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House Passes Bill to Relax Restrictions on Small Business PPP Loans

  • May 29, 2020

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The House of Representatives yesterday overwhelmingly passed legislation (417-1) intended to ease restrictions on Paycheck Protection Program (PPP) loans to help small businesses keep workers on payroll with benefits during the coronavirus outbreak.  (The Hill, May 28

  • H.R. 7010 would make other changes that offer greater flexibility for PPP-eligible businesses, including: 
    • Extending the loan forgiveness period from eight weeks to 24 weeks after origination;
    • Extending the PPP re-payment period to five years, for small businesses that do not receive loan forgiveness;
    • Allowing PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and
    • Allowing small businesses to receive forgiveness for up to 40% of PPP loan amounts used for rent and other non-payroll expenses.

  • The Roundtable joined a broad coalition of organizations supporting the flexibility bill – as originally introduced – that would have given small businesses greater discretion to decide how to best apportion PPP proceeds to help pay rent obligations and other ordinary operating expenses.  (Roundtable Weekly, May 22)
  • The original bill would have completely eliminated the so-called “75-25 Rule.”  The rule’s name derives from a Small Business Administration (SBA) regulation that currently requires a qualifying business to use at least 75% of PPP proceeds for payroll and benefits, and no more than 25% for rent, mortgage interest, and utility payments.  (See RER’s “8-Point Plan to Reform the PPP”)
  •  H.R. 7010 as passed by the House yesterday defaulted instead to a “60-40 Rule.”  According to Politico, “Democrats scaled back [the] initial version of the bill to address complaints from labor leaders that it would have given businesses less incentive to hire back workers.”  (POLITICO, May 28)
  • A bipartisan group of Senators led by John Cornyn (R-TX), meanwhile, is on record to move the “75-25 Rule” to a “50-50 Rule” where up to half of PPP loan proceeds could be used by a business to pay rent and other non-payroll fixed expenses.  (Cornyn press release, May 6)
  • Treasury Secretary Steven Mnuchin has expressed the Administration’s opposition to changing the “75-25 Rule.”  “Let me just remind people it’s called the Paycheck Protection Program, it's not called the overhead protection program,” Mnuchin said in a May 21 interview for The Hill. “It was designed that you got eight weeks of payroll plus 25 percent for overhead, which we thought was a reasonable amount.”

House Majority Leader Steny Hoyer (D-MD) claimed earlier this week that House and Senate negotiators are nearing agreement on PPP reforms. (Bloomberg, May 26).  A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in March.   

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