The House of Representatives passed a bipartisan bill Thursday that would make several changes to the Paycheck Protection Program requested by the restaurant industry.
The bill passed 417-1.
The most significant tweak involves the eight-week forgiveness period. Currently, when a PPP loan is disbursed to a small business, it must spend the loan in the subsequent eight weeks for the loan to be totally forgiven. June 30 is the end of any forgiveness period.
In the bill, the forgiveness period would extend to 24 weeks. For companies that already received PPP funds, this means 16 weeks would be added on to their original eight-week period. December 31 would be the new deadline of any forgiveness period.
In addition, the 75/25 rule that requires businesses to spend 75 percent of the loan on payroll and 25 percent on rent/utilities would be changed to 60/40.
To reduce the financial burden of businesses that receive PPP loans, the bill would change the loan terms for new PPP loans from two years to five years, meaning lower monthly payments. For companies that already received a PPP loan, the bill clarifies that nothing prevents lenders and borrowers from “mutually agreeing to modify the maturity terms of a covered loan.”
The proposed legislation also changes the process for a business rehiring employees to obtain maximum loan forgiveness. As it stands now, a business must document a written offer for the same pay/hours and a rejection of the offer. The employer then sends these records to the state unemployment office within 30 days.
Under the new bill, loan forgiveness would not be reduced if a company is unable to rehire an employee, shows an inability to hire “similarly qualified employees” before December 31 or shows an inability to return to the “same level of business activity” prior to February 15.
The bill covers payroll taxes, as well. The current law prevents PPP users from deducting payroll tax expenses if they use the loan and it is forgiven. The new legislation would give PPP borrowers full access to payroll tax deferment.
“Restaurants have suffered more job and revenue losses than any other sector of the economy because of mandated closures and restrictions on operating,” said Sean Kennedy, National Restaurant Association executive vice president of public affairs, in a statement. “This is why we have expressed, since the beginning of the COVID crisis, that our industry’s unique operations require a flexible recovery program. While the PPP program can be a critical tool for helping restaurants and small businesses, changes to the program are needed so it can be utilized as intended.”
“ … Our focus will now shift toward achieving similar bipartisan results in the Senate because enacting these PPP changes will help restaurants get the relief they need to get employees back to work and the industry on the path to recovery.”
The Senate introduced its own bill May 21 that would extend the forgiveness period to 16 weeks for loans less than $500,000. It’s unclear how the Senate will handle the proposed bill from the House.
As of May 23, the Small Business Administration has approved more than 4.4 million loans valued at $511 billion. That means about $148 billion remain in the program.
