At a hearing of the House Financial Services Committee on Tuesday, Treasury Secretary Steven Mnuchin said the Trump administration supports legislation to re-purpose the more than $130 billion left in the small-business fund.
“I’ve already had conversations with the [Small Business Administration] committee in the Senate about repurposing that $135 billion and think that should be done, and look forward to working with both the House and the Senate so we can pass legislation by the end of July,” Mnuchin said.
The aim should be “extending it to businesses that are most hard-hit, that have requirements that their revenue have dropped significantly — things like restaurants and hotels and others where it is critical to get people back to work,” Mnuchin said.
Rubio is working on legislation along the lines of what Mnuchin described. It would create new programs to expand uses for the funds, such as allowing chambers of commerce to apply and directing more money to certain businesses that prove they were affected by the pandemic.
According to a draft copy of the bill that was obtained by The Washington Post, the legislation would also set aside $25 billion for businesses with fewer than 10 employees and formally prevent hotel or restaurant chains from receiving more than $2 million total. Rubio would need to reach an agreement with Democrats before any deal could be signed into law, however, and they have been calling for a range of other economic responses to the coronavirus pandemic.
A separate bill proposed weeks ago by Cardin and Sen. Jeanne Shaheen (D-N.H.) — who along with Rubio and Sen. Susan Collins (R-Maine) helped craft the original PPP legislation — would extend Tuesday’s deadline by six months to allow more businesses to access the remaining funds. But the Democratic-sponsored legislation contains more restrictions that would limit new loans to the smallest businesses and those in dire need.
The bill would restrict new lending to small businesses with 100 employees or fewer, significantly lower than the 500-employee cap that applies under current rules. And in a significant departure from current rules, it would restrict businesses that had already received and spent a PPP loan, requiring them to prove a revenue reduction of 50 percent or more.
The PPP disbursed hundreds of billions of dollars to small businesses, but it also faced criticism because of some of its recipients. Publicly traded chains early on reaped millions, prompting more than $38 billion to be returned to the government after the administration condemned well-capitalized companies for taking funds.
Asked Monday whether the PPP deadline ought to be extended, Rubio said he would consider that but was leaning toward providing new programs to meet businesses’ changing needs as parts of the country are able to reopen.
The idea behind the repurposing of leftover funds would be to better target money to businesses that need it and allow them to use more of it on capital expenditures as they move toward reopening. Restaurants, for instance, could use funding to build sidewalk seating or reconfigure their dining rooms for social distancing.
Though the administration has not yet released detailed data on the PPP’s effectiveness, the Treasury Department and the Small Business Administration, as well as many economists, credit it with saving millions of jobs. Borrowers snapped up the first $349 billion Congress approved just 13 days after the program’s April 3 launch.
Two months after a second, $310 billion round launched, more than a quarter of the money remains available despite record-high unemployment, more than 100,000 small-business closures and growing projections that the ill economic effects of the pandemic will extend through next year. Interest in the program was tempered in recent weeks as many companies opted against taking on additional debt as the rules of the program kept changing.
Jonathan Miller, an accountant in Tucson, said he got a PPP loan to cover eight weeks of payroll while his company’s five employees worked from home. He said the extra funding was critical to maintaining economic stability during a period when his clients — including doctors and other sole proprietors — were in a state of economic turmoil.
But now that his business is past the initial shock of the economic downturn, his biggest problem is that some of his clients are going out of business. He said he is worried about how to prepare for yet another downturn, with spiking coronavirus cases in his state potentially leading to more closures.
A major change between the PPP and Rubio’s new proposal would be a further expansion of allowable expenditures, something the hotel industry has been pushing for since early in the pandemic.
Because travel was one of the earliest industries hit by the pandemic and is expected to be one of the last to recover, the PPP’s focus on bolstering payroll expenses for an initial eight-week period (a time frame that was later extended) is not likely to help hotel owners who are struggling to pay their mortgage and utilities. Many hotel owners do not know when they will be operating at full capacity again.
Of 2.3 million people who worked at hotels before the pandemic, an estimated 60 percent remain unemployed, Chip Rogers, president of the American Hotel and Lodging Association, said in a statement. He said a full recovery is not expected before 2023.
Members of Congress plan to consider new coronavirus responses when they return to work from a two-week recess beginning next week, despite pleas from Democratic leaders that negotiations begin more quickly. Asked Monday how close he was to a deal with Democrats on creating the new programs, Rubio said: “I’d say we’re close on a lot of the details, but like always the ones that are left open are probably the hardest ones to confront. But conceptually the answer is yes.”