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.
The U.S. Senate cleared changes to the popular Paycheck Protection Program on Wednesday that will allow small businesses more flexibility in using the rescue loan funds.
Senators gave unanimous consent for the legislation hours after one Republican senator objected. The bill, which passed the House last week in a nearly unanimous vote, now heads to President Donald Trump’s desk for his signature.
The Paycheck Protection Program provides forgivable loans to help small businesses make their payrolls during the coronavirus crisis. The bill would extend an eight-week period during which proceeds must be spent for loans to be forgiven to 24 weeks or until the end of the year, whichever comes first.
Businesses would also have as long as five years, instead of two years, to repay any money owed on a loan, and they could use a greater percentage of proceeds on rent and other approved non-payroll expenses.
Timing is urgent because the eight-week spending period began expiring last Friday for the first loan recipients after the Small Business Administration program opened April 3. Businesses — especially in the restaurant and hospitality industry, which are only recently getting the green light to reopen — say they need more time to distribute pay.
The House bill mirrored legislation led by Sens. Angus King, I-Maine, and Steve Daines, R-Montana. In a statement, King, who caucuses with Democrats, said the changes will give business owners “the flexibility they need to make decisions that best fit their unique circumstances.”
Sen. Susan Collins, R-Maine, co-wrote the program as originally drafted. She did not oppose the overhaul bill but said she was concerned about the way the House drafted a provision reducing the current requirement that 75 percent of a loan be used on payroll.
Restaurants and other small businesses have said they want flexibility to spend more on overhead expenses, especially in high-rent areas. The bill would instead require that 60 percent of a loan be used on payroll.
The House bill creates a “cliff,” Collins said in a statement. The current PPP program allows partial loan forgiveness if a company uses less than 75 percent of a loan for payroll, but the House bill appears to state that none of the loan would be forgiven if the 60 percent threshold isn’t met.
“Instead, the employer is saddled with a debt for the entire amount, and no portion of the loan is forgiven or converted to a grant,” Collins said.
About $130 billion remains from the second round of $320 billion that Congress approved for PPP. The initial round of $349 billion was tapped in just 13 days.
There was broad support during a Senate Small Business Committee hearing Wednesday for extending the eight-week loan forgiveness period and changing the rule that 75 percent of proceeds must be spent on payroll.
Michael Strain, director of economic policy studies at the American Enterprise Institute, called the 75 percent rule implemented by the Trump administration “a mistake” because it limits the program’s ability to help companies such as those in high-rent cities that need to spend more on expenses.
“A business that cannot pay its rent also cannot continue paying its workers,” Strain told the committee.
BDN writer Michael Shepherd contributed to this report.
Watch: What does returning to normal look like?