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Lawmakers compromise on PPP loan terms as talks continue

Bill sponsor says he expects House, Senate leaders to reach deal on how small businesses can use $660 billion lifeline provided in two previous laws

Rep. Chip Roy, R-Texas, one of the sponsors of the bill, said lawmakers agreed to lower how much of a loan must be used on payroll.
Rep. Chip Roy, R-Texas, one of the sponsors of the bill, said lawmakers agreed to lower how much of a loan must be used on payroll. (Bill Clark/CQ Roll Call)

A Republican lawmaker said Wednesday that negotiators agreed to adjust a key ratio in a program to relieve small businesses from the COVID-19 pandemic, lowering to 60 percent the portion of loans that must be used for payroll, from 75 percent currently, and giving borrowers more time to use any loans. 

Rep. Chip Roy, R-Texas, the sponsor of a bill that is scheduled for a House floor vote Thursday, told CQ Roll Call that he expects House and Senate leaders to reach a deal on how small businesses can use a $660 billion lifeline provided in two previous economic relief laws through the Paycheck Protection Program administered by the Small Business Administration. 

“Our belief is it’s moving forward and moving forward well,” Roy said. Roy introduced the bill with Democratic Rep. Dean Phillips of Minnesota, who put out a press release Wednesday touting the support of 45 business groups.

The bill would reduce an administration requirement that 75 percent of PPP loan funds be used for payroll. Roy said lawmakers had agreed to require that 60 percent of such loans be used for payroll, a compromise between the initial draft that would have eliminated it and Treasury Secretary Steven Mnuchin’s position last week that it should stay at 75 percent. 

The bill would give borrowers up to 24 weeks, up from eight currently, to use the funds and extend the deadline for rehiring workers to June 30. The bill would also allow businesses to repay any non-forgiven balance over five years, instead of two, which would help companies stay solvent by reducing the size of each payment.  

“There were concerns about us zeroing out the 75 percent requirement that the SBA put in place, and we agreed to a 60 percent version of it — just giving some relief but leaving some measure in places,” Roy said. “I’m hopeful that will shake some things loose, and hopefully, if we get it through here, then they can glide path it through the Senate.”

Many business groups have criticized the ratio, saying businesses that can’t afford to pay rent or meet other overhead costs would have to get rid of employees, thus undermining Congress’ goal of limiting the damage to such businesses.

But as recently as last week, Mnuchin said, “Let me just remind people it’s called the Paycheck Protection Program; it’s not called the Overhead Protection Program.”

The proposal would also allow PPP recipients to defer payroll taxes, a move Mnuchin has opposed, saying it would amount to double dipping since the program’s forgiven debts aren’t taxed.

Roy said the “four corners” — Speaker Nancy Pelosi, House Minority Leader Kevin McCarthy, Senate Majority Leader Mitch McConnell and Senate Minority Leader Charles E. Schumer — were still ongoing as of Wednesday evening. 

Congress created the PPP as part of the roughly $2 trillion coronavirus relief package passed in March. The program allows small businesses to apply for forgivable loans up to 10 weeks’ worth of payroll. To the extent the companies use that money to pay workers and some other fixed costs, like rent, they won’t have to repay the debt.

The program quickly ran out of the $349 billion that Congress originally gave it, leading to a stopgap refill of $310 billion more a few weeks later. But the program’s use has fizzled as some sectors — like retail, restaurants and tourism — have complained that the program’s rules are too rigid to save them. The amount of lending has gone down in recent weeks, from $513.3 billion as of May 16 to $511.3 billion as of May 26, after some larger companies handed back the loans.

Economists estimate that more than 100,000 small businesses have already permanently shuttered because of the pandemic, which has claimed 100,000 lives. 

While the law’s authors originally intended for businesses to use the PPP funds to pay their workers regardless of whether they had work for them, most owners decided to hold on to the money until they could reopen. But that has taken longer than expected. When Congress passed the $2 trillion relief package in late March, the stay-at-home orders were expected to last only a few weeks. But those weeks turned into more than two months as the curve stubbornly refused to flatten, prolonging how long many businesses had to go without regular revenues.

The Senate tried to hotline a similar measure last week before leaving for an extended Memorial Day break, but at least one senator objected. That bill would have lengthened the time period to use funds from eight weeks to 16. It also would have allowed businesses to spend the money on personal protective equipment and other infection-preventing investments.

Sens. Angus King, I-Maine, and Steve Daines, R-Mont., introduced a companion to the Roy-Phillips bill last week. If the House passes the Roy-Philips measure Thursday, it’s unclear which version the Senate will take up next week.

The House is also slated to vote on another PPP-related measure Thursday. That one, also from Phillips, would require the SBA to publish more data about the loans, including borrower names and amounts.

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