The Biden administration announced on Monday a two-week window in which only businesses with fewer than 20 employees would be considered for the first or second paycheck protection program loan.
The exclusivity period for loan applications begins Wednesday, February 24 at 9 a.m. and lasts 14 days. Past PPP data and industry statistics from the Census Bureau indicate that a large portion of the auto body repair industry would be eligible to take advantage if it had not already secured PPP funding for 2021.
The Small Business Administration said he would take further steps during the first week of March to help companies raise PPP funding.
Sole proprietorships, independent contractors and the self-employed will be able to borrow more money as part of an upcoming overhaul of the funding formula, the SBA said. Census and PPP data also suggests that it will be a boon for many bodybuilders as well.
The SBA will no longer disqualify applicants for student loan default or delinquency or felony conviction (other than fraud) in their past. The agency said the removal of the criminal barrier was “in line with a bipartisan proposal from Congress.”
Finally, the agency will also clarify that legal U.S. residents but not citizens can use individual taxpayer identification numbers to request a PPP.
“The SBA is a front-line agency working to create an inclusive economy, focused on significantly reaching out to women-owned, minority, low- and moderate-income, rural and other underserved communities. While the reported data illustrate we have made real progress in ensuring that these funds reach underserved communities, we believe we can still do better, ”said Michael Roth, senior advisor to the SBA, in a statement. “The significant policy changes we are announcing further ensure inclusiveness and integrity by increasing access and much-needed support to the main street businesses that anchor our neighborhoods and help families build wealth.”
Monday, Democratic President Joe Biden said small businesses with a “handful of people” make up 90 percent of America’s business. However, many small businesses found themselves “beefed up” by larger companies during the PPP application period, he said.
It was not clear whether Biden meant PPP 2020 or PPP 2021, or both.
The original PPP initiative ran from April 3 to August 3. 8, 2020, and distributed more than $ 525 billion to U.S. small businesses in the form of payroll-size clawback loans. Last year, Congress approved reopening the PPP to newcomers and allowed companies to apply for a second loan, sowing the effort with $ 284.45 billion.
An analysis of SBA data by Repairer Driven News found 20,351 companies in the NAICS 811121 “Auto Body, Paint and Interior Repair and Maintenance” sector raised nearly $ 1.5 billion in PPP loans during the initial PPP in 2020.
The industry continued to request and receive PPP dollars until its deadline of August 8.
At least 77.8 percent (15,829 companies) of all these “auto body” companies employed between 1 and 19 employees and would be able to take advantage of the new window of PPP exclusivity.
The actual proportion of eligible stores could be even higher. The SBA’s PPP data lists 3,370 companies with more “bodybuilders” with an empty number of employees or “0”. It’s a safe bet that many of these records are likely errors and a workforce exists in these companies. However, it also seems to be a safe bet that at least some of these companies also employ less than 20 people.
the an average body shop had around 7 employees in 2018, according to the Census Bureau.
A smaller but still significant part of the industry is also poised to benefit from the plan to increase the PPP funding formula for sole proprietorships, independent contractors and self-employed workers. SBA data indicates that 4,002 auto body companies that received PPP funding in 2020 were organized in one of these three formats. They employed at least 8,813 people in total.
Census data indicates that 6,459 businesses in the “automotive organizations” segment are recognized as “sole proprietorships”, which includes the self-employed and sole proprietorships. (We could not determine the number of independent contractors.)
The 2021 PPP, open to applicants January 11, will run until March 31 or until all money runs out. More than $ 140.28 billion, nearly half the amount, was released on Sunday, according to the Small Business Administration.
The new PPP offers “first draw” loans of up to $ 10 million to businesses with 500 or fewer employees who did not get a loan in the first round. These loans mostly follow the same rules as the PPP in 2020.
“Second Draw” loans are up to $ 2 million and are only available to businesses with 300 or fewer employees. The company must have experienced a 25% drop in gross revenue of at least one quarter in 2020.
ASB said companies could prove the reduction in gross revenues with quarterly financial statements, bank statements or tax returns. On average, repairable auto claims – a key indicator of collision repair revenue – fell 35% nationally in the second quarter of 2020, according to CCC. Claims were still down nearly 20 percent in the third and fourth quarters.
No collateral is required for a PPP loan, and there are no fees to apply. Companies can borrow the equivalent of 10 weeks of payroll capped at $ 100,000 per employee. Money can only be spent on “salary costs, including employee benefits, and can also be used to pay mortgage interest, rent, utilities, worker protection costs related to COVID-19,” the costs of uninsured property damage caused by looting or vandalism in 2020, and certain supplier costs and expenses for operations.
The “first draw” and “second draw” PPP loans and their 1% interest are fully forgivable if a borrower complies with the necessary rules, including preserving jobs and wages and spending at least 60% of the money on payroll.
Despite the SBA’s concern for the nation’s smaller businesses on Monday, they appear to be lucky to get PPP loans. The SBA said on Sunday that 574,936 of 591,833 2021 “first draw” PPP borrowers and 986,022 of 1,326,830 companies receiving “second draw” PPP loans had 10 or fewer employees.
“For companies with fewer than ten employees, the share of funding is up almost 60%,” the SBA wrote in a press release Monday.
Small Business Management, February 22, 2021
Small Business Announcement by President Biden of February 22, 2021 (Starts at 53:49 mark)
White House YouTube channel, February 22, 2021
Featured Image: Democratic President Joe Biden on February 22, 2021 discussed helping COVID-19 small businesses. (Screen capture from White House video)