Administration Outlines Changes in PPP Loans – Focuses on Small Businesses

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On February 22, 2021, the Biden Administration announced its intentions to assist primarily small businesses through the PPP loan. This focus will take effect this week under the guidance and direction of the Small Business Administration (SBA). Specifically, the SBA will restrict PPP loan application only to small businesses for a two-week period beginning on Wednesday, February 24, 2021 (at 9:00 AM EST) and ending on March 9, 2021. A “small business” is defined for this purpose as employers (businesses and not-for-profits) with fewer than 20 employees. On March 10, 2021, employers with over 20 employees will be able to again apply for PPP loans.

Background

The PPP loan was a cornerstone feature in the CARES Act enacted at the onset of the pandemic last March. It focused on keeping people working as the country dealt with the unfolding situation. Many businesses signed up for their PPP loans to provide critical liquidity during these fragile times, and if they used the loans primarily for payroll, their PPP loan could be forgiven. In late December, Congress enacted the Consolidated Appropriation Act, 2021 (CAA), which extended the PPP loan through March 31, 2021 and made several other changes – some retroactive to when CARES was passed.

Latest Directive on PPP Loans for Small Businesses

New small business owners counting revenue and expenses - Start-up entrepreneurs, woman and man, businessmen doing accounting with calculator and tablet in RestaurantAs noted above, the Administration and SBA announced directives emphasizing small businesses. Among the provisions are the following:

  • A two-week exclusive PPP loan application period for employers (businesses and not-for-profits) with fewer than 20 employees;
  • Changes to permit sole proprietors, independent contractors, and self-employed individuals to obtain more support by changing the PPP’s formula for these borrowers. These applicants will be allowed to calculate their loan amount based on gross revenues reported as a sole proprietor on their personal income tax return. More details are still needed on this revision;
  • Removes a restriction on access to PPP loans to owners of small businesses with prior non-fraud felony convictions (consistent with a bipartisan congressional proposal);
  • Also removes restrictions on access to owners of small businesses who have struggled to make federal student loan payments. The changes would eliminate these student loan delinquencies as disqualifiers to be entitled to PPP loans.

We wanted to make you aware of these emerging developments and will provide more updates on these changes as information is released. Small employers should look now at the next two weeks as a time to analyze and apply for any available PPP loans while they have the attention of lenders and the SBA. Employers with more than 20 employees that are in the process of applying for a PPP loan should contact their lender now to review the timeframe on their loan and see if the loan can be submitted prior to the February 24, 2021 date.

Please contact your Sikich advisor with any questions.

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About our authors

Jim Brandenburg

Jim Brandenburg

Jim Brandenburg, CPA, has extensive experience and knowledge in corporate and partnership tax law, mergers and acquisitions and tax legislation. His expertise includes working with owners of closely held businesses to identify tax planning opportunities and assist them in implementing these strategies.

Tom Bayer

Tom Bayer

Thomas E. Bayer, CPA, CExP, has more than 25 years of experience providing a broad range of accounting, tax, and business advisory services to commercial clients across various industries and Sikich offices. Tom has specialized expertise in the areas of business succession planning, tax planning and compliance, and business advisory. He puts his business succession planning abilities and knowledge to work firm-wide, serving clients in advisory services across the country.

Glen Birnbaum

Glen Birnbaum

Glen Birnbaum, CPA, ABV, ASA, CVA, CM&AA, is a partner with over 20 years of experience valuing closely held businesses. Glen provides expert accounting and tax advisory services for a range of entities, including those in the agriculture, manufacturing and construction industries. He excels in delivering tax and succession planning services to his clients, who value his commitment to strengthening their businesses.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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