Why Biden hit pause on PPP loans for businesses with over 20 employees

The Biden administration earlier this week paused the Paycheck Protection Program for businesses with more than 20 employees, in an effort to get more loans to very small businesses.

Why it matters: PPP implementation has taken lots of arrows since its initial launch last April, but this move seems to be getting broad-based applause. Even if no one really knows if it will achieve its objective.

Backdrop: PPP was reauthorized late last year with another $284 billion, but several big rules changed. The most significant was that applicants for second-draw loans must be able to demonstrate at least a 25% revenue loss in 2020, either for the entire year or for a single quarter (compared to the same quarter in 2019).

• The U.S. Small Business Administration reports that over $140 billion of PPP 2 has been disbursed to over 1.9 million businesses. Since last April, there have been more than 7 million PPP loans, totaling $663 billion.

The problem: When PPP originally rolled out, many larger businesses got loans before smaller businesses — namely because they had deeper relationships with lenders and more access to lawyers and accountants.

• And when the original pool was quickly depleted, some small business owners either didn't realize it was later refreshed or still didn't know how to apply.

What's happening now: A White House official explains that the two-week moratorium on larger applicants is to enable the more than 5,000 lenders to get the word out that there's still over $100 billion remaining in PPP loans. Plus, lenders will have more time to work with small businesses that might have poorly organized records.

• Bill Briggs, who served as the SBA's deputy associate administrator in the Trump administration, tells me that "it's important that small businesses are reminded that PPP still exists."

• He adds that lenders must overcome levels of institutional distrust among some potential applicants — including religious nonprofits — and that key to the changes is that it gives both lenders and the SBA some timing slack so that they can both operationally catch up.

The bottom line: We should get a sense on how many Main Street jobs were supported by this extra effort at some point next month, or if it was already a lost cause.