The Biden is implementing a series of changes to the federal Paycheck Protection Program small business loans designed to ensure more of the funding goes to the smallest of small businesses.

The new changes play into the a $284 billion tranche of PPP funding currently being loaned out, and build on a phased roll-out that started about a week before Biden took office.

Companies with more than 20 employees will be shut out of the program until March 10 in order to give the smallest firms an exclusive two-week window. Other changes announced in late February mean that some independent contractors and self-employed individuals could get larger payouts.

By shutting out the larger applications, the Treasury Department is trying to send more money towards the bottom end of the income distribution.

“While the Paycheck Protection Program has delivered urgent relief to many businesses across the country, the initial round of PPP last year left too many minority-owned and mom-and-pop businesses out, while larger, well-connected businesses got funds quickly,” a senior administration official told reporters in a Sunday-evening call with news media.

Below are answers to some key questions facing business owners and those they employ, including changes to the law that came with the most recent bipartisan relief bill, as well as rule changes announced more recently by the Biden administration. (This FAQ will be updated as new information becomes available)

How will PPP change under President Joe Biden?

The program could end on March 31 if Congress and the Biden administration do not extend the PPP deadline or devote more funding to it. The White House has not said whether it plans to seek an extension.

In the short-term, the Treasury Department has several changes designed to push more PPP funding to independent contractors and the smallest small businesses:

  • For two weeks starting Wednesday Feb. 24, companies with more than 20 employees are shut out of PPP.
  • The SBA plans to change the formulas that are applied to sole proprietors and independent contractors with the goal of increasing their payouts. Documentation on how the new formulas will work can be found here.
  • Eliminate restrictions that exclude people who have defaulted on student loans.
  • Allow non-citizen small businesses to apply using Individual Taxpayer Identification Numbers, something that is designed to give legal immigrants such as Green Card holders a clearer path to receiving PPP funds.

The new changes are detailed in a fact-sheet that was distributed to reporters and published on the White House website.

The 20-employee cap went into effect on Wednesday, Feb. 24 and continues for two weeks. The other changes to PPP are to be implemented in early March based on pending guidance from the Small Business Administration.

My company already received a PPP loan. Can it get another one?

The SBA is allowing some first-time recipients to get a second PPP loan, but not all of them.

To be eligible for a “second-draw” PPP loan a business can’t have more than 300 employees. Businesses receiving second-draw loans must have experienced a 25 percent or more reduction in revenue in 2020 compared to 2019. (This calculation does not include loan forgiveness)

On the whole, the SBA has seen significantly more demand for second-draw loans; as of Feb. 15 SBA-approved lenders had issued $114 billion in second-draw loans and $10 billion in loans to first-time recipients.

Which businesses are eligible?

Starting on Wednesday, Feb. 24 the Paycheck Protection Program will be restricted solely to businesses that have fewer than 20 employees. The two-week restriction is intended to force PPP lenders to re-focus their efforts on reaching the smallest of small businesses.

“The 14-day exclusive application period will allow lenders to focus on serving these smallest businesses,” stated an SBA fact-sheet that was shared with reporters.

After the 14-day period the earlier PPP rules will apply: those eligible to receive PPP funding for the first time include businesses that meet established SBA size standards, independent contractors and 501(c)(3) nonprofits. The SBA also made some new business categories eligible which had previously been shut out, including 501(c)(6) organizations such as local chambers of commerce, housing cooperatives and direct marketing organizations.

Business owners with past felony convictions and those who have defaulted on student loan payments are no longer excluded from the program, thanks to bipartisan legislation known as the PPP Second Chance Act. Those with past fraud convictions are still excluded.

Detailed eligibility requirements can be found starting on page 13 of this document for first-draw loans, and on page 5 of this document for second-draw loans.

What time period do the loans cover?

PPP loans can cover any length between 8 and 24 weeks depending on what best meets the business’ needs, according to SBA informational materials. The interest rate is still 1 percent.

How much funding can I get?

If your company is receiving a PPP loan for the first time, you can receive up to $10 million. Second-draw loans are capped at $2 million. In both cases the amount of funding you receive is based on your payroll for the previous year.

The Treasury Department also plans to carve out a $1 billion set-aside for businesses that are in low and moderate-income areas.

How will the new rules affect loans given to independent contractors and sole-proprietors?

The Treasury Department is changing the loan formulas specific to independent contractors and sole-proprietors. Specifically, it is changing how it defines net payroll costs that determine the size of the loan. Under the old rules, applicants had to narrowly define payroll as payroll costs plus net profits.

Under the new rules, independent contractors and sole-proprietors can use an alternative definition of payroll costs that includes both income and net earnings from employment. The changes are described in detail starting on page 5 of this document.

What kinds of expenses can a PPP loan cover under the new rules?

While the program was initially limited to payroll expenses, the new PPP funding can also be spent on a range of new expenses including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.

The rules for how PPP funding can be spent are included on page 48 of this document.

How much longer will PPP loans be available?

The third round of PPP funding expires on March 31, and the Biden administration has not said whether it will work with Congress to secure more funding.

How do I apply on behalf of my small business?

Paycheck Protection Program loans are accepted, processed and disbursed by a network of SBA-approved lenders. They are listed by state here and through the SBA’s online lender match tool here.

First-time loan applicants should use this form to apply for new funds with an SBA-approved lender. Second-time applicants should use this one.

Is the funding likely to run out?

The first round of PPP funding, which started in April 2020, ran out in a matter of weeks as a panicked business community quickly applied for loans. The second round, by contrast, finished the year with more than $100 billion leftover.

SBA and Treasury Department officials say they believe the current $284 billion round of funding will be more than enough.

“We don’t anticipate the money running out,” said a senior administration official involved in implementing the PPP program.