Spanberger: Cut red tape for businesses with PPP
Abigail Spanberger, D-Va., is leading a bipartisan effort urging House leadership to improve flexibility and cut red tape for American small businesses seeking federal assistance through the SBA’s Paycheck Protection Program.
Just prior to the rollout of PPP earlier this month, the SBA introduced guidance that severely restricted non-payroll loan forgiveness for U.S. small businesses applying for PPP loans. This guidance requires businesses to spend 75 percent of the PPP loan on maintaining payroll in order to receive loan forgiveness—a stipulation not included by Congress in the Coronavirus, Aid, Relief and Economic Security (CARES) Act.
These restrictions can place greater stress on businesses with higher non-payroll costs to cover during the coronavirus crisis—such as high rent or utilities payments—and hamstring business owners’ ability to adapt the loans to the unique challenges faced by their individual businesses.
In a letter sent Thursday to Speaker of the House Nancy Pelosi and House Minority Leader Kevin McCarthy, the bipartisan group of lawmakers urged Pelosi and McCarthy to push for the elimination of this restrictive requirement in the next iteration of COVID-19-related emergency legislation.
“As Congress continues our negotiations to craft another legislative package to respond to the impacts of the COVID-19 pandemic, we must include language clarifying the loan forgiveness provisions of the Paycheck Protection Program (PPP),” said Spanberger, Fitzpatrick, Gottheimer, and their colleagues. “Specifically, Congress must take action to ease burdensome requirements on loan forgiveness set by the Department of the Treasury and the Small Business Administration (SBA), particularly the requirement that 75 percent of the loan be spent on payroll costs. Additionally, we must address the negative implications for a borrower’s loan forgiveness that arise if a small business tries but is unable to rehire employees due to the economic and public health uncertainty surrounding the current crisis.
Additionally, according to current PPP guidance, many small businesses unable to rehire employees by June 30, 2020 could see reductions in their federal loan forgiveness percentage. These additional stipulations could mean the difference between a business successfully reopening or permanently closing its doors, which flies in the face of Congress’ intention in creating this program through the CARES Act. In their letter, the bipartisan group of lawmakers called for clarified guidance on these regulations.
“Congress must ensure that any future COVID-19 relief legislation provides guidance for borrowers that try but are unable to rehire employees by June 30, 2020,” the letter states. “Many small businesses are concerned that, due to the extenuating factors surrounding the pandemic – including ongoing state and local stay-at-home orders – they may not be able to meet the June 30 deadline. According to current PPP guidance, this would negatively affect a borrower’s loan forgiveness, even though this is a factor outside of the borrower’s control. These small businesses require direction on how to navigate this aspect of the PPP loans, without sacrificing their loan forgiveness.