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Biden faces backlash over small business rescue overhaul

The US Small Business Administration (SBA) (File photo)

The new rules by the Biden administration aimed at overhauling the way small business loans are doled out have drawn criticism from business oweners.

On February 22, the new US administration changed how the Paycheck Protection Program (PPP) run by the Small Business Administration (SBA) calculates forgivable loans for the smallest firms and sole proprietors.

The new rules, however, are likely to leave thousands of sole proprietorships and the self-employed on the sidelines, in spite of President Joe Biden's promise to give them better access to aid during the coronavirus pandemic.

The SBA quietly decided that many of the businesses, which have already received aid from the program, will not receive the benefits that Biden pledged to "one-person businesses".

The agency admits those businesses were shortchanged under earlier rules, with some of them receiving as little as $1 because of the way loans were calculated, however, it says it cannot allow the PPP borrowers to raise existing loans.

Although the move was criticized by business owners and PPP lenders responsible for doling out the loans, the SBA is not relenting.

"These businesses have been neglected for nearly a year," House Small Business Chair Nydia Velázquez (D-N.Y.) told POLITICO. "I committed to working with the Biden administration to spread these benefits to as many of these sole proprietors as possible, not just those submitting new applications."

The SBA's handling of the program has been under criticism since it began distributing more than $662 billion in loans last April.

The small federal agency, which has run the PPP along with the Treasury Department, has been slammed for obscure decision-making and ever-changing rules governing the unprecedented economic lifeline.

Over 2.6 million sole proprietors, independent contractors and self-employed individuals have already been approved for PPP loans, according to data from the House Small Business Committee.

"I'm in a black hole because it seems like they're definitely going to forget about the people who already applied," said Jonathan Kolbe, a New Jersey-based freelance photographer who received two PPP loans but will not be able to raise them under the new rules. "I am disappointed in the SBA that they're not looking into it, to help people who have already played by the rules, signed the applications and gotten approved."

The concerns about the treatment of sole business owners, independent contractors as well as self-employed businesses — small employers including cleaning and home repair services — have caused trouble for the PPP since the program began.

Other businesses could calculate their eligibility for PPP loans based on payroll costs, while the smaller companies were forced to apply for loans based on their net profits, which deducts things like rent and utilities.

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