President Joe Biden unveiled several changes Feb. 21 to a major federal COVID-relief program in order to target smaller firms, independent contractors and minority-owned businesses, which critics say have been left out of prior rounds of funding.
Called the Paycheck Protection Program, federal officials unveiled the Trump-era program as part of the Coronavirus Aid, Relief and Economic Security Act omnibus bill last spring in order to keep businesses afloat that have taken major financial hits from the onset of the pandemic.
The first round included $349 billion and the second round of $320 billion was issued in May, but the program closed in August with $130 billion in unused funds. The current round of PPP funding includes $284 billion.
According to the federal Small Business Administration, which runs the PPP program, the agency awarded nearly $4 billion of PPP loans to over 42,000 New Jersey businesses in 2021, and another $17 billion in 2020.
An August 2020 study from the Federal Reserve reported that less than 20% of businesses in majority Black and Brown counties received PPP loans. A study that same year from the National Bureau for Economic Research found that the number of Black-owned businesses in 2020 shrunk 41%, compared to Latinix-owned businesses which shrunk 32% and White-owned businesses which shrunk just 17%.
“There has been a history of discrimination, a history of an inability to access capital, a very definitive, systematic and deliberate locking out of Black and Brown-owned businesses of getting loans,” Newark Mayor Ras Baraka said during a Feb. 18 remotely-held press conference with several of the cities’ mayors.
“Even in the PPP, we can’t get access to PPP because we don’t have relationships [with] those financial institutions.”
A two-week period will begin on Wednesday, Feb. 24 during which the federal loans will be available only to companies with less than 20 employees. That’s meant to keep out larger companies that critics say have gotten the lion’s share of federal aid in the first round last spring, according to the White House.
“[T]hese businesses often struggle more than larger businesses to collect the necessary paperwork and secure relief,” reads a Feb. 21 statement from the White House. “The 14-day exclusive application period will allow lenders to focus on serving these smallest businesses.”
The new changes will expand access to the PPP loans for sole proprietors, independent contractors and self-employed individuals. Applicants with non-fraud felony convictions or arrests in the past year, those who are delinquent on their student loans, and non-citizen business owners – like green card holders – can now take part in the program.
To help minority communities, the Biden team is setting aside $1 billion of PPP loans for low-and-moderate income, typically minority communities.
Biden is scheduled to hold a press conference in the White House at 12:05 p.m. to detail the changes.