Congressional lawmakers call for changes to small business assistance program

WASHINGTON — The federal government’s $ 670 billion program to help small businesses will be in the spotlight when Congress returns to action, with many lawmakers planning to target what they say are gaps in the program.

The proposals include extending the number of weeks that small businesses can spend money from government forgivable loans under the Paycheck Protection Program and allowing businesses to use more of it. funds for overheads.

Some lawmakers want to create new funding vehicles, including allocating aid to local governments to be disbursed as they see fit in the middle the coronavirus pandemic.

“What I now know for sure is that Congress needs to do more to advance the smallest of small business agenda in the next coronavirus package,” said Sen. Ron Wyden (D., Oregon ).

Mr Wyden said smaller businesses have struggled to access loans through PPP. He offered direct cash payments equal to 30% of gross revenue, up to $ 75,000, to companies with $ 1 million or less in gross revenue and 50 or fewer employees.

Additional funding proposals could face obstacles from lawmakers who say they are concerned about the accumulated debt. “I think it’s also time to start thinking about how much debt we are adding to our country and the future impact of that,” Senate Majority Leader Mitch McConnell recently told reporters ( R., Ky.).

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

The small business loan program designed to keep workers employed is strapped for cash, and some Main Street business owners affected by the coronavirus pandemic say it is simply not enough to keep their business running. life in the first place. Photo: BA Van Sise / NurPhoto

Business groups say the PPP, which provides forgivable loans to small businesses, has serious flaws. They are asking for measures that would lighten the program’s mandate, whereby employers maintain the payroll and offer more generous discount conditions.

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

PPP borrowers have to spend 75% of their loans on salary expenses to be fully forgiven, which turns out to be a challenge for small businesses still sailing state-imposed closures or have funding needs beyond employee compensation.

“My greatest asset is obviously my people, but it would be nice to be able to put [the loan] towards other things, because we are not able to pay for the things that are due, ”said Don Furr, owner of Exhibit-A, a company in Arlington, Tenn., which creates exhibitions for trade shows.

Another limitation of the PPP, advocates say, is that the discount applies to qualifying expenses – including payroll and some overhead – paid for an eight-week period that begins after the loan is made.

With the social distancing measures, “rehiring staff within eight weeks doesn’t really make sense,” said Naomi Pomeroy, chef and owner of Beast, a restaurant in Portland, Ore., And co-founder of the Coalition. newly formed independent restaurants. . She said the program should “allow us to reopen and come back to full capacity before we have to use the money.”

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Others want Congress to significantly lengthen the loan cancellation period. The Small Business & Entrepreneurship Council suggested the window be at least 24 weeks instead of eight weeks, and the Economic Innovation Group requested 20 weeks.

There are reasonable claims that “the eight week period is really not the right time to use for pardon payments,” said Sen. Ben Cardin (D., Md.), The most important member. of the Senate Small Business Committee.

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

A number of Democratic and Republican lawmakers have called for further 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 said some loans will be audited to determine if they were properly made.

Going forward, other lawmakers have come up with proposals that contemplate helping small businesses outside of PPP boundaries.

Senses Steve Daines (R., Mont.) And Cory Booker (D., NJ), for example, crafted a measure that would complement PPP by sending $ 50 billion to cities, counties and states to create and expand local coronavirus relief fund that could offer small businesses financing options such as grants and loans.

The PPP’s first $ 350 billion credit was quickly depleted, and companies have already clawed back $ 175 billion of the additional $ 320 billion provided by lawmakers, raising the question of whether the program can meet the demand. small business demand.

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

“I think we have reached the limits of the PPP program. I think it is becoming more and more clear. It was a temporary lifeline for business, ”said Senator Josh Hawley (R., Mo.).

Mr Hawley proposed that the federal government cover 80% of employee salaries in real time, up to the national median salary, for companies 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 companies to receive additional funding equal to 20% of past earnings, which could be used for overheads and bonuses if they rehire laid-off workers.

“I think the advantage of a program like the one I am proposing is that it is very simple. It does not require a new administrative apparatus. It’s direct support to the business for the worker, direct support the business can count on, ”said Hawley, whose office did not say how much the plan could cost.

He joins other lawmakers who have called for wage subsidies in the next wave of relief. Such assistance could offer a lifeline to small businesses, which often have little cash reserves. Nearly 50% of small businesses had a cash reserve of less than 15 days, according to a study by the JPMorgan Chase Institute.

Representative Pramila Jayapal (D., Washington) said her wage subsidy plan would use upfront payments to employers to fully cover wage costs up to the 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 said, including savings in spending on programs like unemployment insurance.

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

Howard Gleckman, a senior researcher at the Urban-Brookings Tax Policy Center, said sending money directly to businesses could pose problems for the federal government, similar to problems in its issuance of coronavirus stimulus checks to households.

Still, the cash proposals are on the right track as they would help small businesses “pay the rent, pay for utilities, keep the lights on and not lose the business,” Gleckman said. “It solves this terrible short-term liquidity problem.”

Write to Amara Omeokwe at [email protected]

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