If you’re a small business that has been thinking about getting money under the Paycheck Protection Program for either a first or second time, the clock is ticking to join a party that only you are invited to attend.
In a series of changes announced by the Biden administration Monday morning, the Small Business Administration said it would kick off a 14-day period this Wednesday during which it would accept applications for PPP funding only from companies that have 20 employees or fewer.
But there is a second provision focused on businesses consisting of a sole proprietor that by extension could benefit independent owner-operators whose fleet consists of a single truck.
While some independent owner-operators did get money in the first round of PPP that ended in August, others got comically small amounts because of the funding formulas. As the formal announcement from the SBA about the new plans notes, there were sole proprietors in some businesses who received payouts of $1.
The SBA said it was going to “revise the loan calculator formula for these applicants so that it offers more relief.” There also will be a $1 billion “set aside” for businesses that are in “low and moderate income areas” and have zero employees beyond the sole proprietor.
An email sent to SBA about how the agency planned to make those formula changes had not been answered by publication time.
Data released by the SBA so far shows that the vast majority of the loans in round two of the PPP are for companies coming back for more after getting loans in round one. According to the data through Sunday, total second-draw loans were $127.4 billion. Of that, only about $47 billion went to companies with 10 employees or fewer or with less than $250,000 in revenue.
Recipients coming in for the first time got $12.8 billion in loans.
Regardless of the changes to be put in place, Alisha Jernack, a partner with the Entrepreneurial Business Services of Mazars USA, which focuses on transportation, said her clients have been finding round two of the PPP program more difficult than the round that ended in August.
“The second round of PPP already has been very challenging for our small business clients,” she said in an interview with FreightWaves. She said Mazars had believed that the second application process would be easier than the first, given that it was mostly similar to the first round. Round two has certain restrictions that were not in the first round, such as a 300-person limit on employees for a recipient (compared to 500 in round one) and a requirement that new borrowers show they suffered a 25% revenue decline between a quarter in 2019 and 2020 to be eligible to receive funds.
The process has not been smooth. According to Jernack. “Many of our clients applied weeks ago and they still have not received funds. So it’s really thrown a wrench for our clients. They need the money.” She said the clients who had applied had a “significant revenue reduction,” and not getting PPP funds is “going to reduce it even further.”
“It’s really been a mess and there are so many questions,” Jernack said. As for the latest temporary changes, “I don’t think it is going to make it easier,” she said. “It will make it more challenging.”
When round two of PPP was announced, the provision that a borrower show that 25% reduction in income was viewed as a possible burden for trucking companies operating in one of the great bull freight markets of recent years. But according to the data released so far on PPP loans, the impact on the companies under the NAICS transportation and warehousing sector does not show much change in the sector’s market share from the first round.
In the first round of lending, PPP loans to the transportation and warehousing sector accounted for 3.34% of all loans. In the current round that began in January, that number has dropped by a minuscule amount to 3.23% for loans given through Sunday.
But the size of the loans in the sector has dropped considerably. In the first phase through August, the average loan to the transportation and warehousing sector was $76,331. In the latest round, it was $49,468.
The average size of all loans also has shrunk. It was a bit more than $101,000 in the first round and is now about $73,000.
There are other provisions announced by the SBA aimed at getting more money into small businesses. An earlier provision blocking money going to anybody with a prior “non-fraud” felony conviction will be lifted. Previously, if an applicant was delinquent on student loans owed to the federal government, that would have blocked receiving PPP money. That is being lifted also.
Noncitizen owners can use their individual taxpayer identification numbers to apply; that is also a change.
More articles by John Kingston
Sorting through the data on PPP loans: A road map from FreightWaves
PPP money lowered freight rates during pandemic’s darkest days: Convoy
Drilling Deep: Loan forgiveness is the next big step as PPP moves toward its completion
