Largest Provider of SBA-Approved PPP Loans (Over 98% to Businesses with Under 20 Employees) Says Rules Changes Will Improve Access in Underserved Communities
Biz2Credit, a leading FinTech company and parent of an SBA-approved processor of Paycheck Protection Program (PPP) loans, is applauding the reforms to the PPP that the Biden-Harris administration announced on Monday, Feb. 22, it would soon implement.
Biz2Credit’s funding subsidiary is the largest provider of approved PPP loans, according to data released by the SBA as of Feb. 21, 2021. The company has risen to the top of the rankings of PPP providers with 139,559 SBA-approved PPP loans by serving the smallest businesses, especially self-employed individuals and minority and women-owned businesses, with over 98% of its approved loan applications coming from businesses with fewer than 20 employees.
“The increased access to capital that we are providing for the hardest-hit and underserved small businesses is a clear testament to the importance of digital lending,” said Rohit Arora, CEO of Biz2Credit. “The fact that we have secured almost twice as many approvals vs. the nation’s two largest banks indicates that a digital platform is the best strategy for serving the broadest range of small business clients, especially for a program as urgently needed as the PPP.”
Biz2Credit is now stating that it supports the Biden-Harris administration’s efforts to increase the flow of capital to these smallest businesses. Specifically, the administration will:
- Institute a 14-day period, starting Wednesday, Feb. 24, during which only companies with fewer than 20 employees can apply for PPP relief. Roughly 98% of small businesses have fewer than 20 employees, and they are Main Street businesses that anchor neighborhoods and create jobs.
- Help sole proprietors, independent contractors, and self-employed individuals receive more financial support. Businesses, such as home repair contractors, beauticians, and small independent retailers, make up a significant majority of all businesses. Among them, companies without employees are 70% owned by women and people of color. Yet many have been structurally excluded from the PPP because of how the loans are calculated. To address this problem, the administration will establish a $1 billion set aside for businesses in the category without employees located in low- and moderate-income (LMI) areas, and will revise the loan calculation formula for these applicants so that it offers more relief.
- Eliminate a restriction that prevents small business owners with prior non-fraud felony convictions from obtaining PPP funding.Currently, a business is ineligible if it is at least 20% owned by an individual who has either: (1) an arrest or conviction for a felony related to financial assistance fraud within the previous five years; or (2) any other felony within the previous year. To expand access to PPP, the administration will adopt bipartisan reforms included in the PPP Second Chance Act that would eliminate the second restriction (the one-year look-back) unless the applicant or owner is incarcerated at the time of the application.
- Eliminate an exclusionary restriction that prevents small business owners who are delinquent on their federal student loans from obtaining PPP relief.Currently, the PPP is not available to any business with at least 20% ownership by an individual who is currently delinquent or has defaulted within the last seven years on a federal debt, including a student loan. Millions of Americans are delinquent on student loans, including a disproportionate number of Black borrowers. Working with the Departments of the Treasury and Education, the SBA will remove the student loan delinquency restriction to broaden access to the PPP.
- Ensure access for non-citizen small business owners who are lawful U.S. residents by letting them use Individual Taxpayer Identification Numbers (ITINs) to apply for PPP funding.All lawful U.S. residents may access the PPP, but there has been inconsistency in access for ITIN holders, such as Green Card holders or individuals who are in the U.S. on a visa. The SBA will address this by issuing clear guidance in the coming days that otherwise eligible applicants cannot be denied access to the PPP because they use ITINs to pay their taxes.
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“Businesses with fewer than 20 employees often have struggled more than larger businesses to collect and submit the necessary paperwork and secure relief from a lender. It is a bit complicated, and just one mistake in submitting forms can significantly delay funding,” added Arora. “The 14-day exclusive application period will allow lenders to focus on serving these smallest businesses, which has been an ongoing commitment of Biz2Credit through this process. Many of these truly small businesses are women-owned and minority-owned firms. They are the backbone of local economies.”
Since PPP reopened in January, 98% of Biz2Credit’s approvals have gone to firms with fewer than 20 employees. Sole proprietors, independent contractors, and eligible self-employed individuals comprise 72.5% of the approvals.
Additionally, the Biden-Harris administration announced its continuing commitment to enhancing the PPP application process to ensure accountability by:
- Addressing waste, fraud, and abuse across all federal programs. Unlike the previous round of the PPP, loan guaranty approval is now contingent on passing the SBA’s fraud checks, Treasury’s “Do Not Pay” database, and public records. The SBA now also conducts manual loan reviews for the largest loans in the PPP portfolio and a random sampling of other loans.
- Promoting transparency and accountability. The SBA is working to improve the PPP loan application to streamline the process. To encourage self-reporting of demographic data and better illustrate the impact the PPP is making across various population segments, the administration is revamping the application.
- Improving the Emergency Relief Digital Front Door. The SBA is updating key areas of its websites to help more applicants find resources, understand, relief options and complete applications.
- Continuing to conduct extensive stakeholder outreach to learn more about challenges and opportunities in the implementation of current emergency relief programs. The President has spoken with small businesses owners in recent weeks to understand their concerns about relief programs.
- Enhancing the current lender engagement model. The SBA is launching a new initiative to deepen its relationships with lenders. This model will increase opportunity for lenders to provide recommendations and ask questions about the PPP and drive resolution of open questions and concerns in a more streamlined way.
“Small businesses account for 44% of U.S. GDP, create two-thirds of the new private sector jobs in the economy and employ nearly half of America’s workers. Millions of these small businesses are owned by females, immigrants, African Americans, and other people of color,” Arora said. “Many of them are struggling to make ends meet in the wake of the COVID-19 pandemic and the resulting economic crisis.”
“At Biz2Credit, we fully support the Biden-Harris administration’s commitment to delivering equitable relief to hard-hit small businesses a top priority,” Arora added. “The latest round of PPP funding is providing meaningful relief to business owners who struggled to secure funding last year in the first round of the program.”
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According to government figures:
- The share of funding going to small businesses with fewer than ten employees is up nearly 60%;
- The share of funding distributed through Community Development Financial Institutions and Minority Depository Institutions is up more than 40%; and
- The share of funding going to small businesses in rural areas is up nearly 30%
Despite these outcomes, many businesses remain hindered by SBA validation errors and other anti-fraud measures that are designed to prevent misuse of taxpayer funding. Errors such as these have led to processing delays and in many cases remain unresolved at this time.
“We continue to encourage collaboration with the teams at SBA and lenders to simplify the application process for business owners and resolve these validation errors that continue to prevent many legitimate borrowers from receiving an SBA approval,” Arora said.
Biz2Credit reminds borrowers that as the SBA implements changes this week, processing delays are to be expected due to the very high volume of demand for the PPP. Business owners should continue to watch their online dashboard for updates as new program rules are released via the Biz2Credit funding platform.
