On the evening of Wednesday, June 3, 2020, the U.S. Senate unanimously approved legislation to fix the Paycheck Protection Program (PPP) by providing direct relief to small businesses affected by the coronavirus pandemic. Senate Majority Leader Mitch McConnell, R-Ky., requested a unanimous consent vote and the vote was nearly unanimous at 417-1.
The bill, which was passed by the House of Representatives on May 28, 2020, now proceeds to President Trump to sign into law. The legislation:
- gives small businesses more time to use Paycheck Protection Program loans, increasing the deadline from eight weeks to 24 weeks.
- amends the 75/25 rule for how much businesses must spend on payroll versus non-payroll costs to get full forgiveness of the loan to 60/40. This gives businesses more flexibility to use the loans to pay for expenses other than payrolls.
- moves the deadline to rehire workers from June 30 to December 31.
- extends the two-year term for the loans to five years, among other provisions.
Under the PPP program, loans for restaurants, hotels, and other small businesses would convert into federal grants if recipients adhere to conditions, including spending the loan amount within the required time. The previous eight-week requirement to use the funds to carry out the terms of the loans had been very restrictive to caterers, museums, gyms, and other small businesses.
Many businesses reported an inability to rehire employees because they are making more on unemployment than they made working. The bill extends the deadline to rehire employees to align with the expiration of enhanced Unemployment Insurance. This was created through the CARES Act, and in some cases is higher than the median wage in 44 states.
Negotiations to expand the PPP’s flexibility have been in process for weeks since the Senate’s Memorial Day recess without being able to pass its own version of the House legislation.
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