SAN DIEGO – Yesterday, Rep. Scott Peters (CA-52) helped the House pass the Paycheck Protection Program Flexibility Act, a bipartisan bill that would improve the Paycheck Protection Program (PPP), an initiative born out of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that provides relief to small businesses feeling economic strain from the coronavirus (COVID-19) pandemic.
The Paycheck Protection Program Flexibility Act expands the benefits and flexibility of PPP loans to:
- Expand loan forgiveness for expenses from an 8-week covered period to 24 weeks, and extending the rehiring deadline. The current eight-week timeline set by the CARES Act in March does not work for many local businesses that just opened back up or that will be allowed to open with very heavy restrictions. Small businesses need the flexibility to spread the loan proceeds over the full course of the crisis, until demand returns.
- Increase the current limitation on the use of loan proceeds for non-payroll expenses from 25 percent to 40 percent. Under regulations issued by the Trump Administration, PPP loans require that no more than 25 percent of loan proceeds can be spent on non-payroll expenses such as rent, mortgage interest, and utilities, preventing many small businesses, such as independent restaurants, from applying to the program because their rent is significantly more than 25 percent of their monthly expenses.
- Extend the program from June 30 to December 31. Prolonging the PPP program for 24 weeks will ensure that more truly small businesses can take advantage of the program.
- Expand loan terms from two years to five years. Allowing longer loan terms will reduce the stress small businesses are already experiencing due to a lack of revenue. According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. If the past is any indication of the future, it will take many businesses in multiple industries more than two years to achieve sufficient revenues to pay back the loan.
- Ensure full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with liquidity to weather the crisis. Businesses need access to both sources of cash flow to survive.
“Dozens of organizations in my district expressed concern over original PPP provisions, like the 8-week covered period, deadlines for rehiring, and limitations on loan use for non-payroll expenses,” said Rep. Peters. “It’s clear the economic toll of this crisis will be felt well past the program’s June 30 deadline, and allowing local businesses greater ability to use PPP loans in ways that best serve their company and employees is crucial to the survival of our Main Street businesses during this emergency.”
Rep. Peters continued, “Congress knew more work was needed to correct flaws of the programs outlined in the CARES Act, and the changes we voted on will ensure that financial relief is more accessible and functional for the small businesses in San Diego and across the country who need it most.”
While San Diegans shelter in place, Rep. Peters continues to work for the people of California’s 52nd district and carry out his legislative duties remotely while following public health guidance. Pursuant to temporary House rules authorizing remote participation during the pandemic, Rep. Peters designated Rep. Kathleen Rice (NY-04) to cast his vote via proxy, according to his direction.