Biden Highlights Small-Business Help, as Problems Persist With Lending Program

President Biden visited a Black-owned flooring company as he continued his weeklong push to highlight the $1.9 trillion economic relief package.

President Biden dropped by a flooring company in the Philadelphia suburbs on Tuesday to promote an assortment of measures in his $1.9 trillion aid package that are aimed at helping small employers and their workers endure the pandemic’s economic shocks.

But Mr. Biden’s most immediate and sweeping small-business initiative — changes he made last month to the Paycheck Protection Program — has been mired in logistical challenges. With the relief program scheduled to end in just two weeks, the effect of his modifications will be blunted unless Congress extends it.

Last month, Mr. Biden abruptly altered the rules of the $687 billion program to make business owners who employ only themselves eligible for more money. The move was intended to address a clear racial and gender disparity in the relief effort: Female and minority owners, who are much more likely to run tiny businesses than larger ones, were disproportionately hobbled by an earlier rule that based the size of sole proprietors’ loans on their annual profit.

Many companies were shut out of the program because of that restriction, while others got loans as small as $1. The administration switched to a more forgiving formula that lets those businesses instead use their gross income, a change that significantly increased the money available to millions of business owners. Its implementation, though, has been a mess.

The program’s government-backed loans are made by banks. The largest lender, JPMorgan Chase, refused to make the change, saying it lacked the time to update its systems before March 31, the program’s scheduled end date. The second-largest lender, Bank of America, decided to update all of its applications manually, causing anxiety and confusion among its borrowers. Wells Fargo released its revised application on Tuesday and told borrowers with pending applications that they had just three days to reapply using the new form.

Compounding the problem is that Mr. Biden’s change was not retroactive, which has prompted backlash from the hundreds of thousands of borrowers who got much smaller loans than they would now qualify for. Many have used social media or written to government officials to vent their anger.

JagMohan Dilawri, a self-employed chauffeur in Queens, got a $1,900 loan in February. Under the new rules, he calculates that he would have been eligible for around $15,000. That wide gulf frustrated Mr. Dilawri, who has struggled to keep up on his mortgage, car loan and auto insurance payments since the pandemic took hold.

“When the Biden administration came, they said, ‘We will be fair with everyone,’” he said. “But this is unfair.”

Officials at the Small Business Administration, which manages the program, said only Congress could fix that disparity. Absent legislative action, loans that were completed before the rule was revised “cannot be changed or canceled,” said Matthew Coleman, an agency spokesman.

On Tuesday, the Senate confirmed Mr. Biden’s nominee to run the Small Business Administration, Isabel Guzman, by an 81-to-17 vote.

Despite the concerns, Mr. Biden was met with praise in Chester, Pa., when he visited Smith Flooring, a Black-owned business that supplies and installs flooring. White House officials said the shop cut payroll over the last year, from 22 union employees to 12, after revenues declined by 20 percent during the pandemic. It has survived, the officials said, thanks in part to two rounds of loans from the Paycheck Protection Program, which Congress established last year during the Trump administration to help small businesses.

“This is a great outfit. This is a union shop,” Mr. Biden said in brief remarks. Its employees, he said, “work like the devil, and they can make a decent wage, a living wage.”

The owners of Smith Flooring, Kristin and James Smith, secured their second loan from the program as part of one of the Biden administration’s changes, which created a two-week exclusive period for certain very small businesses to receive loans. They thanked Mr. Biden for his efforts and for visiting Chester.

Mr. Biden’s aid bill, signed last week, added $7 billion to the program and funded others to help struggling businesses, including a $28 billion grant fund for restaurants. The law also set aside additional money for other relief efforts run by the Small Business Administration, including a long-delayed grant program for music clubs and other live-event businesses, which the agency said would start accepting applications early next month.

Lenders are scrambling to carry out the administration’s changes to the Paycheck Protection Program and finish processing a flood of applications before March 31. The American Institute of Certified Public Accountants called the deadline “unrealistic,” and 10 banking groups sent a letter to lawmakers urging Congress to give them more time.

Advocacy groups are also calling, with increasing urgency, for both an extension and a fix to make the rule change for sole proprietors retroactive.

Doug Mills/The New York Times

“We absolutely need those changes,” said Ashley Harrington, the federal advocacy director at the Center for Responsible Lending. In December, Congress made retroactive changes to Paycheck Protection Program loans for farmers that allowed those borrowers to recalculate and increase previously finalized loans.

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Frequently Asked Questions About the New Stimulus Package

The stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more.

Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read more

This credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.

There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.

The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.

“To have that change be made for one group and not be made for another — especially for a group that has so many Black and Latino business owners that have struggled so much in this crisis — really raised alarms and red flags for us,” Ms. Harrington said.

Some key Democratic lawmakers said they were willing to extend the date. Representative Nydia M. Velázquez, a New York Democrat who leads the House Small Business Committee, said she was working with the Small Business Administration and congressional Republicans “to find a path forward, whether that be through agency action or additional legislation.”

“For those sole proprietors who applied before the new rules took effect, we understand their concerns and are eager to work with Congress to resolve them,” said Bharat Ramamurti, the deputy director of the National Economic Council and the White House’s point person on the relief program.

Mr. Ramamurti said that “tens of thousands” of loans had been approved by around 4,000 lenders using the new formula, and that some large lenders — including the online lender Biz2Credit and two banks, Cross River Bank and Customers Bank, that make loans for dozens of partner companies — said they had successfully made the needed updates.

But many applicants are struggling. Chase’s refusal to make the change provoked outrage on social media from its customers. “What a slap in the face,” one tweeted at the bank. “Please make this right,” another begged.

And some Bank of America customers are mired in confusion over the bank’s process, which required loan seekers to apply in writing for an incorrect amount — one that used the older formula — and rely on the bank’s staff to correct their applications by hand.

Asim Khan, an environmental consultant in Ann Arbor, Mich., has been trying for two weeks to get his Bank of America application untangled. He has spent hours on the phone and on hold. “I’ve had two reps tell me they’ve seen it work for people, but yet they can’t make it work for me,” he said. “It’s all super clumsy.”

Bill Halldin, a Bank of America spokesman, said the bank was “working with each individual client to manually update their loan information, which is the best way for us to help them take advantage of the recently announced rule change.”

While the program still has two weeks left, the big banks are already shutting down. Bank of America stopped accepting new applications last week, and Chase plans to close its application system on Friday.

Source: Economy -


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