Fixing the Paycheck Protection Plan for small businesses

By Sen. Angus King | Jun 06, 2020

It’s starting to feel like summertime in Maine, which means that beaches should be bustling, shops should be packed, and traffic on Route 1 should be bumper-to-bumper within 10 miles of Red’s Eats. The last weekends in May typically kick off Maine’s peak season, but this year, our usual seasonal visitors didn’t come — instead, they stayed home, like most of us who are doing our part to protect ourselves, our families, and our communities from the coronavirus pandemic. This is the right decision, for their health and for ours, but even still, the lack of tourism revenue is devastating to our state’s small businesses — the lifeblood of our state’s economy — especially during the busy — and brief – summer season.

These unprecedented challenges are why Congress created the Paycheck Protection Program (or PPP). The program has already done a lot of good and has been a vital source of important economic relief to help businesses weather this storm; since it became law, 25,615 Maine businesses have received more than $2.2 billion in PPP funds to help them get through the pandemic’s economic fallout. But like any piece of major legislation, it is creating unintended consequences that stand in the way of its intended goals. In this case, several of the PPP’s strict requirements prevent small business owners from addressing their most pressing needs or planning for the long-term economic obstacles that are sure to come.

Fortunately, we have a chance to fix the PPP and help it work the way it should — so let’s do it. That’s why I’ve introduced the Paycheck Protection Flexibility Act, which would help remove some of the most challenging regulations that I’ve been hearing about from Maine’s small businesses over the last few months. The bill has some serious bipartisan momentum — it’s cosponsored in the Senate by three Republicans, two Democrats and myself. Even more promising: The House of Representatives passed its version of the bill on Thursday by a count of 417-1. This is a big deal, bringing us one step closer to making important changes like:

- Eliminating spending restrictions so businesses can spend PPP funds on what they need. Under existing regulations, businesses must spend 75% of their PPP loans on payroll expenses. That’s a problem for many businesses, because that’s just not how their expenses break down. The limit means that many businesses have money meant to pay the bills, but aren’t allowed to use a penny more than 25% of their loan to cover expenses like rent if they want to get their loans refunded — even if paying that bill is the difference between making it through this crisis or being forced to shut down. My legislation, as amended in the House, would broaden this formula so it’s more like 60/40, to make sure that businesses can weather this storm by making the best decisions for their individual situations.

- Allow forgiveness for expenses incurred for up to 24 weeks. Right now, PPP recipients need to spend their PPP funds within eight weeks of receiving their loans in order to qualify for forgiveness — but that doesn’t work if businesses are forced to close or drastically reduce their services to ensure public health and safety. By providing additional flexibility and allowing use of the loan funds for up to 24 weeks, we can let these businesses make the choices that fit their unique needs.

- Adjust metrics to account for the economic realities of the months to come. I know some think the reason businesses are hurting is because government restrictions are preventing businesses from opening, but that ignores a fundamental law of economics: businesses need customers. Whether it’s economic uncertainty causing people to reduce their spending, or the looming danger of coronavirus pushing people to stay inside as polls show many Americans remain hesitant to re-engage in public life, it’s clear that we are not in the business atmosphere of a few months ago — and it’s likely to take some time to reach that level again. This bill would build in a mechanism to take the strength of the economy into account, so businesses aren’t penalized for operating within the possibilities of a new normal.

These are just a few of the fixes in my legislation, all of which are based on the feedback I’ve been getting from business leaders, workers, and consumers since this pandemic began. The bill can’t magically fix the challenges we face — nothing will — but it can give our businesses more of the tools they need to adjust to this crisis and the ensuing economic struggles. There may be more adjustments and negotiations, and I’m ready to work with anyone in Congress to make the PPP stronger and more practical to help our nation’s businesses get through these unexpected obstacles

This is a challenge unlike anything we’ve faced in a generation — but Maine people are resilient, and always ready to work with each other to solve a problem. We’re used to weathering storms, and I know we can weather this one, together — and when we do, I want to make sure that the local institutions we’ve relied on for years are able to welcome us back with open arms. They have the will, and the know-how; I want to make sure that they are getting the help that they need from the PPP, and that they have the freedom to make the right choices for their unique circumstances. The goals and the framework of the Paycheck Protection Flexibility Act will give them a little more certainty — and flexibility — and I’ll keep pushing to make it law.

Independent Angus King is Maine's junior U.S. senator.

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