Dive Brief:
- President Joe Biden announced Monday that beginning Wednesday, only businesses with fewer than 20 employees will be allowed to apply for Paycheck Protection Program loans for a 14-day period. Roughly 98% of small businesses have fewer than 20 employees, according to the White House.
- The administration has also revised PPP's loan calculation formula so that independent contractors, self-employed entrepreneurs and sole proprietors have an increased chance of receiving loans, and plans to eliminate restrictions that prevent small business owners with prior non-fraud felony convictions from accessing PPP relief. Provisions barring small business owners that are delinquent or have defaulted on a federal debt, including student loans, in the past seven years will also be waived, and the administration will make the program accessible to non-citizen small business owners who are lawful U.S. residents.
- Mom-and-pop restaurants could benefit from the program's new focus on small businesses from Feb. 24 to March 10. The second round of PPP expires at the end of March.
Dive Insight:
The revisions to PPP released today could help make a dent for smaller businesses, many of whom were left out in the first iteration of the program last year. However, while restaurants are having better luck with PPP's latest round, which began in January, both the National Restaurant Association and the Independent Restaurant Coalition have argued that it's not enough.
Earlier this month, the associations released a joint statement to Congress stating that PPP is not enough to cover the industry's staggering losses. While the program allocated roughly $34 billion in loans to the restaurant segment, the industry has lost more than $240 billion dollars in sales since the start of the pandemic, the associations said. So far, $134 billion of PPP's $284 billion second round has been allocated to 1.8 small businesses, USA Today reports, leaving $150 billion up for grabs.
The National Restaurant Association and Independent Restaurant Coalition have yet to issue statements in response to these new changes.
The NRA and IRC pressed federal lawmakers to pass a stimulus bill that includes a $25 billion grant fund for restaurants to help the industry recover. The House of Representatives is expected to vote on the bill this week.
Still, progress is being made through PPP. So far this year, the hospitality industry has received more than $18 billion in loans, or 18% of loans distributed in 2021, according to U.S. Small Business Administration data from Feb. 7. Roughly 70% of these loans total less than $50,000. During last year's round, the hospitality industry secured only 8% of PPP loans, according to SBA data from August 2020.
Small businesses that obtained loans during the program's first round are also accessing three times their original loans in the current round, according to Restaurant Business.
