Cunningham and Torres Small Lead Effort to Give Businesses More Flexibility to Spend PPP Funds

Washington, D.C. – Reps. Joe Cunningham (SC-01) Xochitl Torres Small (NM-02) today led a bipartisan effort to give businesses more flexibility to spend Paycheck Protection Program (PPP) funds as they respond to the coronavirus pandemic. Congress created the PPP to address the immediate needs of small businesses and allow them to maintain their workforce as stay-at-home orders shuttered businesses. However, some of the guidelines for spending have put undue strain on these vulnerable businesses, creating additional roadblocks instead of providing relief.

Current guidelines state that the entirety of the loan must be spent within an 8-week window, and require businesses to rehire employees and return to full staffing levels by June 30, 2020. These requirements do not reflect the current state of the crisis and many businesses are finding it impossible to do so while meeting other stipulations of the loan program. If businesses cannot meet every requirement, their loan will not be forgiven, thrusting them into debt without any revenue source to pay it back.

“Businesses are acting in good faith to keep their businesses operational and their employees on payroll,” the lawmakers wrote. “While it is essential that we implement accountability measures and guidelines on how these loans must be spent, it’s important that we give businesses the flexibility to spend these funds over a longer time period given the scale of the COVID-19 public health crisis. Our small businesses are the backbone of our economy, and if we allow them to fail now, our local economies will take years to fully recover.”

Full text of the letter can be found online and below:

Dear Speaker Pelosi, Minority Leader McCarthy, Majority Leader McConnell, and Minority Leader Schumer:

As Congress continues to respond to the threat of the novel coronavirus across the country, it is essential that we institute policies that address the needs of our most vulnerable small businesses. We must reconsider the initial timelines and limitations put in place for our small business assistance programs as the extent of this crisis becomes clearer each day.

The idea behind the Paycheck Protection Loan Program (PPP) was simple. We wanted to cover the immediate needs of small businesses and allow them to maintain their workforce to pre-pandemic levels while national emergency and state stay home orders persisted. However, as applicants have started to receive their loans from the first round of PPP funding, it is clear the guidelines for spending are putting undue strain on these businesses, and in many cases creating additional roadblocks instead of providing much-needed relief.

Both Congress and the Department of Treasury established guidelines to ensure that PPP funds are used appropriately and within a reasonable timeframe. Among these guidelines is the requirement that the entirety of the loan must be spent within the 8-week window immediately following receipt of the loan. This requirement makes it impossible for businesses to responsibly pace their spending in order to keep their businesses open in the long-term, as many will not have revenue after that 8-week period if stay home orders and business closures persist. Consequently, this could mean many employees who have been brought back on payroll through the PPP loan will not be maintained. This would defeat the objective of the PPP, which is to keep people on payroll and off unemployment for the extent of this crisis.

Additionally, the requirement put on businesses to rehire employees and return to full staffing levels by June 30, 2020 does not reflect the current state of the crisis. We commend this attempt to offer flexibility as businesses slowly work to get back on their feet, while recognizing the importance of returning to full staffing levels as quickly as possible. However, it will be impossible for many businesses to continue working toward full employment by the end of June, especially under the expectation that the economy will not fully reopen until after the summer. June 30th is simply too soon to expect businesses to return to normal operations.

Businesses that have received PPP loans are trying hard to meet these requirements, but many are finding it impossible to do so while meeting the other requirements of the loan program. And if businesses cannot meet every requirement, their loan will not be forgiven, thrusting them into debt without any revenue source to pay it back. By providing employers flexibility to utilize PPP payroll funds over a longer time period, many employees will be retained through the most severe period of revenue loss and small businesses will be able to return to full time employment once demand returns.

Businesses are acting in good faith to keep their businesses operational and their employees on payroll. While it is essential that we implement accountability measures and guidelines on how these loans must be spent, it’s important that we give businesses the flexibility to spend these funds over a longer time period given the scale of the COVID-19 public health crisis. Our small businesses are the backbone of our economy, and if we allow them to fail now, our local economies will take years to fully recover.

Sincerely,