U.S. Senators Michael Bennet (D-Colo.) and Todd Young (R-Ind.) this week announced new proposals to support the small- and mid-sized businesses hardest hit by the COVID-19 crisis.
The Bennet-Young plan includes a new RESTART loan program for funding to jump-start those businesses for the remainder of 2020 and provide loan forgiveness as a backstop against ongoing difficulties.
It would also make enhancements to the Paycheck Protection Program to support restaurants and other deeply affected businesses.
“With a simple change to the Paycheck Protection Program — doubling the amount of time hard-hit businesses have to deploy their funds — we can help restaurants, gyms, mom-and-pops, and other Main Street businesses weather these difficult times,” Bennet said in a news release.
“At the same time, we need a long-term strategy to help businesses ramp back up in the second half of the year and provide some assurance they’ll be able to survive the uncertainty they face. Our new RESTART Program will provide flexible funding with a longer repayment period to Main Street businesses that took a big financial hit, so they can relaunch and rehire their workers when it’s safe to do so.”
Young said the PPP is working for many small businesses, but more needs to be done.
“The RESTART Act will go a step further by helping to provide longer-term loans to businesses and nonprofits that are experiencing economic hardship due to the coronavirus pandemic,” he said. “Millions of Americans have lost their jobs, and our goal is to revitalize the economy and get them back to work as quickly as possible.”
Bennet and Young outline the proposals as follows.
Near-term fix to PPP for hardest-hit businesses
Background: PPP has an 8-week “covered period” that begins immediately following the origination of a PPP loan. As funds were limited and there was much uncertainty, businesses rushed to apply and were unable to adjust the timing of their application to a point when they were actually prepared to relaunch their business. Payroll during this 8-week period is used to determine what amount of loan forgiveness a business receives. Businesses are also required to rehire their full headcount by June 30, 2020, regardless of whether their business is back up to anything near full capacity. Businesses that have already laid-off employees are having difficulty rehiring. Some businesses may be shuttered for most or even all of the 8-week period and may even be prohibited from operating at anything near full capacity by June 30, making the decision to rehire employees for a short time frame even more difficult.
Proposal: Bennet and Young propose a fix to address those shortcomings: extend the 8-week covered period to deploy PPP funds and earn loan forgiveness to 16 weeks after the loan is disbursed for the hardest-hit businesses that have seen revenues decline by at least 25 percent.
Longer-term strategy: The RESTART Program
Background: The PPP has worked well for some businesses, but is often less effective for the businesses that should be receiving the most assistance: the smallest businesses or those who have seen revenues decline the most. Its limited duration will also leave many of the most-affected businesses without support in the difficult months ahead.
Proposal: Bennet and Young propose a new RESTART Program, to provide funding to cover the next 6 months of payroll, benefits, and fixed operating expenses for businesses that have taken a substantial revenue hit during the COVID-19 pandemic. A share of that loan will be forgiven based on the revenue losses suffered by the business in 2020, and the remainder can be repaid over 7 years, with no interest payments due in the first year and no principal due for the first two years. This program is designed to provide small- and medium-sized businesses with loans to get their businesses going again, and ensure that they receive loan forgiveness to help fill in a loss in revenues.
Read a detailed summary of the Bennet-Young proposal and examples here.
Senator Cory Gardner (R-CO) has also urged changes to improve the PPP for Colorado small businesses.
In a letter to Senate colleagues, Gardner today called for Congress to reload the program funding and increase the loan amount to four times the average monthly payroll. He is also asking for a requirement that new applicants show significant revenue loss because of COVID-19.
Gardner’s letter asks Congress to set aside PPP funding to support the smallest businesses as well as minority-, veteran-, and women-owned businesses, and consider permitting county and municipal governmental employers to participate in the program.
“Since the Coronavirus Aid, Relief, and Economic Security (CARES) Act became law, I have spoken with small business owners, farmers, and non-profit directors across Colorado regarding the Paycheck Protection Program,” Gardner wrote. “Those conversations have made clear that the PPP is an essential lifeline for many small businesses. They have also made clear that the program needs to be modified.
“The changes outlined below aim to address the issues that countless Colorado businesses have brought to my attention, and likely many of you have heard directly from your constituents. The proposed modifications will expand access to the program and make it more usable for these businesses that desperately need our assistance.”
The full text of the letter is here: https://bit.ly/2xKlKei