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New Bill Would Ease Restrictions On Federal Small Business Emergency Loans

A pair of bipartisan lawmakers on Capitol Hill are preparing to introduce legislation to make it easier for small businesses to receive federal relief.


A pair of bipartisan lawmakers are preparing to introduce new legislation easing tight restrictions on federal loan assistance provided under the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

“The Paycheck Protection Program Flexibility Act,” sponsored by Texas Republican Rep. Chip Roy with Minnesota Democratic Rep. Dean Phillips, will eliminate provisions in the loans that mandate 75 percent of funds to go to payroll without repealing conditions that require employers to retain staff throughout the crisis.

The new bill will also allow business that take the loans to defer payroll taxes without penalty and pushes the rehiring deadline later in the year, past the June 30 date currently set as businesses struggle to bring back employees who are getting more on unemployment. A study from the conservative Heritage Foundation unveiled last month shows that bigger federal unemployment benefits have provided the median full-time American worker earning $48,000 a year with 15 percent more from government assistance than remaining in their prior full-time job. As a consequence, small businesses that are required to keep a consistent employee headcount for loan forgiveness are struggling to rehire laid-off staff.

Other provisions of the PPP Flexibility Act include allowing loan forgiveness to cover expenses incurred past the initial eight-week period after funds are acquired and eliminate the loans’ current two-year limit, as recovery is expected to last far longer.

The PPP program was established in late March to provide immediate cash assistance to small businesses struggling to survive abrupt state and local lockdowns implemented to curb the spread of the Wuhan coronavirus. Just two weeks after loans became available, however, the more than $350 billion in funds set aside for small businesses were exhausted.

This led to a bitter partisan battle on Capitol Hill. For more than a week, Democrats blocked a clean funding bill proposed by Republicans to sustain the program. By mid-April, lawmakers compromised on a nearly $500 billion package that included more than $310 billion in fresh funds for small-businesses.

Although Congress refunded the program, tight restrictions on loans made securing assistance impractical for thousands of sinking businesses that remain shut down. If small enterprises are unable to meet the current guidelines set out in the loan parameters established by Congress and the U.S. Treasury, then the money would have to be paid back. For many businesses, that would be the final blow after forgoing more than two months of revenue.