Regulatory and Industry News Alerts from Armanino

Biden Administration Adjusts PPP Rules

by Jenn McCabe, John Schweisberger
February 24, 2021

On February 22, President Biden announced a series of changes to the Paycheck Protection Program (PPP). The changes are meant to help smaller businesses and take effect almost immediately:

  • Beginning February 24 and for a two-week period, the SBA will process loan applications only for businesses with fewer than 20 employees; this does not affect forgiveness applications for loans issued in 2020.
  • Independent contractors and those who base their loan amount requests on their Schedule C or F net income will now be allowed to use gross revenue as the basis for their calculation instead, opening loan access to unprofitable businesses.
  • Eligibility is expanded for those with federal student loan defaults, felonies unrelated to fraud and business owners who are not U.S. citizens but are lawful residents.

As with other changes that have been associated with the program, this set of revisions too raises questions including:

  • Does the hiatus for companies with 20 or more employees mean the SBA will hold any applications it receives beginning February 24, or will they go ahead and process an application timely received and approved by the lender even if the SBA receives it after the temporary deadline?
  • Is the loan calculation multiple based on gross revenue the same multiple as has been used for net income, or something different?
  • Will the SBA have to come out with a new application form for the gross revenue-based loans, and if so, when will it be issued and what happens in the meantime?
  • What changes will banks have to make in their underwriting process and supporting technology to accommodate everything?

One question that is answered is that small businesses who could have benefited from the changes but have already received approval for their PPP loan will not be allowed to return the money and re-apply for more under the new rules.

We will continue to monitor additional changes and how they may impact borrowers between now and the end of the current version of the loan program, set to end on March 31.

For questions or assistance, reach out to our experts.

February 24, 2021

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