BRUNSWICK, ME — Today, U.S. Senator Angus King (I-Maine) applauded the House of Representatives’ overwhelmingly bipartisan passage (417-1) of the Paycheck Protection Flexibility Act, a bipartisan bill that would make necessary changes to the Paycheck Protection Program (PPP). The legislation, which mirrors a bill introduced by Senators King and Steve Daines (R-Mont.) last week, would adjust PPP rules that are preventing some businesses from fully utilizing the funds to address the severe economic impacts of the coronavirus pandemic. Most significantly, the legislation would extend new loans over a longer period of time and allow for added flexibility in how businesses can spend their PPP funds. The House version of the legislation is led by Representatives Dean Phillips (D-Minn.) and Chip Roy (R-Tex.).

“The overwhelmingly bipartisan support for this legislation in the House shows just how critical it is for us to improve the Paycheck Protection Program for the sake of our small businesses and our economy,” said Senator King. “The PPP has been a vital resource for Maine businesses since the pandemic began, but unintended consequences of the program are creating additional headaches for business owners when we should be trying to make things easier. Our legislation would build on the good that’s already been done, and create more flexibility to allow business owners to make the right decisions for their unique circumstances. We have no time to waste if we want to help our local institutions weather this storm; I urge the Senate to quickly pass this bill when we return to session next week.”

 

Specifically, the Paycheck Protection Program Flexibility Act legislation will:

1.     Allow forgiveness for expenses beyond the 8-week covered period.  The 8-week timeline does not work for local businesses that are prohibited from opening their doors, or those that will only be allowed to open with restrictions.  Businesses need the flexibility to spread the loan proceeds over the full course of the crisis until demand returns. Otherwise, employees will simply be furloughed at the expiration of the 8 weeks. This provision will allow the businesses to choose between using their loans in the initial 8 weeks or extending the period for up to 24 weeks.

2.     Reduce restrictions limiting non-payroll expenses to 25% of loan proceeds.  In order to survive, businesses must pay fixed costs. The PPP loans require that 75% of the loan go to payroll. For many businesses, payroll simply does not represent 75% of their monthly expenses and 25% does not leave enough to cover mortgage, rent, and utilities.  Retaining employees is not possible if a business cannot retain their physical location. Under the version of the legislation passed by the House, up to 40% of PPP funds could go to non-payroll expenses.

3.     Eliminate restrictions in new loans that limit loan terms to 2 years.  According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. This is the same for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenue to pay back the loan.

4.     Ensure full access to payroll tax deferment for businesses that take PPP loans.  The purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis.  Receiving both should not be considered double-dipping.  Businesses need access to both sources of cash flow to survive.

5.     Extend the rehiring deadline to offset the effect of enhanced Unemployment Insurance.  To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020.  However, the enhanced Unemployment Insurance created through the CARES Act is higher than the median wage in 44 states.  Many businesses have reported an inability to rehire employees because they are making more on Unemployment than they made working.  To mitigate this unintended consequence, the deadline to rehire employees under PPP should be extended.

6.     Adjusts program’s standards to account for economic realities following the coronavirus pandemic. If economic conditions prevent businesses from reaching pre-coronavirus revenue levels and businesses aren’t able to rehire all employees, this legislation would make sure businesses are still able to receive loan forgiveness.

 

The Paycheck Protection Program Flexibility Act is supported by the International Franchise Association, American Hotel and Lodging Association, National Federation of Independent Business, National Restaurant Association, US Travel Association, Small Business Majority, U.S. Hispanic Chamber of Commerce, National Small Business Association, National Association for the Self-Employed, Small Business and Entrepreneurship Council, and Economic Innovation Group.