06/05/2020

Senate Passes Bill to Relax PPP Restrictions

Legislators believe further reforms are necessary before the end of the year

The Senate cleared legislation yesterday to ease restrictions on loans obtained through the popular Paycheck Protection Program (PPP), created to assist small businesses struggling during the ongoing COVID-19 pandemic. The bill, which passed the House last week, now heads to President Donald Trump’s desk for signature.

The bill, passed by unanimous consent, is designed to make PPP loans more accessible by making its terms of use more flexible. Importantly, the bill does not expand eligibility for the PPP to include 501(c) associations as the House-passed HEROES Act does.

The legislation would give small businesses more time to use loans under the PPP by extending the eight-week period in which they must use the money to qualify for loan forgiveness to 24 weeks. The bill also gives PPP recipients more flexibility by changing the 75/25 rule which requires fund recipients to use 75 percent of the money for payroll costs in order to be eligible for loan forgiveness. The new ratio would be at least 60 percent on payroll and no more than 40 percent on other expenses. Businesses would also have as long as five years, instead of two, to repay any money still owed on a loan.

The Senate was eager to pass the legislation because the eight-week spending period began expiring last Friday for businesses that obtained loans just after the Small Business Administration (SBA) program opened in early April.

Still, legislators believe further reforms to the PPP are necessary before the end of the year. Senate Small Business Committee Chairman Marco Rubio (R-FL) said the PPP was created to allow partial loan forgiveness if a company used less than 75 percent of a loan for payroll but the bill that just passed the Senate appears to state that none of the loan would be forgiven if the 60 percent threshold isn’t met.

“I am glad Congress came together to provide much-needed flexibility for small business owners to use their PPP loans as our economy begins to re-open,” Rubio said. “I appreciate the Administration’s flexibility and commitment to address the bill’s inadvertent technical errors that could create unintended consequences for small businesses as they seek forgiveness. If the Administration cannot address these issues, Congress will need to fix them through additional legislation, which will be made even more difficult given House Democrats’ decision to recess for the entire month.”

To date, roughly 4.5 million businesses have received loan approvals totaling more than $500 billion. SBA said about $130 billion remains from the second round of $320 billion that Congress appropriated for the PPP. The initial round of $349 billion in PPP funding approved in the CARES Act was tapped in less than two weeks.

This article was provided to OSAE by the Power of A and ASAE's Inroads.