President Signs Reed-backed PPP Loan Flexibility Act into Law
Reed-backed law provides thousands of Rhode Island small businesses with needed certainty & flexibility, but Senator says too many struggling Americans are being left behind
WASHINGTON, DC – Thousands of Rhode Island small businesses are getting some much needed certainty, clarity, and flexibility thanks to a new law that was cosponsored by U.S. Senator Jack Reed (D-RI) and signed into law today.
The Paycheck Protection Program Flexibility Act, which Reed helped pass, extends the Paycheck Protection Program (PPP) loan forgiveness period from 8 weeks to 24 weeks, and allows businesses and non-profits to spend more money on other business expenses, such as utilities and rent by altering the threshold that must be directed to employee wages from 75 percent to 60 percent.
Reed, a proponent of PPP reform, who was one of nine Senate cosponsors of the Paycheck Protection Program Flexibility Act, says the new law will help thousands of Rhode Island small businesses who have been approved for $1.8 billion across two rounds of PPP loan approvals.
But Reed says stronger Congressional oversight, better implementation by the Trump Administration, and increased transparency are still required to ensure the law works. And Reed is calling for additional support to help workers, businesses, and communities recover, including more federal support for unemployment insurance, housing, and health assistance because the economy is still hurting and not close to fully healed, and won’t be until the nation effectively combats and contains COVID-19.
“This is a small, positive step for thousands of struggling small businesses across the state, especially our restaurants and hospitality industry. I helped pass this law to provide small businesses with increased certainty, clarity, and flexibility to cover necessary costs like rent. But too many on Main Street are being left behind by this Administration. I will continue pressing the Trump Administration to get this program working properly and get our economy working again. There has to be meaningful accountability and oversight of PPP and sustained, bipartisan commitment to broad-based economic recovery. There should be a public audit of PPP so the American people can see where their money is going and who it is going to. And even as some businesses begin to open and some people begin to go back work, Main Street is facing lower profits, workers are facing lower wages, state and local governments are facing increased costs and lower revenue, and the Trump Administration and Congressional Republicans are turning a blind eye to people’s suffering,” said Senator Reed.
The U.S. Senate unanimously approved the Paycheck Protection Program Flexibility Act late Wednesday after Senator Mike Lee (R-UT) dropped his hold on the bill. The measure had previously passed the House on a vote of 417-1. Without passage of this law, the old eight-week period to spend the loan money would have lapsed within days for some businesses. This compressed time period limited the U.S. Senate’s ability to consider more comprehensive fixes.
Congress created the Paycheck Protection Program in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law No. 116-136) and appropriated an initial $349 billion for the program, which was intended to be a lifeline for small businesses and workers. PPP offers forgivable small business loans to cover two months-worth of payroll and overhead costs. But PPP has been plagued by problems, mismanagement, and lack of sound guidance from the Trump Administration. After the first round of PPP funding lapsed, Senator Reed sought important legislative fixes and updates to the program. Unfortunately, Congressional Republicans blocked any legislative fixes from being included in the second round of PPP funding, which increased the overall allocation to $659 billion.
And instead of addressing known problems with the bill during the May legislative session, Senate Republican leaders failed to bring PPP improvements up for a vote before the Memorial Day recess.
“The Trump Administration’s mismanagement of PPP has created significant confusion and hindered economic recovery. And instead of passing legislative fixes and focusing on COVID-19 relief, Congressional Republicans have prioritized a partisan agenda that focuses more on confirming out of the mainstream judicial nominees over helping working families. Meanwhile, the economic hole is getting deeper for Main Street businesses, employees, and out of work Americans. Congressional Republicans should set partisanship aside and join us to help get the economy working,” said Reed.
President Trump signed the bill into law today at a White House ceremony.
SUMMARY: The Paycheck Protection Program Flexibility Act
- Extends the PPP loan forgiveness period from 8 weeks to 24 weeks.
- Allows PPP loan recipients to spend 60%, rather than 75%, of their loan proceeds on paying workers and still be eligible for loan forgiveness.
- Increases the loan repayment period from two to five years.
- Allows payroll tax deferral for PPP recipients.
- Extends the June 30 rehiring deadline.