A number of leading business associations and organizations have asked Congress for big changes to the pandemic small-business relief program, including open-ended funding, the ability to spend funds on more than just payroll, and more time to spend the money.
The small-business relief program “was largely focused on helping employees, but employees need a business to come back to,” said Matthew Haller, senior vice president at the International Franchise Association. “This will require a more extensive program than the initial one. The changes we’re asking for would help businesses to actually survive for employees to come back to.”
The Small Business Administration’s coronavirus relief program, called the Paycheck Protection Program, was initially funded with $350 billion as part of the massive $2.3 trillion CARES Act relief package. The program was given an additional $321 billion last week after the initial funds ran out within just two weeks, but re-funding was a struggle due to disagreements between the Democrats and Republicans on how to structure the program, which is intended to help small businesses keep employees on their payrolls while business has dried up because of the coronavirus.
The fight over re-funding it, along with technical and administrative issues with the program have caused the program to get overloaded and caused delays in getting relief to small businesses. Nevertheless, the program has been a lifeline for small businesses, disbursing hundreds of billions of dollars to them in the past few weeks, and has maintained strong support from both parties.
The business groups, led by the Economic Innovation Group, a bipartisan public policy organization, along with other organizations such as the U.S. Travel Association, the International Franchise Association, and American Hotel & Lodging Association, sent a letter to House and Senate leadership last week calling for the changes. The groups collectively support well over 40 million jobs and contribute trillions to the U.S. GDP every year.
The business groups have called for a number of improvements to the program, including extending the end date of it from June 30 to Dec. 31, 2020, removing the funding uncertainty to make it an open-ended appropriation that’s not constantly running out of money, and increasing the borrowing limits so businesses can withstand a longer period of lost revenues and operational disruption.
They also want to expand the list of covered expenses to include business insurance, inventory, and payments on debt incurred prior to the covered period. Currently, 75% of the relief loans have to be used for payroll costs and 25% for mortgage interest payments, rent, leases, and utilities. Instead, the groups want to be able to use more than 25% of the loans on non-payroll expenses, since such costs often constitute much more than 25% of most businesses’ total costs.
Another major issue millions of small businesses are facing is the challenge of hiring employees back when employees can get more money from unemployment benefits than from their employer. The relief loans currently require businesses to rehire employees, which small businesses want more flexibility for so that they don’t get unfairly penalized.
“Congress has told us exactly what we need to be spending the loan on, just give me flexibility on when I can use this money though,” said James Cummings, owner of multiple Great Clips hair salons in North Carolina. “It’s just silly to expect me to hire them back when unemployment is paying them more than I can.”
The groups would also like to see businesses and industries that are already in a position of relative strength to be discouraged from applying for the relief loans, given how limited the resources are and how quickly the relief money is getting disbursed.
“The law currently includes no meaningful disincentive for healthy businesses to take advantage of the program,” the group’s letter to Congress states. “When applying for loan forgiveness, borrowers should be required to provide good faith certification under threat of penalty that they meet at least one category of significant economic harm.”
