House passes bill to extend 8-week period to spend PPP loans and alter the 75% rule

May 28, 2020, 7:28 PM UTC

Small businesses may soon find more flexibility in the Paycheck Protection Program (PPP) as a bill passed the House on Thursday that would extend the time in which businesses need to spend funds and alter the rule that they must spend 75% of the funds on payroll for full forgiveness (that level would be reduced to 60%).

The bipartisan bill, titled the Paycheck Protection Program Flexibility Act and spearheaded by Democratic Rep. Dean Phillips and Republican Rep. Chip Roy, passed through the House in a nearly unanimous vote, 417 to 1.

The House bill proposes extending the time in which businesses must use the funds from eight weeks to 24 weeks; amending the 75/25 rule for how much businesses must spend on payroll versus non-payroll costs in order to get full forgiveness of the loan to 60/40; pushing back the deadline to rehire workers from June 30 to Dec. 31; and extending the two-year term for the loans to five years, among other provisions.

The Senate also has its own PPP extension bill, led by Sen. Marco Rubio (R-Fla.), chairman of the Committee on Small Business and Entrepreneurship, that would propose increasing that time frame from eight to 16 weeks, extend the deadline to apply for the PPP, and allow businesses to use funds to purchase protective equipment for employees, among several other amendments. Senators failed to pass the bill before adjourning for a recess this week, but will return next week.

Rep. Phillips said in a statement on Sunday before the vote that “Congress now has an opportunity to fix what’s broken and make this important relief program more accessible and usable to the small businesses that need it the most. Every day counts, and time cannot be wasted.”

Indeed, the first recipients of loans that opened up on April 3 are nearing the end of their eight-week period, and many small businesses and lobbyists have argued the time frame and payroll limits have made it challenging for businesses that remain unable to fully open (especially restaurants, bars, and salons) to use the funds.

The House’s legislation has been widely endorsed by various outside groups, including the U.S. Chamber of Commerce and the National Restaurant Association, among others.

Yet it’s unclear whether Republicans and Democrats can ultimately reach a compromise on legislation to amend rules for the $660 billion program.

“Small businesses continue to have a tough road ahead, and they need flexibility in how they use the emergency capital. And this provision gives them that,” Rep. Nydia Velázquez (D-N.Y.), the chair of the House Small Business Committee, said on the floor Thursday. “That will help ensure businesses have more room to breathe, even in places where reopening the economy happens more slowly.”

The House bill now heads to the Senate for a vote and must be signed by the President to become law. Rep. Phillips urged the Senate to “pass it without delay,” he wrote in a tweet after the vote.

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 CEOs
—WATCH: Why banks were ready for the financial impact of the coronavirus

Subscribe to How to Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic.

Read More

CryptocurrencyInvestingBanksReal Estate