The smallest business owners are excited and confused by PPP rules as priority window opens

When Sinelia Louis, 50, heard about the recent changes to the Small Business Administration’s Paycheck Protection Program, she felt like her prayers had been answered.

“I was cleaning, and I said, ‘Thank God,'” said Louis. “That gives me some hope to keep going, some hope that my business will not die right here, right now.”

Louis runs Caregivers Company LLC, a home-care service that works with seniors, in St. Louis. She’s a sole proprietor who’s been trying to expand her business in the hopes of being able to hire employees.

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When Covid hit last March, it was devastating, and the PPP program was a glimmer of hope. Louis applied for a forgivable loan in the first round but was ultimately denied because of her immigration status – she came to the U.S. from Haiti in 1998 and is still waiting to receive her green card. Still, she’s working legally with a business license and pays taxes with an Individual Taxpayer Identification Number.

Now, under new rules that take effect soon, she’ll be eligible to receive a PPP loan. She’s getting her paperwork ready and plans to take advantage of the priority application period.

PPP confusion abounds

The Biden administration on Monday announced key changes to the SBA’s Paycheck Protection Program, which was first established by the CARES act to give forgivable loans to firms hard-hit by the pandemic. For a two-week period that started Wednesday, the program will only process loans to the smallest businesses, those with fewer than 20 employees.

At the same time, the administration made key changes to the program that will begin the first week of March. It will update the loan calculation formula for sole proprietors, allow some non-citizen U.S. residents to apply for loans and removed previous restrictions that kept business owners with certain felony convictions or were delinquent on student loans from access to funds.

The misaligned timing of the priority application period and the start of these changes to the program have led to both excitement and confusion for business owners, especially sole proprietors wondering when they should submit their information for a forgivable loan.

“It’s déjà vu all over again,” said Megan Gorman, an attorney and managing partner at Chequers Financial Management in San Francisco, adding that the uncertainty reminds her of the first PPP rollout in April 2020. “Are [small businesses] willing to go through a process which is going to play out as they apply?”

Small businesses with employees that are already eligible should submit their paperwork as soon as possible, said Gorman. Those that would benefit from changes due soon – either sole proprietors that would get more money, non-citizens or those with certain criminal backgrounds – should get their financial house in order, she said, but wait to file.

“What we’re hopeful for is that we get guidance sooner rather than later,” said Gorman.

Some businesses aren’t sure if the rules apply to them

The timing of the policies has also caused confusion among small business owners with pending applications, such as Tracy Sarris Braddock, who runs business consulting firm Inova Management in Lavon, Texas. Braddock, 53, was able to apply for a PPP loan last year as a sole proprietor and received $19,500.

The loan, while helpful, wasn’t enough to make up for business she’d lost due to the pandemic, so she also applied for an SBA economic injury disaster loan, which is not forgivable, and in early February, submitted paperwork for a second PPP loan which is still pending.

She hopes that means it could fall under the updated calculation formula, which would lead to a bigger loan – by her own rough estimate, it may mean about seven thousand dollars more.

So far, the SBA has said that small businesses will be subject to the rules in place at the time of their application. Some groups are pushing the White House for flexibility, or some form of retroactivity, to help small businesses that have recently applied for loans or have pending applications.

“I’m extremely optimistic that even if an application is already in that the new calculation – the gross income versus net income – will apply to those applications as well,” said Keith Hall president and CEO of the National Association for the Self-Employed.  ”I think there will be a process.”

If the SBA’s current guidelines aren’t updated, Braddock, and others like her with pending loans, may have to settle for less money.

“It’s frustrating,” she said. “As a small business I’m kind of getting used to getting kicked in the teeth.”

To be sure, experts have generally applauded updates to the PPP, which are aimed at getting funding to the businesses that have had difficulty accessing forgivable loans in the earlier round, including businesses led by women and minorities.

“When you look at when the Biden-Harris administration is trying to do, they’re trying to do the right thing,” said Gorman.

But another bumpy rollout means lenders and borrowers are waiting for updates in real time and dealing with an ever-shifting program as they’re trying to apply.

Adding to the tension is that time is running out for all small businesses – not even those covered by the new rules. The SBA’s program is set to sunset on March 31, and so far, the Biden administration has not asked Congress to extend it. That leaves all eligible borrowers little time to take advantage of the changes and for issues to be resolved.

“We’re going to be running out of time if they don’t extend it past the March 31 deadline,” said Chris Hurn, chief executive of Fountainhead Commercial Capital. “That will be a real shame because so many of these people are qualified and deserving of these funds.”

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