Extension of Paycheck Protection Loan Program Hits Senate Snags

The Senate’s attempt to fix the popular Paycheck Protection Program has hit snags, possibly delaying changes for small businesses that seek more flexibility in using the rescue loan funds.

So far some Republicans are refusing to provide unanimous agreement to quickly pass and send to President Donald Trump a PPP bill that passed the House last week on a 471-1 vote.

A roll-call vote could be scheduled this week or next week on the House bill or a possible amendment, according to aides in both parties who spoke on condition of anonymity. That could require another vote in the House, which isn’t scheduled to return to Washington until June 30.

The coronavirus program provides forgivable loans to help small businesses make their payrolls during the Covid-19 crisis. The House bill would extend an eight-week period — when proceeds must be spent for loans to be forgiven — to 24 weeks or until the end of the year, whichever comes first.

Businesses would also have as long as five years, instead of two years, to repay any money owed on a loan, and they could use a greater percentage of proceeds on rent and other approved non-payroll expenses. Applications for loans could be accepted until Dec. 31 instead of the end of June.

Timing is urgent because the eight-week spending period began expiring Friday for the first loan recipients after the Small Business Administration program opened April 3. Businesses — especially in the restaurant and hospitality industry, which are only recently getting the green light to reopen — say they need more time to distribute pay.

Utah Senator Mike Lee has objected to the new application deadline and is seeking an Aug. 15 deadline to keep the program temporary. Wisconsin Senator Ron Johnson outlined changes he is seeking in a Wall Street Journal opinion piece this week, saying revisions are needed to ensure the loans go to businesses that truly need them.

Maine Senator Susan Collins said she isn’t objecting to the House bill, but she’s concerned about the way the House drafted a provision reducing the current requirement that 75% of a loan be used on payroll.

Restaurants and other small businesses have said they want flexibility to spend more on overhead expenses, especially in high-rent areas. The bill, H.R. 7010, would instead require that 60% of a loan be used on payroll.

The House bill creates a “cliff,” Collins said in a statement. The current PPP program allows partial loan forgiveness if a company uses less than 75% of a loan for payroll, but the House bill appears to state that none of the loan would be forgiven if the 60% threshold isn’t met.

“Instead, the employer is saddled with a debt for the entire amount, and no portion of the loan is forgiven or converted to a grant,” Collins said.

Senate Small Business Chairman Marco Rubio last week sought guidance from Treasury on whether that issue can be addressed through regulation. Treasury and the SBA haven’t responded to requests for comment.

A House Democratic leadership aide said that while the House would look at whatever the Senate produces, Democrats want the Senate to pass the House measure unchanged so it can go to the president for signing.

Funds Remaining

About $130 billion remains from the second round of $320 billion that Congress approved for PPP. The initial round of $349 billion was tapped in just 13 days.

There was broad support during a Senate Small Business Committee hearing Wednesday for extending the eight-week loan forgiveness period and changing the rule that 75% of proceeds must be spent on payroll.

Republican Senator Joni Ernst of Iowa highlighted a sportswear business in her state that kept 27 workers employed with a PPP loan despite a 96% decline in revenue. But with ballparks and other venues where the apparel is sold still closed — and the firm’s eight-week period expiring this week – the workers will be furloughed, she said.

Michael Strain, director of economic policy studies at the American Enterprise Institute, called the 75% payroll rule — set by SBA and Treasury — “a mistake” because it limits the program’s ability to help companies such as those in high-rent cities that need to spend more money on expenses.

“A business that cannot pay its rent also cannot continue paying its workers,” Strain told the committee.

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