PPP loans have new rules to help more actual small businesses

Posted at 5:01 PM, Dec 29, 2020

The government plans to be a little more careful this time around as it hands out money to struggling small businesses as part of the Paycheck Protection Program (PPP). Some changes have been made in this round to ensure these federal dollars go to small businesses that prove they need the money.

We Grow Microgreens, a Boston-based urban farm, is one of perhaps millions of businesses hoping to tap into round two of PPP loan money.

“I always had a dream of starting an urban farm,” said Timothy Smith.

Smith has spent the last few years working toward that dream, finally transitioning from being a teacher to an urban farmer last year.

“By October of 2019, we had a ribbon cutting with Mayor Marty Walsh,” said Smith.

The new neighborhood greenhouse had quick demand for its more aromatic and nutrient-packed vegetables. It was able to hire a half dozen part-time workers, with the plan to make them full-time soon, but the pandemic hit and the impact was instant.

“We had a number of loyal customers that continued to purchase at local farmer’s markets, but that being said, a lot of our customers were restaurants,” said Smith. “We lost some of that business.”

The Boston-based small business applied for a PPP loan under the CARES Act and was surprised to only get approved for $810. Smith was even more surprised to see large businesses getting millions, since the PPP loan program was intended mostly for mom-and-pop businesses like his. In fact, data released by the SBA shows more than $250 billion went to larger-than-intended businesses.

“I just hope in the next round they really consider the up-starts like us, and some of the very small businesses that also need to survive,” Smith added.

“I am optimistic that this money will get out relatively soon and to much more to companies that really need it,” said Todd McCracken.

McCracken is with the National Small Business Association and explained this latest round of PPP loans has new provisions. The provisions were added to ensure the new money actually goes to more small businesses like We Grow Microgreens.

Some of the new provisions include one that requires a business to prove a drop in revenue of at least 25% during one quarter of 2020. This hopes to ensure only struggling businesses get this money and get it first. There’s a provision that a business with more than 300 employees no longer qualifies for the forgivable loans. Previously, that was set at 500.

Another provision implemented by the government is that the maximum loan amount is now set at $2 million. That was previously set at $10 million, which led to bigger businesses taking the lion’s share of PPP loans in round one. To that end, the government has also put in provisions blocking large chains from qualifying for PPP loans in this round. Several major chains, including the fast-food chain Shake Shack, applied for PPP loans in the first round. Shake Shack returned the money, after news reports surfaced of the company receiving money intended for small businesses.

It is important to note that a major reason why the Paycheck Protection Program was created specifically for small businesses was because smaller businesses usually do not have as much access to borrowing in the way that larger businesses do. During this pandemic and economic downturn, it was critical for the government to ensure small businesses could borrow money to stay afloat. If most of that money was used to keep people employed, the government would forgive it.

“The other thing that they have done, and we are not sure how it is going to play out, is that they have done 'set asides' for small companies,” said McCracken. "So there is a pool of money specifically for companies with fewer than 10 employees, that only they can tap.”

If the new provisions work as intended, small business like the urban farm in Boston and millions like it around the country can re-hire workers, move part-timers to full-time, and help employees who have also struggled through this pandemic.