A new bill introduced this week would allow eligible small businesses to apply for a second Paycheck Protection Program (PPP) loan. The legislation, part of a broader relief package backed by Senate Republicans known as the Health, Economic Assistance, Liability Protection, and Schools Act (HEALS Act), would offer a second forgivable loan to businesses that can show at least a 50% reduction in gross revenues during the pandemic.
Introduced by U.S. Sens. Marco Rubio (R-FL) and Susan Collins (R-ME), the Continuing Small Business Recovery and Paycheck Protection Program Act looks to reform portions of the original PPP Act that small businesses criticized—including the types of expenses eligible for forgiveness—while also providing additional financial assistance to small businesses still struggling to stay afloat, both with short-term PPP loans and a new long-term recovery loan program.
“The PPP and the other small business provisions under the CARES Act have been an historic lifeline to millions of small businesses and tens of millions of American workers,” Rubio said in a press release. “Now, Congress must take action to help industries and businesses, especially minority-owned small businesses and those in low-income communities, that have been hit hard by the COVID-19 pandemic.”
The bill includes four areas of focus:
This would provide $190 billion in funding for PPP loans and PPP second draw loans, the latter expressly for those businesses that meet the U.S. Small Business Administration revenue size standard, have no more than 300 employees and can show at least a 50% reduction in gross revenues. The legislation also restricts businesses from receiving a second loan if it would boost their combined PPP loan amount above $10 million.
This would include expanding forgivable expenses to include:
Other changes to the original PPP law includes letting borrowers select their preferred eight-week period to use their PPP funds and simplifying the forgiveness application process for loans of $150,000 or less.
This part of the legislation sets aside $10 billion to registered SBA Small Business Investment Companies (SBICs)—privately-owned companies that offer small business financing—that invest in small businesses in low-income communities, domestic supply chain manufacturers and businesses with significant COVID-19-related revenue losses.
This would allocate $100 billion in long-term, low-cost loans to eligible “recovery sectors” of the economy, which are defined to include rural, low-income and eligible seasonal businesses. Allowable loan uses include working capital, acquisition of fixed assets and refinancing existing debt. Loans would be for up to 20 years at 1% interest.
Supporters of the bill say it’s the missing piece that the smallest and most disadvantaged businesses were lacking in the original Coronavirus Aid, Relief, And Economic Security (CARES) Act.
“The separate low-interest, long-term ‘recovery’ loan program established in the package could very well be the true Main Street lending program that the Federal Reserve seems to have missed,” Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, said in a press release. “This program will help a diverse range of small businesses in low-income areas by offering favorable terms, and allow for a broad usage of loan funds, including working capital and refinancing of existing debt.”
The smallest businesses have been hit particularly hard by the pandemic compared to their larger peers. According to a May 2020 report by the Small Business Association’s Office of Advocacy, employers who had 20 to 49 employees suffered the largest percentage of job losses, with employment declining 21.5%. By comparison, businesses with 1,000 or more employees saw a decline of 13.3%.
Some say although the Continuing Small Business Recovery and Paycheck Protection Program Act is a step in the right direction, it still doesn’t do enough to help those who need it the most, particularly minority-owned businesses as well as those with relatively limited financial resources who are disproportionately affected by the pandemic. A June 2020 study by management consulting firm McKinsey & Co. found that minority-owned businesses and business owners with only a high school degree or less were among the most vulnerable sectors.
"While the Rubio-Collins bill begins to take a longer view of the economic impacts small businesses are struggling with, their PPP expansion and new program are not the right vehicle for getting support to underbanked small businesses,” Amanda Ballantyne, executive director at The Main Street Alliance, a small business advocacy group, wrote in an email to Forbes Advisor. “A bigger expansion of the Employee Retention Tax Credit (ERTC), and easing ERTC access is a better, more equitable route to achieve the dual goals of maintaining employment and sustaining small businesses.”