Politico is first to report a planned vote in the U.S. House of Representatives that will revamp the Payroll Protection Program, allowing recipients of the loan more flexibility in how they use the money. Many members of NAED fear the initial program’s rules could potentially lead to misuse of the funds, which they would then have to pay back.
tED magazine reported last week on the bi-partisan bill that would clarify how the funds could be used. Representatives Chip Roy (R-TX) and Dean Phillips (D-MN) proposed the bill that would clarify 5 points from the initial program:
- Allow forgiveness for expenses beyond the 8-week covered period. The 8-week timeline does not work for local businesses that are prohibited from opening their doors, or those that will only be allowed to open with restrictions. Businesses need the flexibility to spread the loan proceeds over the full course of the crisis until demand returns. Otherwise, employees will simply be furloughed at the expiration of the 8 weeks. We want employers to be able to keep their employees on the payroll, not furlough them without pay or terminate them entirely.
- Eliminate restrictions limiting non-payroll expenses to 25% of loan proceeds. In order to survive, businesses must pay fixed costs. The PPP loans require that 75% of the loan go to payroll. For many businesses, payroll simply does not represent 75% of their monthly expenses and 25% does not leave enough to cover mortgage, rent, and utilities. Retaining employees is not possible if a business cannot retain their physical location
- Eliminate restrictions that limit loan terms to 2 years. According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. This is the same for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenue to pay back the loan.
- Ensure full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis. Receiving both should not be considered double-dipping. Businesses need access to both sources of cash flow to survive.
- Extend the rehiring deadline to offset the effect of enhanced Unemployment Insurance. To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020. However, the enhanced Unemployment Insurance created through the CARES Act is higher than the median wage in 44 states. Many businesses have reported an inability to rehire employees because they are making more on Unemployment than they made working. To mitigate this unintended consequence, the deadline to rehire employees under PPP should be extended to align with the expiration of enhanced Unemployment Insurance.
“These common-sense solutions will provide the flexibility necessary to weather the storm and prepare for uncertain times ahead. I am pleased to work with Congressman Roy on a bipartisan solution supporting small businesses; the backbone of the U.S. economy,” Phillips said in a statement about the bill.
House Speaker Nancy Pelosi initially wanted to table discussion of this bill while she worked on a separate $3 trillion rescue package with Congress. But according to the report on Politico, on Tuesday, May 19, Pelosi decided she could not wait any longer to fix the PPP situation. If the bill passes the House, the Senate will probably not vote on it until after the Memorial Day holiday.Tagged with Biggest News, legislation, paycheck protection program, small business