On February 22, the White House announced changes to the Paycheck Protection Program that give exclusive access to certain small businesses.
Year-end legislation provided additional funding and an extension of the Small Business Administration’s Paycheck Protection Program (PPP) for the first quarter of 2021. Effective February 24, the Biden-Harris administration is instituting a 14-day holding period on new PPP applications (sometimes referred to as PPP2 loans) for businesses with 20 or more employees. The goal of the hold is to lessen the PPP competition for small businesses and sole proprietorships that may have had difficulty accessing the federal funds previously.
How We Got Here
When the first round of PPP loans were introduced nearly a year ago as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the funds were depleted within a few weeks, and re-upped in subsequent legislation. Congress and the White House have indicated the $284.5 billion provided by the December 2020 Consolidated Appropriations Act, 2021 (the Act) would be the last cash infusion for the program.
One of the concerns raised about the PPP early on involved whether applicable businesses were the ones actually receiving the federal funds. To enhance PPPP transparency, the Biden-Harris administration revamped the PPP2 loan application to include more demographic information. The Small Business Administration (SBA) is also conducting fraud checks, cross-checking applicants with the Department of the Treasury’s Do Not Pay database and other public records. This adds to the large loan reviews already underway by the PPP for applicants receiving loans of $2 million or greater.
What This Means for Your Organization
Financial institutions and banks facilitate the PPP loans, and for small businesses, finding a lender that would accept PPP loan applications may have been a barrier to accessing the program initially. This additional time may help small organizations that wanted a PPP2 loan find a PPP2 lender.
Organizations with 20 or more employees that have not yet applied for a PPP2 loan but would like one should ensure they have their application and supporting materials prepared and ready for their lender at the end of the holding period, which is scheduled for March 9, 2021 at 5:00 p.m. Eastern Time.
For More Information
Our team continues to monitor for PPP developments and will keep you updated as more information becomes available. For more information, please contact a member of our COVID-19 loan and capital assistance team.
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