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Proposed PPP Revival Zeroes In On Small, Struggling Businesses

  • Paycheck Protection Program in proposed $908 billion economic stimulus bill would focus on smaller companies that have suffered significant revenue losses during the COVID-19 pandemic
  • Legislation includes funding earmarked for theaters and live entertainment venues, but not restaurants
  • First round of PPP often credited with providing crucial support to businesses, but has been criticized for fraud, favoring larger companies, and other shortcomings

A second round of Paycheck Protection Program funds would be geared toward smaller companies if a $908 billion compromise on economic stimulus passes Congress. The legislation would also provide assistance to the hard-hit theater industry as well as funding for community lenders.

A summary of the package, released Monday, says it includes $300 billion for the Small Business Administration to relaunch PPP, with the added note “inclusion of 501c6, restaurants, live venues, and EIDL grants.” The summary also promises a simplified forgiveness process for loans under $150,000.

PPP, along with several other measures, are being grouped together in a single $738 billion act. Two more controversial measures, $160 billion in state and local aid along with a liability shield protecting businesses and other entities from lawsuits related to COVID-19, are split off in a separate bill in an attempt to increase the chances of success for the more popular relief options.

While the bill is still being crafted, the proposed renewal of the PPP would create a narrower range of eligible recipients, restricting the funds to companies with 300 or fewer employees that can demonstrate an annual revenue loss of at least 30 percent in any quarter of 2020. This would differ substantially from the original PPP, which disbursed more than $520 billion in forgivable loans to over 5 million companies; in that program, companies with up to 500 employees were generally eligible for funding if they simply attested that they were encountering economic uncertainty.

Despite disagreements over certain stimulus proposals, there has been broader bipartisan support for a new round of PPP loans. Relief for small businesses is regarded as a more crucial priority, as many companies have exhausted their additional loans and continue to face diminished revenues due to ongoing or renewed restrictions implemented in response to the COVID-19 pandemic.

The current proposal includes $15 billion targeted at movie theaters and live entertainment venues. It does not incorporate a proposal to assist independent restaurants and bars with $120 billion in funding, although the National Restaurant Association has said the bill does offer “short-term stopgaps” that can assist restaurants.

The legislation also sets aside some dedicated funding for companies with 10 or fewer employees, as well as money for small community lenders. These lenders are thought to be better sources of support for minority-owned businesses.

The anticipated changes in PPP would also include relaxed requirements on how the funds can be spent, allowing it to be invested in areas such as HVAC improvements and personal protective equipment; allowing both first-time applicants and companies that have previously received a PPP loan to be eligible for the funds; and tax deductibility of the loans, although it is unclear if this would be retroactive to the first round of borrowers.

Many of the proposals would address criticisms that have been raised about how PPP was managed. When the SBA released data on the program recently, analyses found that large companies snapped up a large share of the available funds, with more than half of the disbursed loans going to just 5 percent of borrowers and over one-quarter going to 1 percent. Critics have also charged that the program was vulnerable to fraud and misconduct and not structured in a way to reach minority business owners.

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