“These businesses have been neglected for almost a year,” Nydia Velázquez (DN.Y.), chair of House Small Business, told POLITICO. “I have committed to working with the Biden administration to spread these benefits to as many of these one-man businesses as possible, not just those submitting new applications.”
According to data from the House Small Business Committee, more than 2.6 million sole proprietorships, independent contractors and self-employed persons have already been approved for PPP loans.
The setback is the latest in a series of controversies over the SBA’s handling of the program, which has handed out more than $ 662 billion in loans since its launch in April last year that can be forgiven if businesses maintain their payroll. The SBA, a small federal agency that manages the PPP along with the department of treasury, has been criticized for opaque decision-making and ever-changing rules governing the unprecedented economic lifeline.
“I’m in a black hole because it looks like they’ll definitely be forgetting the people who’d already applied,” said Jonathan Kolbe, a freelance photographer in New Jersey who received two PPP loans and was unable to to do so. increase it under the new rules. “I am disappointed in the SBA because they are not investigating it, to help people who have already played by the rules, signed the applications and been approved.”
Concerns about the handling of sole proprietorships, independent contractors and self-employed businesses – small employers, including cleaning and home repair services – have upset the PPP since the program began. While other businesses were able to calculate their suitability for PPP loans based on wage costs, the smaller businesses were forced to apply for loans based on their net profit, which deducted things like rent and utilities.
A poll by members of the National Association for Self-Employers in December and January found that 68 percent believe the federal government does not provide adequate financial support to the small business community through the PPP. A separate survey released last month by small business law firm Small Business Majority found that more than one in three businesses applying for loans did not receive the full amount they applied for, including almost all of the black entrepreneurs surveyed.
Last week, the Biden administration announced that it would review the rules for sole proprietorships and self-employed businesses after finding that business owners were “structurally excluded” and short-changed, even though they make up the majority of all businesses. Under new rules announced by the SBA on Wednesday, businesses will be able to calculate their loan amounts based on a broader measure – gross income, which will make it easier for them to qualify.
While this appears to be a comprehensive policy benefit for the first time, the SBA will limit its potential impact by not allowing businesses to modify their existing PPP loans if they have already been approved for the aid. This is a break from the recent precedent. The SBA has allowed farmers and ranchers to increase PPP loans earlier after Congress passed a law in December enabling them to get more money.
The SBA argues that it has no retrospective authority to increase rules that allow it to increase earlier PPP loans. Matthew Coleman, spokesman for the SBA, said Congress in December gave the power to review rules with retroactive effect for farmers and farmers.
Although the small businesses in question do not have an army of lobbyists, their lawyers are starting to fight back.
“Those who are zealous should not be punished,” said Keith Hall, president and CEO of the National Association for the Independent.
Some people on Capitol Hill believe the SBA has the power to adjust the loans. Legislators plan to investigate more deeply the reasons behind the decision and whether legislation is needed to address it.
Ben Cardin (D-Md.), Chairman of the Senate for Small Business, which plans to hold a PPP oversight this month, said it was a matter of fairness.
“I am very interested in the way we can offer the same benefits to those who have already submitted their applications,” he said. “I need to better understand the administrative challenges the SBA faced and why they can not recommend doing it administratively.”
If the SBA adheres to the policy and it is up to Congress to intervene, lenders face a short timeline. PPP loans will expire on March 31st. So far, neither the White House nor the key Democrats have made a major effort to expand it.
Dennis Ammann, chief executive of Peoples Bank in Mississippi, said: “It seems like the small businesses that need the most help are being punished.”
“I’m so frustrated with SBA if they stick to this expected policy,” Ammann said. “I do not understand why SBA will not allow lenders to help these tiny little businesses. It just makes no sense.”