Bipartisan support for new PPP loans gains momentum in Congress

Lawmakers on both sides of the aisle want to create another round of the Paycheck Protection Program (PPP) to help small businesses as coronavirus cases surge across the country, but the timing and details are still being ironed out.

The PPP, which was first created in the $2.2 trillion CARES Act Congress passed in March, allowed businesses to receive loans that can be fully forgiven if used for payroll and certain other expenses.

Millions of businesses received loans under the program, but now need additional help after spending the funds they received earlier in the year. There’s also a desire among stakeholders to better target the program to the smallest and hardest-hit businesses and to ease certain rules.

Several business groups are pushing for Congress to act sooner rather than later to prevent more companies from shuttering.

“This is not something that can wait for a new president,” said Tom Sullivan, vice president of small-business policy at the U.S. Chamber of Commerce. “It’s not something that can wait for a new Congress.”

Congressional leaders are in the process of negotiating another coronavirus relief package, with the goal of reaching a deal and getting legislation enacted before the end of the year.

For months, talks around an additional relief package had stalled because Democrats and Republicans disagreed over the bill’s price tag. But in recent days, there has been new momentum.

After a bipartisan group of moderate lawmakers proposed a $908 billion compromise plan that fell between the amounts previously proposed by Republicans and Democrats, Democratic leaders announced that they wanted the proposal to serve as the basis for further discussions.

The bipartisan proposal calls for $288 billion in support for small businesses, including through the PPP.

Authors of the proposal highlighted the support for the PPP when they rolled out their plan.

“This will be particularly helpful to those businesses that have received a first PPP loan that has kept them alive and paying their employees but now find that they need additional assistance,” said Sen. Susan Collins (R-Maine). “In particular, that includes our restaurant and hospitality industry.”

Sen. Mark Warner (D-Va.) noted that minority-owned businesses have been disproportionately impacted by the pandemic and highlighted the fact that the proposal includes $12 billion for Community Development Financial Institutions and Minority Depository Institutions, which lend to underserved communities.

“That will have a good short-term and long-term effect,” he said.

Groups in support of new PPP loans say they’re encouraged by how many lawmakers have rallied around the bipartisan proposal.

The proposal “has really struck a nerve with folks, that there are greater rays of hope as a result of this,” said Sean Kennedy, executive vice president for public affairs at the National Restaurant Association.

But there are still questions about how quickly Congress will be able to pass any additional coronavirus relief legislation.

Speaker Nancy Pelosi (D-Calif.) has indicated that she wants coronavirus relief to be attached to an omnibus spending bill that funds government agencies through Sept. 30. Senate Majority Leader Mitch McConnell (R-Ky.) said Monday that he expects the Senate to pass a one-week stopgap measure this week to prevent a government shutdown while talks on a larger package continue beyond the current Dec. 11 deadline.

Lawmakers are also still working out the details of exactly what another round of the PPP would look like. The authors of the bipartisan proposal said they hope to release legislative text early this week.

It is expected that the new round will be more targeted in some ways to businesses that have been most hurt by the pandemic.

A draft coronavirus relief proposal that McConnell circulated last week, which is separate from the bipartisan proposal, would make businesses eligible for a second PPP loan if they have no more than than 300 employees and had at least a 25 percent reduction in revenue between comparable quarters in 2019 and 2020. The GOP proposal also would set aside some funds for first- and second-time borrowers with 10 or fewer employees.

The first round of the PPP faced criticism because there were some larger businesses that received some of the biggest loans and because banks prioritized applicants that had preexisting relationships with them — a move that was particularly harmful for minority-owned businesses.

Groups that have been critical of the PPP are advocating for a new round to be more accessible to a broader variety of businesses.

“We need a small-business program that actually helps small businesses, not just the wealthy and well-connected,” said Derek Martin, a spokesperson for the watchdog group Accountable.US.

Marc Morial, president and CEO of the National Urban League, said that much of the money in a new PPP round should be devoted to businesses with five or fewer employees. He also said it should be easier to use the loan proceeds for expenses other than payroll, such as rent and inventories.

“More emphasis needs to be put on smaller businesses,” he said.

Kevin Boehm, a co-founder of the Independent Restaurant Coalition, said the PPP was not well-designed for restaurants because they couldn’t get loan forgiveness for some key expenses such as the costs of goods sold and because they needed to spend additional money on lawyers and accountants to navigate the loan program.

The PPP “was not obviously built for restaurants, and we’re a very specific business,” he said.

Boehm argued that PPP should be improved by having loan amounts be based on more than 2.5 times payroll, allowing businesses to use proceeds over a longer period of time and allowing costs of goods sold to be a forgivable expense. He also called on Congress to pass a bill that would provide grants to restaurants.

Lawmakers and stakeholders also want to simplify the loan-forgiveness process for businesses that received PPP loans under $150,000.

And they want new legislation to stipulate that expenses associated with PPP loan forgiveness are tax-deductible. Lawmakers on both sides of the aisle said that they intended for this to be the case in the CARES Act, but the Treasury Department subsequently issued guidance saying the expenses cannot be deducted.

Amie Kuntz, a CPA in the national tax office of RubinBrown, said that guidance about the PPP came out on a piecemeal basis during the first round of the program, leaving borrowers and their advisers exhausted.

She said it would be helpful for all of the terms of a second round to be set up front, to “ensure borrowers know what they’re signing up for ahead of time.”