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June 03, 2020

King-Daines Bill to Improve Paycheck Protection Program Passes Senate, Now Heads to President’s Desk for Signature

Legislation would extend length of time businesses could use funds, ease regulation that limits only 25% of funds to non-payroll expenses

WASHINGTON, D.C. — Today, the U.S. Senate passed H.R.7010, the Paycheck Protection Flexibility Act, which mirrors the bipartisan bill introduced on May 21st by U.S. Senators Angus King (I-Maine) and Steve Daines (R-Mont.) – and will make vital changes to the Paycheck Protection Program (PPP) so it can better support small businesses. The legislation will make key adjustments to the PPP to help small businesses through the coronavirus pandemic, including extending new loans over a longer period of time and allowing for added flexibility in how businesses can spend their PPP funds. The bill passed the House of Representatives last week by an overwhelming 417-1 tally, and now heads to the President’s desk to be signed into law. 

“The coronavirus pandemic has done unprecedented, unmitigated harm to businesses across Maine, and we need to do everything we can to help make sure they can weather this storm and come out the other side,” said Senator King. “The Paycheck Protection Program has been a valuable source of federal support for local institutions – but talking to business owners trying to navigate the loans’ requirements, it’s clear we can be doing better. This bill will serve as a ‘mid-course correction’ by loosening restrictions on small businesses that are already facing enough challenges, and giving business owners the flexibility they need to make decisions that best fit their unique circumstances. I’m grateful that Congress moved so quickly to provide real relief, at a moment when local businesses truly need it.” 

“I’m glad to have secured passage of my bipartisan bill to increase flexibility in the Paycheck Protection Program to ensure Montana small businesses have the relief they need to stay open, support our workers and protect jobs,” Senator Daines said. “This bipartisan proposal is the result of listening to feedback from Montanans on what flexibility they need under PPP to make it even more effective. I look forward to getting flexibility for Montana small businesses and workers using PPP signed into law.” 

"The Paycheck Protection Program Flexibility Act will hopefully now encourage small businesses to seek assistance, especially those very small shops previously deterred from accessing the short-term relief offered from this program," said Chris Slevin, Vice President at the Economic Innovation Group. "Senators King and Daines, along with leadership of the Small Business Committee, should be applauded for their work to adjust the program, and Congress should build on this effort by addressing the solvency of small businesses throughout the country now facing a more prolonged crisis." 

Specifically, the Paycheck Protection Program Flexibility Act legislation will: 

1.     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. This provision will allow the businesses that already have PPP loans to choose between using their loans in the initial 8 weeks or extending the period for up to 24 weeks.

2.     Reduce restrictions limiting non-payroll expenses to 25% of loan proceeds.  In order to survive, businesses must pay fixed costs. The SBA requires PPP loan recipients to use 75% of their loan in order to qualify for loan forgiveness. 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. Under the version of the legislation passed by the House, up to 40% of PPP funds could go to non-payroll expenses.

3.     Eliminate restrictions in new loans 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 a PPP loan if they do not achieve full forgiveness.

4.     Ensure full access to payroll tax deferment for businesses that take PPP loans.  The purpose of both the PPP and the payroll tax deferment provision included in the CARES Act 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.

5.     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 bill extends the deadline to rehire employees under PPP.

6.     Adjusts program’s standards to account for economic realities following the coronavirus pandemic. If economic conditions prevent businesses from reaching pre-coronavirus revenue levels and businesses aren’t able to rehire all employees, this legislation would make sure businesses are still able to receive loan forgiveness.

In addition to Senators King and Daines, the Paycheck Protection Program Flexibility Act was cosponsored by Senators Tim Kaine (D-Va.), Thom Tillis (R-N.C.), Debbie Stabenow (D-Mich.), Cory Gardner (R-Colo.), Kyrsten Sinema (D-Ariz.), John Cornyn (R-Tex.), and Jack Reed (D-R.I.). The legislation was supported by the Maine Chamber of Commerce, International Franchise Association, American Hotel and Lodging Association, National Federation of Independent Business, National Restaurant Association, US Travel Association, Small Business Majority, U.S. Hispanic Chamber of Commerce, National Small Business Association, National Association for the Self-Employed, Small Business and Entrepreneurship Council, and Economic Innovation Group.


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