Bills
| 3.23.22

Should Small Businesses Receiving Forgivable ‘Paycheck Protection Program’ Loans Have More Flexibility? (H.R. 7010)

Do you support or oppose this bill?

What is H.R. 7010?

(Updated July 6, 2020)

This bill — the Paycheck Protection Program Flexibility Act of 2020 — would provide small businesses that receive forgivable loans under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) with additional flexibility in terms of permitted uses, and extend both the forgiveness period & the maturity period of loan amounts that aren’t forgiven.

This bill would revise the requirement that small businesses spend at least 75% of PPP loan amounts on payroll and that no more than 25% on covered overhead expenses (including rent, mortgages, and utilities) to instead require that at least 60% of loan amounts be spent on payroll.

The PPP loan forgiveness period would be extended from 8 weeks after origination to 24 weeks after origination or December 31, 2020 — whichever is earlier — although recipients that want to use the 8 week period can do so. This bill would also give small businesses the same timeframe (the earlier of 24 weeks after origination or December 31, 2020) to rehire workers that are unable to do so in the near term, which is currently set at June 30, 2020.

The maturity period for amounts of newly originated PPP loans that aren’t forgiven would be extended from 2 years to 5 years, giving small businesses more time to amortize those amounts at the loan’s 1% interest rate. This provision wouldn't apply retroactively to previously originated PPP loans.

Additionally, this bill would prohibit the mutual exclusivity of PPP loans & payroll tax deferments, thus allowing small businesses receiving PPP loans to receive both forms of aid.

Argument in favor

The Paycheck Protection Program has helped many small businesses across the country weather the COVID-19 pandemic. The adjustments this bipartisan bill would make to the program would give small businesses even more flexibility to rehire & use loans to cover overhead costs while still receiving loan forgiveness.

Argument opposed

This bill may be bipartisan, but these modifications to the Paycheck Protection Program will mean that more small businesses receive loan forgiveness and that amounts not forgiven will be repaid over a longer period of time, which means it will ultimately cost the government more taxpayer money.

Impact

Small businesses receiving PPP loans; employees of those small businesses who are rehired; and the SBA.

Cost of H.R. 7010

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Rep. Dean Phillips (D-MN) introduced this bill to increase flexibility in the Paycheck Protection Program for small businesses that receive its forgivable loans:

“Representation begins with listening, and I am hearing from too many Minnesota small business owners who have received PPP loans but are afraid to use the money because of the inflexible, one size fits all rules - and others who are not applying for aid at all out of fear and confusion. It won’t matter how much money we appropriate if the distribution mechanisms are broken. Congress now has an opportunity to fix what’s broken and make this important relief program more accessible and useable to the small businesses that need it the most.”

Original cosponsor Rep. Chip Roy (R-TX) added:

“The Paycheck Protection Program (PPP) is providing essential capital to millions of small businesses across the country. Unfortunately for many of these business owners, particularly local restaurants, hotels, and those in the hospitality industry, the terms are too inflexible to provide the help they need to weather the economic storm. PPP cannot protect jobs if workers have no job to return to after state and local lockdowns are lifted. After listening to business owners, I will be introducing this Paycheck Protection Program Flexibility Act to provide essential flexibility to PPP loans. Time is of the essence. Many businesses are already four weeks into the loan and need this flexibility immediately before the forgiveness timeline runs out. I look forward to continue working with my colleagues on both sides of the aisle to enact these simple but critical reforms in order to save small businesses.”

The Problem Solvers Caucus endorsed this bill, with Co-Chair Rep. Josh Gottheimer (D-NJ) calling it “critical to making important fixes and providing new, essential flexibility to the PPP program that will help small businesses in my district.” Fellow Co-Chair Rep. Tom Reed (R-NY) added that, “As we continue to ensure the health and safety of Americans during this pandemic, it’s critical that we also continue to protect our small businesses and provide them with the support they need to get through these challenging times.”

This legislation has the support of 35 bipartisan cosponsors in the House, including 18 Democrats and 17 Republicans.


Of Note: The Paycheck Protection Program was created with the enactment of the “phase 3” CARES Act, which provided $350 billion in funding for forgivable small business loans under the PPP. Due to high demand, the initial tranche of funding was exhausted after 13 days of operation on April 16th, which aided 1.661 million small businesses and saw an average loan size of $206,000 according to SBA data tabulated by USAFacts.

Senate Republicans attempted to increase funding for the PPP a week before the initial tranche of funding was exhausted, but Democrats blocked that legislation. On April 20th, the Senate reached a compromise on a “phase 3.5” relief bill, the Paycheck Protection Program & Health Care Enhancement Act, which provided $321 billion in additional PPP funding along with funding for other SBA small business aid programs, healthcare provider reimbursement amid the coronavirus pandemic, and coronavirus testing & tracing capacity.

As of Friday, May 22, the SBA had processed 4.4 million loans, totaling about $512 billion in awards of the total $671 billion in funding allocated.


Media:

Summary by Eric Revell

(Photo Credit: iStock.com / valentinrussanov)