‘Self-employed’ PPP winners have been largely white-collar. New Biden rules aim to change that.

President Joe Biden says his new plan to channel more coronavirus-relief cash toward the self-employed will help “home repair contractors, beauticians, and small independent retailers” that have struggled through the pandemic.

The health crisis is “hurting Black, Latino, and Asian American communities the hardest,” the president said this week when he announced the new moves, the biggest one of which gives independent businesspeople access to bigger awards under the Paycheck Protection Program.

But a look at the owner-operated businesses that have so far gotten the most help from PPP lays bare the challenges faced by the administration as it seeks to use the $953 billion program to aid the most impacted populations and employment sectors.

An Inquirer analysis shows that self-employed workers in less diverse areas, notably law and real estate, have often been the biggest recipients of past payouts of PPP money, doing better than the groups mentioned by Biden.

“Broadly blanketing ‘self-employed people’ as who’s going to get the loans is flawed,” said Richard Prisinzano, director of policy for the Penn Wharton Budget Model at the University of Pennsylvania. “People have a vision of what ‘self-employed’ is, but Warren Buffett is self-employed.”

Still, others are confident that the changes will have their desired effect, given that about 70% of the independently employed are women or members of minority groups, according to U.S. Small Business Administration data. By contrast, just 40% of businesses that employ others are owned by women or minorities.

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“These steps are going to be incredibly helpful in helping small businesses and people of color get access to this program,” said Ashley Harrington, director of federal advocacy at the Center for Responsible Lending in Washington.

Matt Coleman, a spokesperson for the Small Business Administration, which is overseeing the program, said the changes “will help lay the foundation for a robust and equitable recovery for small businesses across the country.”

PPP was initially authorized in the early days of the pandemic as part of the first financial stimulus to keep the economy afloat through the health crisis. The program, which gives out loans that turn into grants if certain percentages are used for payroll and other allowed expenses, was pitched as a boon for small businesses whose operations had come to a virtual halt.

In fact, much of the funding from the program went to big companies, such as publicly traded mall landlords, hotel operators, and restaurant chains. In the Philadelphia area, it was law firms — many of them elite partnerships with offices in gleaming Center City skyscrapers — that got the most cash.

While keeping those employers solvent kept paychecks flowing to millions of workers — and perhaps staved off economic disaster — many smaller and minority-owned firms struggled to get funding.

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Experts said at the time that PPP’s drafters had effectively given those big borrowers a leg up over smaller businesses when they decided to reach awardees through banks, some of which prioritized their existing customers. That gave bigger businesses with existing bank relationships first dibs on the money.

Lawmakers tried to tilt the balance toward those smaller firms when they revised the program’s rules in legislation late last year so that only businesses with fewer than 300 employees — down from 500 — could qualify for a second allocation. Another revision required applicants to demonstrate a loss of revenue during the health crisis, which hadn’t been necessary for those seeking their first award.

The Biden administration’s changes this week attempt to focus even more tightly on small, vulnerable businesses of diverse ownership with its focus on the self-employed and other provisions aimed at “mom-and-pop” enterprises.

“Small businesses are the engines of our economic progress,” Biden said Monday. “They’re the glue and the heart and soul of our communities. But they’re getting crushed.”

The biggest change announced by Biden this week affects three classifications of small businesses: self-employed workers, sole proprietors, and independent contractors.

When it goes into effect March 1, it will allow such workers to apply for PPP loans based on their yearly revenue. In most cases, that will make them eligible for larger awards than would be available under current rules that base loans on their take-home pay after business expenses.

The Small Business Administration is setting aside $1 billion for such businesses in low- to moderate-income communities.

Another change to the program will strike provisions that disqualify most applicants with recent felony convictions or those that have defaulted on federal student loans.

So far, however, the self-employed workers, sole proprietors, and independent contractors who have gotten the most awards have tended to be in white-collar fields, especially in the Philadelphia region.

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The Inquirer analyzed PPP data for all award recipients through the end of January that identified themselves as being within those three categories. It found that real estate agents and brokers took home the most awards, both nationally and in the Philadelphia region.

For the region — an area encompassing Philadelphia, Delaware, Montgomery, and Bucks Counties in Pennsylvania and Camden, Gloucester, and Burlington Counties in New Jersey — that worked out to 1,100 awards, totaling $17.4 million.

Next up regionally were insurance agents and brokers, who received 652 loans, adding up to $14.1 million; then lawyers who received 610 loans, totaling $15.6 million.

Those fields do not appear to have been the hardest hit by the health crisis.

Unemployment in the real estate sector was 4.7% last month, compared with an average of 6.8% across all industries, according to the U.S. Bureau of Labor Statistics.

About 4% of those in professional and technical services fields ― a group that includes lawyers ― were unemployed, as were just 2.2% of those in the insurance sector.

Workers in those fields are also predominantly white, according to BLS averages for all of last year: 84% of real estate agents and brokers, 85% of legal services workers, and 82% of insurance brokers.

Beauticians, one of the fields cited by Biden, received the seventh-most PPP awards regionally — 403, for a total of $5.2 million — though second-most nationally.

Unemployment in the labor group that includes beauticians, personal, and laundry services, was 11.3% last month. Workers in that field last year were 76% white, 13% black, 7% Asian and 16% Hispanic.

Maura Shenker, who directs the Small Business Development Center at Temple University, hopes that the recently announced changes to PPP will make it more useful to more self-employed workers from such lesser-paid fields with diverse workforces.

Many small-businesspeople in less lucrative fields may not have even bothered to seek PPP loans in the past, since their reported net earnings were too small to make it worth the trouble of pursuing a loan based on that sum, she said. Being able to use the revenue figure could change that calculation.

“The intention is to help the people who have been shut out because their income has been so little to begin with, that it wasn’t worth it,” she said. “The white-collar workers, they’ve already applied.”