PPP (Paycheck Protection Program) Loans for Minority, Underserved, Veteran, and Women-owned Businesses

The U.S. Small Business Administration (SBA) and Treasury issued guidance on January 6th for the new Paycheck Protection Program (PPP). The original program was put into place to offer forgivable loans to small businesses impacted by the coronavirus pandemic. Those funds ran out quickly and this new round offers basically the same program.

However, this time around, priority will be given to certain businesses including minority, underserved, veteran, and women-owned businesses. Here are details so you can apply for the PPP funding you need in 2021.

SmartBiz Loans is proud of the fact that over 50% of the SBA and term loans funded by our banks are for women-owned, minority, or veteran businesses. Let us help you apply today.

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PPP details

The first round of the PPP forgivable loans supported the employment of 51 million American workers and over 80 percent of small business payroll across all 50 states and territories.

More than 87 percent of loans have been for $150,000 or less. PPP loans have been distributed across diverse areas of the economy, with 27 percent of the funds going to low- and moderate-income communities, which is in proportion to their percentage of the population.

Building on the success of the earlier round of PPP, the SBA is continuing to address potential barriers to funding.

PPP round two new guidelines for underserved small businesses

To address obstacles, there are new set-asides in place for certain business types seeking funding this time around including minority, underserved, veteran, and women-owned businesses. A set-aside is a program requiring a percentage of opportunities (as for jobs or funding) to be reserved for an underrepresented group.

Here are the numbers and guidelines you need to know to prepare you for the PPP application whether it’s your first or second PPP loan.

Minority business statistics

In May 2020, the U.S. Census Bureau released new estimates showing 1.1 million employer firms were owned by women and 1.0 million by minorities.

Additional statistics released include:

In 2017, the sector with the most women-owned businesses 16.9% (192,159) were in the health care and social assistance industry, followed by professional, scientific and technical services 16.4% (185,649), and 11.7% (132,894) in the retail trade industry.

The top sectors for Hispanic-owned firms were construction with 15.6% (50,187) of all firms, followed by accommodation and food services 13.0% (41,817), and professional, scientific and technical services 10.6% (34,292). Hispanic firms in these top three industries employed approximately 1.2 million workers, had receipts totaling approximately $130.9 billion and an annual payroll of approximately $35.8 billion.

There were 555,638 Asian-owned businesses, with 23.9% (132,698) in the accommodation and food services sector. Asian-owned firms had the largest receipts ($814.8 billion) among minority groups.

Black or African Americans owned 124,004 firms in 2017 with 32.0% (39,714) of these firms in the healthcare and social services industry.

New interim final rules

The guidance included two Interim Final Rules (IFRs).

The 82-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” consolidates the rules for PPP forgivable loans for first-time borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.

The 42-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.

Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns

In addition, the SBA released a three-page “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns.” It includes a commitment from the SBA to make at least the first two days of the PPP application window open exclusively to applications from community financial institutions that serve minority- and women-owned businesses. SBA began accepting applications for the second round of PPP Loans on January 13, 2021. The program is authorized through May 31, 2021.


New set-aside guidelines

The Economic Aid Act has provided set-asides for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders. The set-asides include:

  • $15 billion across first- and second PPP loans for lending by community financial institutions
  • $15 billion across first- and second- PPP loans for lending by insured depository institutions, credit unions, and Farm Credit System institutions with consolidated assets of less than $10 billion
  • $35 billion for new PPP borrowers
  • $15 billion and $25 billion for first and second PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.
  • The SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods

The SBA announced in its three-page guidance that it would take a number of steps to ensure increased access to the PPP for minority, underserved, veteran, and women-owned business concerns.

Important application timeline

The SBA said it would:

  • Continue setting aside dedicated hours to process and assist the smallest PPP lenders with their PPP loans
  • Continue to strongly encourage community development financial institutions and minority, women-, veteran-, and military-owned lenders to apply to become PPP lenders.
  • Continue to work with the Board of Governors of the Federal Reserve System on the PPP Liquidity Facility to enable PPP lenders, including nonbank lenders, to pledge PPP loans to the Federal Reserve as collateral for Federal Reserve borrowings to enhance lender liquidity and enable PPP lenders to expand their lending capacity
  • Promote awareness of these policies and procedures via traditional media methods, SBA social media accounts, and guidance to lenders
  • Continue to work with federal partners to share the guidance with PPP lenders, borrowers, and the broader public.

Expanded use of PPP funds for loan forgiveness

Congress has expanded the types of expenses for which all PPP loans can be used, which applies to existing PPP loans, unless forgiveness has already been obtained, and new PPP loans.

Previous proceed use for first round of PPP:

Funding could be used for payroll, rent, covered mortgage interest and utilities.

New proceed use for the next round of PPP funding:

The PPP now allows proceeds to be used for:

  • Covered Operations Expenditures: payments for business software or cloud computing service that support business operations, product or service delivery, the processing, payment or tracking of payroll expenses, HR and billing functions, or tracking of supplies, inventory, records, and expenses
  • Covered Property Damage Costs: costs related to property damaged and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation
  • Covered Supplier Costs: expenditures to a supplier of goods that are essential to operations when the expenditure was made and is made pursuant to a contract or order in effect at any time before the covered period or, with respect to perishable goods, in effect at any time during the covered period
  • Covered Worker Protection Expenditures: operating or capital expenditures that allow a business to comply with requirements or guidance issued by the CDC, HHS, OSHA or any state or local government during the period beginning March 1, 2020 and ending on the date which the national emergency declared by the president expires. Other covered costs include the maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID-19. These expenses appear to include PPE, physical barriers that were put in place, expansion of indoor/outdoor space, ventilation or filtration systems and drive-through windows

Next Steps

Let SmartBiz help you apply for the new round of the Paycheck Protection Program (PPP). Review our list of documents to help you organize and prepare.

SmartBiz Loans® works with small business owners like you every day to help you apply for the funding you need. Since 2013, we’ve specialized in SBA (Small Business Administration) loans. The new round of the PPP, to be administered by the SBA, makes continued financial support available to help eligible small businesses keep their employees and stay open safely during the COVID-19 pandemic.

What You Need to Know

The availability of PPP loans remains subject to SBA guidance and other factors, including the amount of funding available to banks and the quantity of eligible applicants considered on a first-come, first-served basis. The information provided above is for educational purposes only. Please consult the SBA’s website for actual rules and the most current guidance.