A new bill introduced this week will enable qualified tiny companies to apply for another Paycheck Protection Program (PPP) loan. The law, part of a wider relief package supported by Senate Republicans called the Health, Economic Assistance, Liability Protection, and Schools Act (HEALS Act), could provide a 2nd forgivable loan to companies that can show a minimum a 50% decrease in gross earnings during the pandemic.
Introduced by U.S. Sens. Marco Rubio (R-FL) and Susan Collins (R-ME), the Continuing Small Business Recovery and Paycheck Protection Program Act appears to reform parts of their first PPP Act that small companies criticized—such as the sorts of expenses eligible for forgiveness—while also providing additional financial aid to small companies still fighting to remain afloat, both with short-term PPP loans plus also a fresh long-term retrieval loan program.
“The PPP and the other small business provisions under the CARES Act have been an historic lifeline to millions of small businesses and tens of millions of American workers,” Rubio stated in a media release. “Now, Congress must take action to help industries and businesses, especially minority-owned small businesses and those in low-income communities, that have been hit hard by the COVID-19 pandemic.”
What’s in the Most Recent PPP Loans Legislation
The invoice comprises four areas of attention:
PPP Second Bring Loans
This could provide $190 billion in financing for PPP loans and PPP second draw loans, the latter specifically for those companies that fulfill the U.S. Small Business Administration earnings size benchmark, have no greater than 300 workers and can reveal at least a 50% decrease in gross earnings. The legislation also limits companies from getting a second loan in case it would increase their joint PPP loan sum above $10 million.
This could include enlarging forgivable expenses to add:
- Covered supplier expenses, such as food orders to get a restaurant or even raw materials for a producer.
- Employee protection costs, such as adapting the company to present needs like installing walls or a brand new air filtration system.
- Operations expenditures, like obligations for company applications or cloud computing solutions used for business operations, billing and sales purposes, bookkeeping, or monitoring of equipment, inventory, documents and expenses.
- Particular property damage, such as harm, reduction from looting or vandalism which has been incurred as a consequence of this 2020 riots which wasn’t covered by insurance or otherwise paid.
Other modifications to the initial PPP law involves letting borrowers pick their favored eight-week period to utilize their PPP capital and simplifying the validity program procedure for loans of $150,000 or less.
Small Company Development and National Manufacturing Investment Facility
This area of the legislation sets aside $10 billion to enrolled SBA Small Business Investment Companies (SBICs)—privately-owned businesses offering small business funding —which invest in tiny companies in low income communities, domestic distribution chain makers and companies with substantial COVID-19-associated revenue losses.
Strategies for SBA Loans to Recovery Sector Firms
This could allocate $100 billion in longterm, economical loans to qualified “recovery sectors” of this market, which can be described to include rural, low income and qualified seasonal companies. Allowable loan uses include working capital, acquisition of fixed assets and refinancing debt. Loans are for around 20 years at 1% interest.
This Bill Can Help the Smallest Firms
Supporters of the bill say it’s the missing bit the tiniest and most disadvantaged companies were missing in the first Coronavirus Aid, Relief, And Economic Security (CARES) Act.
“The separate low-interest, long-term ‘recovery’ loan program established in the package could very well be the true Main Street lending program that the Federal Reserve seems to have missed,” Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, stated in a media release. “This program will help a diverse range of small businesses in low-income areas by offering favorable terms, and allow for a broad usage of loan funds, including working capital and refinancing of existing debt.”
The tiniest companies are hit especially hard by the pandemic in comparison with their bigger peers. Based on a May 2020 report from the Small Business Association’s Office of Advocacy, companies who’d 20 into 49 employees suffered the greatest percentage of job reductions, with employment declining 21.5%. By comparison, companies with 1,000 or more employees saw a decrease of 13.3%.
Some state though the Continuing Small Business Recovery and Paycheck Protection Program Act is a step in the ideal path, it still doesn’t do enough to assist people who need it , especially minority-owned companies in addition to people with relatively limited financial resources that are disproportionately impacted by the outbreak. A June 2020 research by management consulting firm McKinsey & Co. found that minority-owned companies and business owners with just a high school diploma or less were one of the most vulnerable businesses.
“While the Rubio-Collins invoice starts to have a longer perspective of their financial impacts small companies are fighting with, their PPP growth and new program aren’t the ideal vehicle for gaining aid to underbanked tiny companies,” Amanda Ballantyne, executive manager in The Main Street Alliance, a small business advocacy group, wrote in an email to Forbes Advisor. “A bigger expansion of the Employee Retention Tax Credit (ERTC), and easing ERTC access is a better, more equitable route to achieve the dual goals of maintaining employment and sustaining small businesses.”