“Democrats are floating a variety of changes to the Paycheck Protection Program, which offers low-interest, government-backed loans that can be forgiven, as well as to the Small Business Administration’s separate Economic Injury Disaster Loan program.
As part of a massive economic aid package that Democrats are expected to release in the coming days, Small Business Chairwoman Nydia Velázquez’s priorities include not only more funding for both efforts, but also new carve-outs in the Paycheck Protection Program that would set aside funding for businesses with 25 or fewer employees and for nonprofits of any type or size.
The New York congresswoman and other House Democrats are also putting a focus on easing restrictions on how small businesses spend Paycheck Protection Program loans, amid growing concerns that the current terms could jeopardize the ability of borrowers to have the loans forgiven. A proposal by Reps. Jimmy Panetta (D-Calif.) and Don Beyer (D-Va.) would give businesses 16 weeks to spend money on payroll — up from eight weeks — without losing loan forgiveness. Velázquez also wants to extend the eight-week window.
The proposals percolating from House Democrats illustrate a growing belief in Congress that the flow of government-backed small business loans will need to continue once current funding is again exhausted.
House and Senate Republicans have signaled support for some of the ideas that Democrats are discussing, in particular easing loan forgiveness requirements for Paycheck Protection Program loans. Sens. Michael Bennet (D-Colo.) and Todd Young (R-Ind.) are offering a plan that would give businesses more time to spend the funds. Rep. Brad Wenstrup (R-Ohio) has also been organizing support for a longer forgiveness period. [ANCOR note: however, there is concern from the White House about the overall cost of the COVID-19 stimulus, signaling potential complications for these negotiations.]
The Paycheck Protection Program depleted an initial $350 billion round of funding on April 16 and was later replenished with $320 billion. As of Wednesday afternoon, the program had approved $183.5 billion under its latest appropriation from Congress. Separately, the SBA has curtailed access to the separate EIDL program, which has also seen massive demand from struggling businesses, by limiting the size of disaster loans to $150,000 — down from an initial level of $2 million — and restricting access this week to only agricultural businesses.
Congress is facing growing pressure from business groups to make the Paycheck Protection Program more flexible, and on Wednesday, state attorneys general lent their voices to the cause.
In a letter to congressional leaders, AGs from 22 states and the District of Columbia said numerous small businesses that need help ‘are not likely to be well served by the current structure of this program.’
They said Congress should give more leeway in the use of loan proceeds in the cases of businesses that are having difficulty bringing back employees and those that will struggle to spend at least 75 percent of the funds on payroll as required to have loans forgiven.
Another recommendation by the attorneys general is that the program’s rules should be revised to ensure that lenders cannot favor certain categories of applicants over others — ‘such as existing larger, potentially lucrative customers or customers whose existing debts could appear to create a conflict of interest for the lender.’”
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