UPDATE: President Biden to Temporarily Narrow Eligibility for PPP Loans

The President was likely persuaded to act by two
factors: (1) the overall demand for PPP loans has
been waning, especially over the past six weeks
as COVID-19 cases continue a steady decline
and many areas of the country have significantly
reopened their economies, and (2) during the
first round of PPP loans last spring and summer,
many of the nation’s small companies and sole-proprietors were unable to timely secure PPP
loans and were forced to rely on other sources
of funding to stay afloat, including dipping into
their own savings or existing credit lines. To the
latter point, this two-week period of exclusive
access for small companies may remove some of
the barriers to obtaining a PPP loan and ensure their applications are timely processed and loan
funds rapidly deployed.

Additionally, the SBA will soon announce new
rules to determine the size of PPP loans to
businesses without employees—i.e., sole proprietors, independent contractors, and the self-employed. Under the existing PPP rules, the
maximum loan amount to these businesses was
determined in relation to net taxable income. As
a result, businesses who took advantage of tax
deductions to minimize or even eliminate their
taxable income were ineligible for PPP loans or
received only nominal amounts.

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