“This bill will serve as a ‘mid-course correction’ by loosening restrictions on small businesses that are already facing enough challenges, and giving business owners the flexibility they need to make decisions that best fit their unique circumstances,” Sen. Angus King (I-Maine) said.
Trump signed the legislation at a White House event in which he lauded the Labor Department report earlier today that the unemployment rate unexpectedly dropped in May and the economy added more than 2 million jobs.
But the new law is by no means the last major change in store for the program, which has been subject to an evolving set of rules since the Small Business Administration and Treasury Department hurriedly launched it on April 3. There is growing pressure on Congress and the Trump administration to further revamp the program, including streamlining the process that businesses must go through in the coming weeks and months to convert the loans into grants.
Senators are already planning to address what they say are drafting errors in the bill Trump signed that could create unintended consequences.
A top concern for Senate Small Business Chair Marco Rubio (R-Fla.) and Sen. Susan Collins (R-Maine) is the way the bill, which originated in the House, would try to give businesses more flexibility to spend money on non-payroll expenses. It lowers the amount that must be spent on payroll to achieve loan forgiveness to 60 percent from 75 percent. But Rubio and Collins argue that the bill’s language makes that 60 percent requirement a “cliff” in which businesses would lose partial loan forgiveness if they spent a substantial amount on payroll but fell short of the threshold.
The SBA and Treasury have not said publicly how they will interpret the language. Rubio said the administration made a commitment to addressing the bill’s “inadvertent technical errors” but he added that Congress would need to pass a fix if the agencies didn’t get it done. SBA and Treasury spokespeople did not respond to requests for comment on the commitments Rubio referenced.
Collins told reporters Thursday that staff was drafting a technical changes bill and she hoped to discuss it next week with Rubio as well as Sens. Ben Cardin (D-Md.) and Jeanne Shaheen (D-N.H.).
In a separate statement, Collins highlighted two priorities. She wants to “correct” the drafting of the 60 percent payroll requirement to allow businesses to receive partial forgiveness if they don’t hit the threshold. She also wants to allow loans to be used for protective gear, plexiglass shields and renovations to meet CDC guidelines as businesses reopen.
And while the new flexibility might help jump-start flatlining demand for the program — $120 billion remains unused — some lenders believe that one of the changes in the bill might dissuade banks from offering the loans. That provision would give new borrowers at least five years to pay back the loans, a significant delay of the two-year deadline being enforced today. That would leave banks on the hook for a longer period with a low-interest loan on their books.
“I can’t see banks extending a five-year, 1 percent loan,” said Paul Merski, group executive vice president for congressional relations at the Independent Community Bankers of America. “It’s too risky.”
Lenders and consumer groups are also pressing to simplify the forgiveness process, which they say is too complicated and burdensome.
The community bank group is asking that all loans of $1 million or less be granted a “presumption of compliance” under the forgiveness rules. It also wants the administration to offer a loan forgiveness calculator and cut down necessary paperwork. Larger lenders, represented by the Bank Policy Institute and the Consumer Bankers Association, want lawmakers to automatically allow loans of $150,000 or less to be turned into grants.
“These small businesses and their employees are the backbone of our nation’s economy and communities,” the Bank Policy Institute and Consumer Bankers Association said. “Their time and resources would be better focused on getting the economy safely back up and running, not processing burdensome paperwork.”
Lawmakers are also pushing for ways to make sure funds reach employers left on the sidelines of Covid-19 aid programs, including minority- and women-owned businesses.
Cardin, the top Democrat on the Senate Small Business Committee, and Sen. Cory Booker (D-N.J.) have proposed setting aside funds for the smallest firms and granting banks extra fees for serving areas in the most need of help. They introduced legislation Thursday with Sens. Rob Portman (R-Ohio) and Jim Lankford (R-Okla.) that would let small business owners with criminal records apply for Paycheck Protection Program loans.
Senate Minority Leader Chuck Schumer is pushing the administration to simplify the forgiveness process, according to a source close to the New York Democrat. He’s also seeking to ensure that funding goes to lenders such as community development financial institutions and minority depository institutions to help get money to small businesses in communities of color. Schumer believes the administration has the authority to address the issues but if needed he would consider legislation, the source said.