Minority, women-owned businesses get first bid on new PPP loans
Community lenders serving minority and women-owned businesses will have exclusive access to a new pot of Paycheck Protection Program loans for at least two days when the next round of money becomes available, according to new rules from the Small Businesses Administration.
The SBA didn’t say when that next round of lending would open. The guidance, released late Wednesday, says the SBA will put its focus on ensuring that under-served businesses can tap the latest round of funding, including matching loan inquiries to small lenders, dedicating hours to assisting small PPP participants and getting more community development financial institutions to sign up as PPP lenders.
The guidance seeks to address several criticisms of the first rounds of PPP funding: largely that small, vulnerable businesses were unable to get assistance because larger business claimed the funds before small firms could get to it. The program had previously encouraged banks to give priority to big loans over small ones.
Congress approved an additional $284 billion for forgivable loans to small businesses in December. The plan features anti-fraud and other measures that advocates say will give some of the most vulnerable employers a better shot of getting some help.
The new pot of money sets aside $60 billion for businesses largely shut out of the process so far, and it puts an emphasis on companies with 10 or fewer employees or those in low-income areas. The initiative also has $30 billion to help boost capacity at lenders active in under-served areas — including community development financial institutions, minority depository intuitions and other small lenders.
The renewal of the Paycheck Protection Program included in the COVID-19 relief package that passed Congress in December adds to the $660 billion that has already been earmarked for forgivable loans. At least millions of dollars of previous aid went to fraudulent applicants, according to public and private estimates.
With the new money, businesses will be able to apply for a second loan, but there are stricter rules. Firms can have a maximum of 300 employees, down from 500, and the maximum loan amount this time is $2 million, a decrease from $10 million. Applicants also have to prove that revenue declined at least 25% in any quarter in 2020 compared with the previous year.
The SBA guidance details how business can calculate their 25% revenue loss — using gross receipts as the measure — to see if they are eligible for a second loan.
The SBA said in the guidance that applicants must have used the full amount of their first PPP loan on or before the expected date of the second PPP loan.