House Passes Bill Loosening Rules on PPP Small-Business Loans
Washington, DC, May 28, 2020 | Wall Street Journal
The House approved a bipartisan bill that would loosen requirements on hundreds of billions of dollars in small-business loans, responding to concerns from employers struggling to stay open during the coronavirus pandemic.
The House bill reduces the level of Paycheck Protection Program funds that must be used for payroll to 60% from 75%. The bill also gives borrowers up to 24 weeks to use the funds, up from the eight set in the initial bill passed in March, and extends the deadline to rehire workers to Dec. 31.
The bill passed 417-1 on Thursday, with many of the Democratic votes read into the record by their assigned proxy, taking advantage of a rule change this week that allows remote voting for the first time. Republicans have rejected proxy voting and have filed a lawsuit to block the practice.
The bill now goes to the Senate, where lawmakers of both parties are hoping for quick action. House lawmakers say last-minute changes to the bill, such as setting the 60% level for payroll, were done to reach a bipartisan agreement in both chambers. That payroll level marked a compromise between keeping it in place at its current level and eliminating it entirely.
“This is a bill to provide immediate flexibility and it’s needed, and if the Senate sits there and messes around and then have to wait and call it back and then weeks go by, then we’re stuck,” said Rep. Chip Roy (R., Texas), a lead sponsor of the bill.
Senators backing it plan to push for a vote next week. The PPP changes are one area of bipartisan cooperation on Capitol Hill, amid deep divisions over unemployment benefits, state aid, liability shields for businesses and other issues in the next round of talks.
“I’m hoping that the Senate can just take it up, maybe even on unanimous consent,” Sen. Angus King (I., Maine) said in an interview. A spokesman for Senate Minority Leader Chuck Schumer (D., N.Y.) said the senator will push for a vote next week as well.
A spokesman for Majority Leader Mitch McConnell (R, Ky.) declined to comment.
The Senate failed last week to reach a deal to extend the amount of time companies have to spend loans obtained through the program to 16 weeks. The House bill has support from several outside groups lobbying for changes to PPP, including the National Restaurant Association, U.S. Travel Association and the National Small Business Association.
“We believe what we’ve compromised on here, in this chamber, will be sufficient to pass the Senate,” said Rep. Dean Phillips (D., Minn.), a lead sponsor of the bill. “This is what small businesses need, and if we don’t keep the businesses open, the jobs go away.”
In a separate development, federal agencies said they would set aside an additional $6.8 billion of funds during PPP’s second round for community lenders that target underserved borrowers, as lawmakers consider broader changes to the program.
The set-aside money will be designated for loans under the $670 billion Paycheck Protection Program that will be made through Community Development Financial Institutions, or CDFIs, the Treasury Department and Small Business Administration said. CDFIs have an express mission of lending to low-income borrowers, along with other groups that are often underserved by traditional banking institutions.
“We have received bipartisan support for dedicating these funds for CDFIs to ensure that traditionally underserved communities have every opportunity to emerge from the pandemic stronger than before,” Treasury Secretary Steven Mnuchin said in a statement.
The PPP offers forgivable loans meant to help small businesses weather the economic fallout of the coronavirus pandemic. Banks and other lenders issue the loans, and the SBA guarantees them.
The 305 CDFIs participating in the program had issued nearly 95,000 loans worth more than $7 billion as of May 23, SBA data show.
The move to earmark funds for CDFIs follows public backlash aimed at the PPP after a rocky start in early April.
Many small firms initially reported being unable to access the program, as some lenders prioritized customers with existing relationships. Meanwhile, several large companies were able to receive the loans, although several have since returned the money after the Treasury Department said the program wasn’t intended for companies with adequate access to other sources of capital.