The BDN is making the most crucial coverage of the coronavirus pandemic and its economic impact in Maine free for all readers. Click here for all coronavirus stories. You can join others committed to safeguarding this vital public service by purchasing a subscription or donating directly to the newsroom.
Small-business owners in Maine welcomed changes to a federal loan program that one in 10 of them have signed up for, saying a bill that was sent to President Donald Trump’s desk on Wednesday would provide a lifeline.
The Paycheck Protection Program, which was championed by Maine Sen. Susan Collins, R-Maine, provided about 26,000 Maine small employers with more than $2.55 billion in loans, though it has been criticized because deadlines for using the money came before many businesses could reopen and rehire. Loan forgiveness conditions were vague and changed frequently and many considered the repayment deadline of two years to be too short.
The U.S. Senate voted Wednesday night to pass the Paycheck Protection Program Flexibility Act, a bill that liberalizes the program, extending its coverage period to 24 weeks from eight. Payroll costs, which had to make up 75 percent if the loan to be forgiven, now are 60 percent. Non-payroll expenses like rent and mortgage that had been capped at 25 percent will be increased to 40 percent. Repayment of the unforgivable parts of the loan will be extended to five years.
The revisions were pushed by U.S. Sen. Angus King, I-Maine. They come on the heels of 24.500 new jobless claims announced by the Maine Department of Labor on Thursday morning. Since March 15, Mainers have filed close to 230,000 applications for state and federal jobless benefits.
“This bill represents an enormous step in the right direction for truly helping Maine’s small businesses,” state Sen. Heather Sanborn, D-Portland, said in her daily email newsletter to small businesses.
Many details about the new forgiveness process and how it will be implemented are still to be determined in another round of Treasury Department regulations, said Sanborn, who also co-owns Rising Tide Brewing in Portland, which has taken out a paycheck protection loan. The paycheck program is managed by the Treasury Department and the U.S. Small Business Administration.
The changes are welcome news to the hard-hit tourism business, which advocated for a lengthening of the coverage period because restaurants and hotels have had operations severely curtailed under Maine’s pandemic-related restrictions.
“The legislation recognizes that recovery will be gradual for restaurants and inns over the next year and reflects the flexibility that Maine’s hospitality sector needs to safely and successfully reopen,” said Greg Dugal, government affairs officer at HospitalityMaine, an industry group.
Randy Wadleigh, CEO of Old Town-based Governor’s Restaurant and Bakery, said the changes are needed relief.
“I really appreciate the modifications that have been made to make this much better for us, our employees and industry,” Wadleigh said in a statement.
The more flexible bill is a shot in the arm for business owners, according to Verill Dana lawyers on a conference call Thursday with the Portland Regional Chamber of Commerce.
Loan forgiveness has been a focal point for businesses, which have until October to spend the money and rehire employees. With the time extensions, forgiveness applications that would have been submitted soon can now be filed in 2021. Banks have 60 days to process forgiveness applications and issue a decision to the SBA, which in turn has 90 days to review them. If approved, the SBA will provide the funds to the bank, which will forgive the loan, the lawyers said.
Under the new act, loans will be forgiven if full-time employees don’t come back, or if revenue in December is below February 2020 levels. Verrill Dana lawyer Ben Ford recommended that business owners keep a written record if employees refuse to return, including an emailed offer letter and the employee’s refusal.
Sanborn said she expects the increased flexibility to create a flood of new applications from businesses that had been on the fence about whether the loan program could help them.
“The remaining funds will likely be depleted within days if not hours, so if you’ve been thinking about applying, make sure you get your application completed today,” she said.