By Victor Reklaitis, MarketWatch
The Democratic-run House on Thursday voted overwhelmingly in favor of a bipartisan bill that would give small businesses more time to use emergency loans and let borrowers spend less of their loan proceeds on payroll.
The action comes as Senate Republicans and the Trump administration also have backed extending the deadline for spending Paycheck Protection Program money beyond the current eight weeks, though they haven’t sounded supportive of relaxing a PPP rule that requires that 75% of loan proceeds go toward payroll expenses.
The House bill, called the Paycheck Protection Program Flexibility Act, makes changes to the PPP that include extending the period for using loans to 24 weeks. It also would let borrowers spend just 60%, rather than 75%, of their loan proceeds on paying workers and still be eligible for loan forgiveness.
The measure — rolled out by Democratic Rep. Dean Phillips of Minnesota, and Republican Rep. Chip Roy of Texas — was considered Thursday under a suspension of House rules, a move usually taken for non-controversial legislation but which requires a two-thirds majority for passage, instead of a simple majority. It passed in a 417-1 vote.
“Small businesses continue to have a tough road ahead, and they need flexibility in how they use this emergency capital,” said Democratic Rep. Nydia Velazquez of New York, who chairs the House Small Business Committee, in a floor speech on Thursday morning before the vote.
An earlier version of the House bill completely eliminated the 75% rule, in line with what many industry groups have lobbied for , but unions objected and the bill was changed to have a 60% rule.
“Labor was concerned that it would reduce the amount of money that would go to employees, and we also wanted to craft something that wouldn’t just pass this chamber, but also the Senate and find, perhaps, a signature in the White House,” Phillips said in explaining the change.
KBW analyst Brian Gardner said in a recent note that House lawmakers could work out a compromise with the Republican-run Senate on the PPP changes this week or next week.
Republican Sen. Marco Rubio of Florida, who chairs the Senate Committee on Small Business and Entrepreneurship, has pushed for moving the deadline for spending PPP loans to 16 weeks from eight weeks, but he and his allies last week weren’t able to pass their bill, which is called the Paycheck Protection Program Extension Act .
“I understand that Sen. Rubio and a couple others have some concerns. We’ve tried to address a few of those concerns,” said Roy, the Republican co-sponsor of the House bill. He added that his measure’s 60% rule “gets closer to a sort of sweet spot where you’re giving the flexibility needed for businesses.”
“So I just hope the Senate will take it up and pass it. In other words, we’re reaching out to try and work on that,” Roy also said.
Phillips said: “My belief is that there’s been enough to ensure that we’re at least in the ballpark to get this done, and now the ball’s in the Senate’s court.”
Rubio on Friday tweeted that the House bill is “good,” but he had concerns about some provisions that could have “unintended consequences.”
The PPP was established in late March to help small businesses and nonprofits hurt by the coronavirus crisis. It has received $670 billion in funding through March’s $2.2 trillion CARES Act and April’s $484 billion relief package.
U.S. stocks /zigman2/quotes/210599714/realtime SPX -1.08% /zigman2/quotes/210598065/realtime DJIA -1.51% are trading well below their February peaks after the coronavirus pandemic forced the shutdown of businesses and travel, but they have rallied from their March lows thanks in part to optimism around Washington’s aid efforts. The S&P 500 and Dow industrials were losing ground Friday but on track for weekly gains.
This report was first published on May 28, 2020.
Jonathan Nicholson contributed to this report.