Today in the nation's capital, the New Democrat Coalition (NDC/) formally endorsed the bipartisan Paycheck Protection Program Flexibility Act; this act was co-introduced by New Dem Rep. Dean Phillips (MN-03/).
As we have thus far seen, the PPP has been providing relief aid to millions of small businesses across the nation. The problem however has largely been with the terms of the loan program. Either they are too inflexible or in some instances, too vague. What Rep. Phillips' legislation proposes makes a tremendous amount of sense as far as improving the PPP overall. Such provisions include the following:
- Extend the forgiveness period beyond just eight weeks of expenses.
The current 8-week timeline is proving highly restrictive for businesses that are currently operating under limited capacity rules or potentially still not operating at all. The legislation deems that businesses should be able to spend funds throughout the crisis and be forgiven for such expenditures.
- The bill also seeks to eliminate the restrictions which state that the nonpayroll expenses can only amount to 25% of the loan total.
Plain and simple, businesses have to be able to pay fixed costs if they are going to make it through this. And for several small businesses payroll just does not make up 75% of their monthly expenses; the remaining twenty-five percent isn't cutting it as far as covering things such as mortgage and utilities.
- Lifting the two-year loan term restrictions.
For many, recovery from the pandemic looks like it will be a great deal longer than two years. Thus, asking those hardest hit to be able to pay that which is not forgiven in that short amount of time is unfair.
- Allow those who get loans to also get payroll tax deferment.
The purpose of the government-funded program as well as payroll tax deferment is to enable those struggling businesses to have a chance at bouncing back and thus making it through this. And yet, they can now only receive one or the other. Businesses need to be able to receive both to effectively stimulate cash flow again.
- For those unable to rehire employees, provide some form of a safe harbor.
In order to get PPP funds and also be forgiven, the business currently has to rehire their employees by June 30. And yet many stays at home orders still in place make this near impossible. If a business attempts to hire back employees but in some instances is not able to, they should still be eligible for loan forgiveness.
For so many smaller Main Street-type businesses, the PPP has been a definite lifeline. The legislation being proposed is simply commonsense. And it thereby makes it even more possible for those faltering businesses to bounce back from this. The New Democrat Coalition is proudly at the forefront when it comes to cleaning up the PPP and making it work even better. Congress has a real chance to fix what is broken and streamline the process for so many. It increasingly looks as if there may just be bipartisan cooperation regarding the reforms needed to help smaller companies stay afloat.
First Union Lending is here to help! There are still PPP funds left. If you need a loan to weather this storm, call today and let us help you through the process!