Lawmakers in both the House and Senate are proposing some pretty major changes to the Paycheck Protection Program, as businesses and lobbyists voice concerns the program doesn’t give them enough flexibility to spend the funds.
On Thursday, the Senate adjourned without voting on a bipartisan bill to extend the time frame in which small businesses need to use funds for the PPP loans to 16 weeks, from the current eight weeks, as well as extend the June 30 deadline for applying to Dec. 31 (lawmakers had expected to pass the bill unanimously). The Senate session ended late Thursday without a vote, and senators headed to a weeklong recess.
Under the current legislation, the first recipients of PPP loans are almost out of time to spend the funds.
The new proposed bill in the Senate, spearheaded by Sen. Marco Rubio (R-Fla.), chairman of the Committee on Small Business and Entrepreneurship; Sen. Ben Cardin (D-Md.); Sen. Susan Collins (R-Maine); and Sen. Jeanne Shaheen (D-N.H.); comes with some big changes: The bill would double the time frame in which businesses needed to spend the money, push back the deadline to apply to the end of the year, ensure lenders weren’t liable for certifications provided by borrowers, and even “allow borrowers to use loan funds to purchase personal protective equipment for employees and to pay for adaptive investments needed to reopen safely,” according to a summary of the bill, entitled the Paycheck Protection Program Extension Act.
The PPP loans, which range up to $10 million, can become grants if used over eight weeks, and if 75% of the funds are used for payroll, while 25% are used for mortgage interest payments and other expenses. The Small Business Administration and Treasury recently released a forgiveness application for businesses, but many say that only raised further issues, including the time and spending limits.
Small businesses have expressed concerns that the eight-week period to spend the funds for full forgiveness has been too short, as shutdowns that remain in place in many areas have made it difficult for businesses to spend the funds while remaining closed.
Lobbyists for restaurant groups and other industries have asked the administration and lawmakers to make changes to this time frame: “When it was implemented…eight weeks probably seemed like an eternity,” José Cil, chief executive of Restaurant Brands International, the owner of Burger King and other chains, told President Trump at the White House this week. “But today, we’re in the 10th week of the pandemic, and I think it’s going to take some time for our restaurants and our owners to get back to the capacity levels and the traffic levels that we were seeing pre-COVID.” Lobbyists asked for 24 weeks, not 16, for the extension, and President Trump said on Monday that extending the time frame to 24 weeks to use funds “should be easy.” Lobbyists also wanted to change the 75/25 rule to be able to spend more money on other costs like rent and utilities, as many businesses (especially restaurants, bars, and salons) remain closed.
In a separate bill, the House proposed extending the time frame to 24 weeks, also amending the 75/25 rule so businesses could have more flexibility to spend funds where they needed them most, as well as extend the time for businesses to repay the loans beyond two years, among other amendments. The House’s proposal has garnered support from the U.S. Chamber of Commerce, the American Hotel and Lodging Association, and the National Restaurant Association, among others. The bill is also separate from the new $3 trillion Democratic stimulus package, and Speaker Nancy Pelosi announced on Wednesday the House will vote next week on the legislation.
Treasury Secretary Steven Mnuchin said he supports extending the eight-week period, but was less open to changing the 75% rule. “We want most of this money to go to workers,” Mnuchin said Thursday during an online event hosted by publication The Hill. “We believe that the 75% was exactly consistent with the way the program was designed.”
The loans were intended to help keep employees on the payroll. But the program’s rollout has been chaotic from the start, as loopholes allowed big chains and public companies to receive funds, and an overwhelming demand created issues for lenders and the SBA’s systems. The SBA and lawmakers have been continually issuing new guidance as issues and confusion continue to plague the $660 billion program.
Sen. Rubio wrote on Twitter early Thursday that he anticipated the bill would pass before the Senate adjourned, citing “strong bipartisan support.”
Separately, he said in a video on his Twitter on Wednesday that the first challenge was to get bipartisan support for the bill in the Senate—but “Number two, can we get the House to take it up and pass it as well?”
While it’s clear there is support on both sides of the aisle to extend the eight-week time period and make loans more flexible, it’s unclear how or when differing proposals could be resolved. It’s also unclear if senators might vote on the bill before returning in June, but the House is expected to vote on its proposal next week. Either bill would need to pass both the House and the Senate and be signed by the President.
More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus
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