A bill that would give small business owners more flexibility in applying using the funds they receive under the Paycheck Protection Program will receive fast-track approval in the Senate if majority leader Mitch McConnell (R- Kentucky) gets his way. The PPP program offers loans that are forgivable if the money is used mostly to pay employees.
“‘I hope and anticipate the Senate will soon take up and pass legislation that just passed the House by an overwhelming vote of 417-1 to further strengthen the Paycheck Protection Program so it continues working for small businesses that need our help,” McConnell said yesterday in a speech on the Senate floor.
“The program is a central element of the nearly $3 trillion federal effort to direct emergency funds in the midst of the worst pandemic in a century. While it got off to a rocky launch, it has been immensely popular for small business owners seeking to keep employees on payroll -- and keep their lights on generally -- as governors across the country issued stay-at-home orders in an effort to slow the spread of coronavirus,” writes Phil Mattingly for CNN.
The new legislation "would give small businesses more time to use the PPP funds and allow them to use more money for nonpayroll expenses. The program, created as part of the roughly $2 trillion economic relief package passed in March, currently requires small businesses to spend the loans within eight weeks in order to have the debts forgiven. The House bill would lengthen that time to 24 weeks, reflecting the longer-than-expected duration of the coronavirus stay-at-home orders,” Jim Saksa writes for Roll Call.
“‘People thought two months was probably going to be enough to get it done. It turned out, it’s not,’ Paul Becht, CPA, a partner at accounting firm Margolin, Winer & Evens tells CNBC’s Greg Iacurci.
“This is especially true for businesses in states and regions like the New York metropolitan area that have moved more cautiously to reopen their economies. Hospitality businesses like restaurants and recreational facilities such as gyms that may reopen in later phases -- and likely won’t see a quick return to their prior customer base, amid social-distancing concerns -- also stand to benefit most from a time extension to use money and rehire workers,” Iacurci observes.
“The legislation would also reduce an administration rule that requires borrowers to use at least 75% of the loans on payrolls to 60%. Businesses with relatively low labor costs but higher fixed costs like rent or utilities -- such as restaurants or retailers -- complained those restrictions were too strict to help their businesses stay afloat,” Saksa adds.
“It is not yet clear if all senators will agree to the bill without changes,” write Bloomberg’s Erik Wasson and Mark Niquette.
“Senate Small Business chairman Marco Rubio, a Florida Republican, said in a statement last week that some provisions in the House bill ‘could create an unintended disincentive to rehiring and create new and serious burdens for PPP borrowers in terms of forgiveness.’
“He said he would work to ensure that ‘necessary changes to increase flexibility do not inadvertently harm business owners and employees in the process.’ Rubio had asked the Treasury Department whether it could address the problems during implementation of the bill,” Wasson and Niquette add.
Rubio yesterday “told reporters he’ll support the House PPP bill but he still has problems with it,” Politico’s Zachary Warmbrodt tweeted.
“Loan volume for the program -- which ran out of the initial $349 billion allocated by Congress in fewer than two weeks -- has recently collapsed as businesses have attempted to navigate shifting rules and regulations, as well as the reality that the economic downturn is far deeper, with wider ranging effects, than initially thought when it was created by Congress,” CNN’s Mattingly observes.
Meanwhile, as Victor Reklaitis reports for MarketWatch, “analysts are predicting that another big coronavirus aid package is likely to come by late July.”
“The end of July looks to be a hard deadline for both Democrats and Republicans with the ending of the enhanced unemployment benefits and the anticipated August congressional recess,” said analysts at Beacon Policy Advisors in a note. In a similar vein, KBW analyst Brian Gardner said his team remains confident that the next bill “will pass sometime in the next two months,” Reklaitis continues.
“‘Fiscal conservatives may push for a smaller bill than Democrats want,’ Gardner said, ‘but we think the events of the recent days plus the May jobs report which will be released on Friday will likely give Democrats additional leverage, so we think chances for a bigger Phase Four bill are likely to rise in the next few weeks,’” Reklaitis adds.