“These companies have been neglected for almost a year,” House Small Business Chair Nydia Velázquez (DN.Y.) told POLITICO. “I pledged to work with the Biden administration to spread these benefits to as many of these sole proprietors as possible, not just those submitting new applications.”
According to data from the House Small Business Committee, more than 2.6 million individuals, independent entrepreneurs and self-employed people have already been approved for PPP loans.
Setbacks are the latest in a series of controversies surrounding the SBA’s handling of the program, which since its launch in April last year has distributed more than $ 662 billion in loans that can be forgiven if companies maintain their payroll. The SBA, a small federal agency that has led the OPP along with the Treasury Department, has been criticized for opaque decision-making and ever-changing rules for the unprecedented economic lifeline.
Concerns about the treatment of individuals, independent contractors and self-employed people – small employers, including cleaning and home repair services – have pushed PPPs since the program started. While other companies were able to calculate their eligibility for PPP loans based on labor costs, the smaller companies were forced to apply for loans based on their net profit, which deducts things like rent and utilities.
A poll of members of the National Association for Self-Employment in December and January showed that 68 percent felt that the federal government did not provide adequate financial support to the small business community through PPPs. A separate study released last month by law firm Small Business Majority found that more than one in three companies applying for loans did not receive the full amount they requested, including almost all of the black self-employed entrepreneurs surveyed.
Last week, the Biden administration announced that it would revise the rules for individuals and the self-employed after finding out that these business owners were “structurally excluded” and short-lived, even though they make up the majority of all businesses. Under new rules released by the SBA on Wednesday, companies will be able to calculate their loan amounts based on a broader target – gross income, which will make it easier for them to qualify.
Although at first it appeared to be a major policy benefit, the SBA will limit its potential impact by not allowing companies to modify their existing PPP loans if they have already been approved for the aid. It’s a break from the recent precedent. The SBA allowed farmers and ranchers to increase previous PPP loans after Congress passed a law in December that allowed them to qualify for more financing.
The SBA claims that it lacks retroactive effect that makes it possible to increase the previous PPP loans. SBA spokesman Matthew Coleman said Congress in December gave that authority to retroactively revise the rules for farmers and ranchers.
Although the small businesses involved do not have an army of lobbyists, their lawyers are starting to fight back.
“People who are diligent should not be punished,” said Keith Hall, president and CEO of the National Association for Self-Employment.
Some on Capitol Hill believe the SBA has the power to adjust the loans. Legislators plan to dig deeper into the reasons for the decision and whether legislation is needed to address it.
Senate President of Small Business Ben Cardin (D-Md.), Who plans to hold a PPP oversight hearing this month, said “it’s a matter of justice”.
“I am very interested in pursuing ways in which we can provide the same benefits to those who have already submitted their applications,” he said. “I need to understand a little more fully the administrative challenges that the SBA encountered and why they could not recommend doing this administratively.”
If the SBA sticks to politics and it’s up to Congress to intervene, borrowers will face a tight timeline. PPP lending expires on March 31st. So far, neither the White House nor key Democrats are making a big push to expand it.
Dennis Ammann, CEO of the People’s Bank of Mississippi, said “it looks like the small businesses that need the most help are being punished.”
“I’m so frustrated with the SBA if they stick to this expected policy,” Ammann said. “I do not understand why the SBA does not allow lenders to help these smallest of the small businesses. It just makes no sense.”