural and urban areas alike. Organizations signing on included the Main Street Alliance, Center for Responsible Lending, Local Initiatives Support Coalition, American Business Immigration Coalition, Asian/Pacific Islander American Chamber of Commerce and Entrepreneurship (National ACE), United States Hispanic Chamber of Commerce, U.S. Black Chambers, Inc., Opportunity Finance Network and dozens of others.

Before this fix, the Small Business Administration (SBA) calculated the loan amounts for sole proprietors and independent contractors based on net profit rather than gross income, which does not give a true representation of their business relief needs. Changes in the rules for the latest round of funds provided a remedy for this issue for small farmers and ranchers, but other micro-businesses were not able to take advantage of that change.

This change will apply to new first time PPP loans as well as second draw loans. While the SBA cannot retroactively apply the fix to loans made prior to today's change, Congress can, and in fact has already done so for small farmers and ranchers.

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. The flaw in the rules related to tax forms was one of several structural impediments to access for minority-owned firms.

The Administration also announced fixes that will increase access by removing barriers for borrowers with student debt delinquencies, making barriers less restrictive for business owners who have had criminal justice system involvement in the past, and by removing restrictions for eligible immigrant business owners. Last week, the SBA also improved its practices around collecting demographic data by moving these questions to the first page of the application form.

Main Street Alliance Government Affairs Director Didier Trinh had this to say:

"The Biden Administration's updates to the PPP are a welcome recognition of the major gaps and challenges to the program. These updates will help expand access, but more is needed to support small businesses. From retroactive application of these updates, to flexible grants outside the PPP program itself we look forward to continuing to work with the Administration to center Black, brown, women-owned and our smallest business owner needs, who have been disproportionately impacted by both the crisis and least likely to receive support."

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

"In concert with the 100-plus organizations who joined the call for a much-needed fix to the rules of the PPP, we extend our appreciation for the quick response from President Biden, Treasury Secretary Yellen, and the Small Business Administration. We ask that Congress move just as swiftly to make the adjustment retroactive, so that businesses who missed out on the level of relief they needed previously might survive this perilous time and thrive as we move forward.

These businesses owned by people of color are a vital part of the very communities who have been hit so hard by the COVID-19 pandemic. We must ensure all vulnerable businesses have equitable access to the relief they need to weather this crisis."

American Business Immigration Coalition's Executive Director Rebecca Shi made the following statement:

"Fueling Black, Latino and immigrant owned businesses is critical to our nation's recovery from the Pandemic. President Biden, Treasury Secretary Yellen and the Small Business Administration's fix for the Paycheck Protection Program breaks down prosperity barriers and provides full access to relief where it is urgently needed."

Background:

Under this change, the proprietor of a mobile food truck in Greenville, NC, a Black woman who received $3,273 in PPP funds, would be eligible for $20,678. And a Latino-owned auto repair business with one part-time employee in addition to the owner would be eligible for $23,216 - five times the $4,680 this business received under the previous rules. These businesses need funds that are adequate to stay afloat during the shutdown and care for their families, and under the previous rules, they were not eligible for enough funding.