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New Dems, Problem Solvers Endorse Legislation to Improve Paycheck Protection Program

May 26, 2020 by Dan McCue

WASHINGTON – Both the New Democrat Coalition and the Problem Solvers Caucus endorsed legislation on Tuesday intended to make the federal government’s Paycheck Protection Program work better for more businesses across the country.

Since its creation in the very first coronavirus relief package, many businesses have found the terms of the Paycheck Protection Program were too inflexible to meet their needs during the sudden and unexpected economic crisis that accompanied the pandemic.

The Paycheck Protection Program Flexibility Act, co-sponsored by Reps. Dean Phillips of Minnesota, who is a member of both the coalition and the caucus, and Fred Upton, R-Mich., makes critical adjustments to the program, including:

  • Allowing forgiveness for expenses beyond the covered eight-week period.

The eight-week timeline does not work for local businesses that are prohibited from opening their doors or will only be allowed to open with restrictions. Businesses should have the flexibility to spread the PPP loan proceeds over the full course of the crisis until demand returns. Otherwise, employees will simply be furloughed at the expiration of the eight weeks, defeating a major goal of the program.

  • Eliminating restrictions limiting non-payroll expenses to 25% of loan proceeds.

In order to survive, businesses must pay fixed costs. 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 its physical location

  • Eliminating restrictions that limit loan terms to two 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: it will take many businesses more than two years to achieve sufficient revenue to pay back the loan.

  • Ensuring full access to payroll tax deferment for businesses that take PPP loans.

The purpose of PPP and the payroll tax deferment 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.

  • Providing a rehiring safe harbor for businesses unable to rehire employees.

To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020. However, due to stay at home orders and other issues, this is not feasible in many cases. To mitigate this unintended consequence, businesses that make a good faith attempt to rehire employees, but are unable to, should still be able to receive loan forgiveness.

The House is expected to vote on the legislation tomorrow.

“The Paycheck Protection Program has been a lifeline for so many Main Street employers during this public health and economic crisis. Congress needs to ensure it’s a success,” said Rep. Derek Kilmer, chairman of the New Democrat Coalition.

“This legislation makes important, commonsense improvements to the PPP to ensure local employers can continue to weather the storm,” the Washington Democrat continued. “I am proud the New Democrat Coalition is taking the lead on forward-looking solutions to provide much-needed support to American families and small businesses during these difficult times.”

“As much as we all wanted this crisis to be over by Easter, the Paycheck Protection Program small business lifeline must be extended to account for the continued uncertainty that otherwise would absolutely drown our small businesses as they attempt to get back on their feet,” Upton said.

Rep. Phillips said he’s always believed representation begins with listening, and noted that since the original Paycheck Protection Program was passed, he heard from “too many Minnesota small business owners who have received PPP loans but are afraid to use the money because of the inflexible, one size fits all rules – and others who are not applying for aid at all out of fear and confusion.

“It won’t matter how much money we appropriate if the distribution mechanisms are broken,” Phillips said. “Congress now has an opportunity to fix what’s broken and make this important relief program more accessible and useable to the small businesses that need it the most. I am encouraged by the bipartisan cooperation of my colleagues in the House and Senate, and look forward to working with them to push these reforms over the finish line without delay. Every day counts, and time cannot be wasted.” 

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