One day before it was set to expire, on Tuesday President Joe Biden signed the Paycheck Protection Program (PPP) extension into law, extending federal aid for small businesses through May 31.
Five days ago, the Senate sent the PPP Extension Act to Biden’s desk, which extends the small-business lending program by two months and permits the Small Business Administration to continue processing loan applications through the end of June. In both the House and the Senate, the bill passed with overwhelming bipartisan support, and Biden declared the law a “bipartisan accomplishment.”
“Without signing this bill today, there are hundreds of thousands of people who would lose their jobs, and small family businesses that might close forever,” Biden said before signing the bill.
Lawmakers lauded the passage of the PPP extension, given that many small business are still suffering financial hits brought on by the pandemic. That’s why Biden included $50 billion in small business aid in his stimulus plan, including $7.25 billion specifically for the PPP.
According to recent SBA data, the PPP has given out 8.2 million small-business loans thus far, totaling $718 billion, helping many small businesses continue paying their bills throughout the pandemic.
Since it was established under the CARES Act in March, though, the PPP’s loan disbursement has come in for criticism. For example, although loans within the program are intended for businesses with 500 or fewer employees, some large companies got them, such as fast-food chain Shake Shack getting $10 million, which it later returned.
Separately, the Office of the Inspector General found the PPP had distributed duplicate loans to over 4,000 borrowers due to problems in the SBA’s controls, which would have to be paid back.
Both Democratic and Republican lawmakers have said the benefits of the PPP outweigh its detriments and are needed to provide pandemic relief to small businesses across the country.
“These loans have saved small businesses throughout our nation,” Sen. Ben Cardin of Maryland said on the Senate floor last week. “They would not be here today but for this program.”
The Paycheck Protection Program was established under the CARES Act to provide aid to small businesses suffering during the pandemic. But it provided too much aid, it turns out.
But the Office of the Inspector General (OIG) found that the Small Business Administration’s program has a major flaw: duplicate loans.
A report released on Monday by the Office of the Inspector General (OIG), a government watchdog, found that of the PPP loans approved between April 3 and August 19, 2020, lenders made more than one loan disbursement to 4,260 borrowers, including 2,689 borrowers with the same tax identification number and 1,571 borrowers with the same name and business address. Those potential duplicate disbursements totaled about $692 million and involved 8,731 PPP loans.
The SBA responded to the findings in the report by saying it will resolve duplications by recovering improper payments and and preventing loan forgiveness on the duplicate loans. That means small businesses will have to give back the duplicate loans, if they can.
According to the report, the SBA identified issues in 2020 that had caused duplicate loan applications to be processed. The SBA had turned off controls for its electronic loan application system, leading to duplication, even though the office had said it would rely on loan reviews to eliminate the issue. The report looked at the PPP’s first round in August 2020.
“Establishing strong controls to prevent improper or duplicate disbursements from occurring during initial loan processing is more effective than attempting to identify and resolve improper disbursements in the loan review phase,” the report said. “SBA’s efforts should focus on safeguarding funds up front, as it is more prudent and effective to prevent a loan from occurring than attempting to recover funds after the loan has been disbursed.”
The OIG recommended that the SBA:
Review potential duplicate loans and take action to recover any improper payments;
Review controls related to all PPP loans to ensure duplicate loans are not forgiven;
Strengthen the SBA’s loan servicing portal controls for future PPP-type programs;
And strengthen controls and guidance for lenders to ensure lenders meet program requirements.
The House Select Subcommittee on the Coronavirus Crisis had requested that the OIG conduct the report to review the vulnerabilities in the SBA’s loan processing system.
Along with the duplicate loans, the PPP faced issues shortly after it was implemented in March, famously including fast-food chain Shake Shack receiving a $10 million loan it ultimately gave back, despite the loans being intended for businesses with 500 employees or fewer.
However, lawmakers have advocated for the PPP and its importance in helping small businesses recover financially from the pandemic. In the $1.9 stimulus plan President Joe Biden signed on Thursday, $50 billion was set aside for small businesses, with $7.25 billion to be used specifically for the PPP.
And the House Small Business Committee on Thursday introduced legislation to extend the PPP through May 31, ahead of its current expiration date on March 31.
“The demand for PPP loans right now is a testament to the program’s effectiveness and the lingering impacts of this pandemic,” Small Business Committee Chair Nydia Velázquez said in a statement. “That’s why we cannot cut off aid now and this short-term extension is so important.”
To help the smallest businesses in the country facing financial hardships, President Joe Biden announced on Monday that he will implement changes to provide more equitable access to the Paycheck Protection Program (PPP).
The first round of PPP loans closed in August, and in December, Congress added funding that allowed the second round of PPP loans to open on January 13.
According to a White House fact sheet released on Monday, funding for businesses with fewer than 10 employees is up by 60% compared to last year, while funding to businesses in rural areas is up by 30%, and funding distributed through Community Development Financial Institutions and Minority Depository Institutions is up by more than 40%.
The remaining funds will be available for distribution through March 31.
The changes to the PPP that the president announced on Monday, which included prioritizing businesses with less than 20 employees and expanding the program’s access to underserved communities, are intended to build on the program’s demonstrated improvements.
“Getting our economy back means bringing our small businesses back,” Biden said in an announcement on Monday. “And that’s what we’re going to do and that’s what I’m doing today.”
Here are the five specific changes Biden made to the PPP:
(1) Instituting a 2-week period where only businesses with under 20 employees can apply for the program
To further target small businesses aid, Biden will institute a 14-day period, from February 24 to March 10, where only businesses with 20 employees and under will be allowed to apply for the PPP to “allow lenders to focus on serving these smallest businesses.”
The fact sheet says 98% of small businesses have fewer than 20 employees, and that they are the “Main Street businesses that anchor our neighborhoods and help families build wealth.”
Those businesses often struggle more than larger businesses in accessing relief, according to the fact sheet, which is why the two-week period will be implemented to ensure targeted aid.
(2) Providing more funding for sole proprieters and self-employed individuals
With many businesses without employees being structurally excluded from the PPP’s loan calculations, the president’s new changes will revise the loan calculation formula to ensure it includes sole proprieters, self-employed individuals, and independent contractors.
Also, $1 billion will be set aside for businesses in that category located in low and moderate income areas.
(3) Eliminating the restriction that prevents small business owners with non-fraud-related felonies from receiving PPP aid
According to current PPP requirements, a business is ineligible for the program if the owner has had an arrest or felony conviction related to financial assistance fraud in the last five years, or any other felony within the previous year.
To expand PPP access, Biden will adopt provisions in the bipartisan PPP Second Chance Act, which would eliminate the second felony restriction.
“Anyone who has rebuilt their life after being incarcerated should be celebrated and supported,” Sen. Ben Cardin of Maryland, one of the co-sponsors of the bill, said in a statement. “Congress created PPP to help all small businesses keep their employees on payroll, and there is no reason why a business owned by someone with an unrelated criminal record should be treated any differently.”
(4) Eliminating the restriction that prevents small business owners with student loan debt from receiving PPP aid
Business owners who are delinquent on a federal debt in the last seven years, including student loan debt, are currently ineligible to apply for the PPP.
With millions of Americans holding student loan debt, Biden called on the Small Business Administration to work with the Depts. of Treasury and Education to remove the student loan delinquency restriction, meaning that those who are late on paying back their loans will not be cut out of PPP eligibility.
(5) Ensuring access for non-citizens who are lawful residents to apply for PPP relief
While the PPP requirements specify that any lawful US resident can access the program, a lack of guidance from the SBA created inconsistencies for those using Individual Taxpayer Identification Numbers, making it difficult for them to get relief.
Biden directed the SBA to make clearer guidance so all eligible applicants will not be denied access to the PPP.
“We will ensure every dollar is spent well,” Biden said on Monday. “These changes will bring much-needed, long overdue help to small businesses who really need help staying open, maintaining jobs and making ends meet.”