Congress Eyes New PPP Loans

With two weeks remaining before jobless benefits and eviction protections expire, Congress is looking at new PPP loans for small business. But this time, only actual small businesses can avail of it. This hopefully addresses the criticisms levied against the last Paycheck Protection Program loans.

RELATED: Kushner, Trump Got PPP Loans Worth $3.65M

Senator Ben Cardin (D-Md), a leading member of the Small Business and Entrepreneur Committee, wants more stringent qualifiers.  “Let us target the program to the smaller of the small businesses. Let’s make sure it’s based upon need so that we get to the small businesses that really need help,” he said during a hearing last week. 

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Two Complementary Coronavirus Relief Bills 

The latest PPP program is part of the larger $908 billion coronavirus stimulus package proposed by a bipartisan group. The coalition, called the House Problem Solvers Caucus, split the proposed package into two bills. The first part is the $738 billion Bipartisan Emergency COVID Relief Act of 2020. It includes funding for unemployment benefits, emergency food assistance, and emergency rental relief. Also, the PPP loan package worth $300 billion, is a major component of this bill. 

Meanwhile, the remaining $160 billion will form a separate bill. It contains the contentious parts of the relief package, including liability programs for business and state, local and tribal aid. The idea of separate bills leaves more room for compromise. With time running out, Congress is feeling the pressure to come up with something. 

PPP Reboot

The last PPP closed on August 8. Since then, small businesses struggled to stay afloat. The $521 billion budget for the PPP ran out faster than anticipated, as even large businesses came out to apply for relief. Data from the Small Business Administration showed that only 28% of PP loans went to actual small businesses.  

The rebooted PPP proposed changes to recipient qualifications. It proposes to limit loans to businesses with 300 employees or less. Also, borrowers should also carry proof that the business lost at least 30% in revenue within 2020. Upwork chief economist Adam Ozimek agreed that a revenue test helps ensure funds reach only the businesses that need help. “It’s a very diverse economy, and you don’t know who is getting hurt and how,” he said. “Within industries, there are businesses that are doing great, even if the average business is doing poorly.”

Surviving the Winter

In a Reimagine Main Street survey conducted the last two months, 60% of 8,328 small businesses said they need financial help or capital infusion in the next six months. 10% expect to close shop by June. A PPP loan is only forgivable when used for payroll. Consequently, this won’t help much in propping up businesses that operate at reduced capacity. 

In addition, PPP loans usually go through a bank or lending institution. Many small businesses do not have that much in terms of relationships with major financial firms. This contributed to the difficulties in getting a PPP loan earlier this year. In particular, black business owners found it harder to apply for the program. 

Community Lenders

The proposed PPP also proposes allocating funds for businesses with less than 10 employers and for small community lenders. Community lenders are key sources of loans for minority and small communities. 

Senator Marco Rubio (R-Fl), Senate Small Business Committee chairman, agrees that the PPP needs changes. He said: “We can help build upon the success of the first round, fix some of the problems that were identified through that first round, and protect small businesses through the winter.” He added the new PPP should come out in a “tailored and surgical way.” 

Bipartisanship Will Save the Day

Lawmakers expect headway by Wednesday this week. Democrat Senator Joe Manchin remains optimistic a deal is incoming. “Bipartisanship and compromise are alive and well in Washington, contrary to what you have been hearing,” he said. “Now it’s up to the leadership to take it and make it happen on a timely basis.” Senator Mitch McConnell agrees. “It’s time for this body to collectively recognize that finger-pointing doesn’t put food on the table for struggling families,” he said Monday.

As the country braces for a new wave of infections as the Christmas season approaches, a new stimulus package would be very welcome. If there is a time for what Senator Susan Collins calls a ”Christmas miracle,” now is the time for one.

View the Yahoo FInance report featuring former SBA Administrator Karen Mills speaking with Adam Shapiro and Seana Smith about the need for stimulus money to help small businesses:

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Do you think that Congress can come up with a Christmas miracle and pass a coronavirus relief package, which includes new PPP loans for small businesses? Let us know what you think and share your comments below.