Lawmakers Press for Changes in Small-Business Aid Program

Proposals include extending the number of weeks that small businesses can spend money from the government’s forgivable loans under the Paycheck Protection Program, and allowing businesses to use more of the funds for overhead costs.

Some lawmakers want to create new funding vehicles, including allocating aid to local governments to disburse as they see fit amid the coronavirus pandemic.

“What I know now for sure is Congress has to do more to promote the agenda of the smallest of the small businesses in the next coronavirus package,” said Sen. Ron Wyden (D., Ore.).

Mr. Wyden said the smallest businesses have struggled to access loans through the PPP. He has proposed direct cash payments equal to 30% of gross receipts, up to $75,000, to firms with $1 million or less in gross receipts and 50 or fewer employees.

Proposals for additional funding could face obstacles from lawmakers who say they are concerned about the debt being accrued. “I think it’s also time to begin to think about the amount of debt that we’re adding to our country and the future impact of that,” Senate Majority Leader Mitch McConnell (R., Ky.) told reporters recently.

The Senate plans to return to Washington on Monday, while the House delayed its return date due to health concerns over the coronavirus pandemic.

Business groups say the PPP, which provides forgivable loans to small businesses, has serious flaws. They are calling for measures that would ease the program’s mandate that employers maintain payroll and provide more generous forgiveness terms.

“This is a much larger and systemic crisis than PPP was designed for,” said John Lettieri, chief executive of the Economic Innovation Group, a bipartisan think tank. “It needs to be a broader, more flexible program and a longer-term program to help the business meet its entire range of costs and challenges,” he added.

PPP borrowers must spend 75% of their loans on payroll expenses to have them fully forgiven, which is proving a challenge for small businesses that are still navigating state-mandated closures or have funding needs beyond employee pay.

My greatest asset is obviously my people, but it would be nice to be able to put [the loan] towards some other things, because we’re not able to pay any of those things that are coming due,” said Don Furr, owner of Exhibit-A, an Arlington, Tenn., company that creates exhibits for trade shows.

Another PPP limitation, advocates say, is that forgiveness applies to eligible expenses—including payroll and certain overhead costs—paid for during an eight-week period that starts once the loan is made.

With social-distancing measures, “rehiring staff within eight weeks doesn’t really make sense,” said Naomi Pomeroy, chef and owner at Beast, a restaurant in Portland, Ore., and a co-founder of the recently formed Independent Restaurant Coalition. She said the program should ”allow us to get back open and be back at full capacity before we’re required to use the money.”

Others want Congress to drastically lengthen the loan forgiveness period. The Small Business & Entrepreneurship Council has suggested the window be at least 24 weeks instead of eight weeks, and the Economic Innovation Group has called for 20 weeks.

There are reasonable requests that the “eight-week period is really not the right period to use for the payments relative to forgiveness,” said Sen. Ben Cardin (D., Md.), the ranking member on the Senate Small Business Committee.

Mr. Cardin said modifying the program would take cooperation between the Treasury Department, the Small Business Administration and a bipartisan group of lawmakers, “recognizing that cost issues are something we have to be mindful of.”

A number of Democratic and Republican lawmakers have called for closer scrutiny of the program after large, publicly traded companies received the funds. Several of those companies have since returned the money amid a public backlash, and the Treasury Department has said certain loans will be audited to determine whether they were appropriately made.

Looking ahead, other lawmakers have issued proposals that envision small-business aid outside the PPP’s bounds.

Sens. Steve Daines (R., Mont.) and Cory Booker (D., N.J.), for example, crafted a measure that would complement PPP by sending $50 billion to cities, counties and states for creating and expanding local coronavirus relief funds that could offer small businesses financing options such as grants and loans.

The PPP’s first $350 billion appropriation was quickly exhausted, and businesses have already snapped up $175 billion of the additional $320 billion that lawmakers provided, raising questions about whether the program can meet small-business demand.

Treasury Secretary Steven Mnuchin has said he doesn’t expect the program to receive an additional round of funding. Larry Kudlow, President Trump’s top economic adviser, said Sunday on CNN he wouldn’t rule out the possibility of allocating more money to PPP, but that the administration wants to focus on other measures, such as a payroll tax holiday for workers.

“I do think we’ve reached the limitations of the PPP program. I think that’s becoming increasingly clear. It was meant as a temporary lifeline to businesses,” said Sen. Josh Hawley (R., Mo.).

Mr. Hawley has proposed that the federal government cover 80% of real-time employee wages, up to the national median wage, for firms of all sizes that demonstrate they have been affected by the coronavirus pandemic. The benefit would last for the duration of the public-health emergency, according to Mr. Hawley.

He said he would also push for businesses to receive additional funding equal to 20% of past revenues, which could be used for overhead expenses, and bonus money if they rehire laid off workers.

“I think the advantage to the program like the one I’m proposing is that it is very simple. It does not require a new administrative apparatus. It is direct to the business for the worker, direct support that the firm can count on,” said Mr. Hawley, whose office didn’t specify how much the plan might cost.

He joins other lawmakers who have called for wage subsidies in the next wave of relief. Such aid could offer a lifeline to small firms, which often have few cash reserves. Nearly 50% of small businesses had a cash buffer of less than 15 days, according to research from the JPMorgan Chase Institute.

Rep. Pramila Jayapal (D., Wash.) has said her wage subsidy plan would use upfront payments to employers to fully cover payroll costs up to an equivalent of $100,000 annualized per employee. It would cost $250 billion over three months and just under $500 billion over six months, Ms. Jayapal has said, factoring in savings from expenditures on programs like unemployment insurance.

Reps. Madeleine Dean (D., Pa.) and Derek Kilmer (D., Wash.) support direct cash payments to very small businesses, and have introduced a companion measure to Mr. Wyden’s in the House. The Small Business Majority, an advocacy group, also favors direct cash grants.

Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, said sending cash directly to businesses could pose challenges for the federal government, similar to glitches in its issuing of coronavirus stimulus checks to households.

Still, cash proposals are on the right track because they would help small firms “pay the rent, pay the utilities, keep the lights on and not lose the business,” Mr. Gleckman said. “This is addressing this terrible short-term liquidity problem.”

By:  Amara Omeokwe
Source: MSN