Now that businesses have received the funds from lenders, many are questioning how to use the money in a way that satisfies forgiveness rules. There are also lingering concerns about whether the loans reached businesses that really needed them, after it was revealed that several large, publicly traded companies including Shake Shack and Ruth’s Hospitality Group were among the first to secure the money. Many of the companies decided to return the loans amid a public backlash and pressure from Washington.
There is bipartisan support for funding the program, which has seen massive demand since its April 3 launch. The effort exhausted an initial $350 billion of funding on April 16. Congress then approved another $320 billion, which allowed the SBA to resume approving applications on April 27.
Senate Small Business Chairman Marco Rubio (R-Fla.), a key player in the legislation, said Monday that there might be a need for additional funding. Yet Senate Minority Leader Mitch McConnell has recently raised concerns about deficit spending. The last funding bill was a two-week slog for congressional leaders to negotiate.
“The key is to figure out who’s not getting the loan,” Rubio said in a video posted on Twitter. “The answer to that question will determine what the scope for a Round 3 would look like.”
But beyond the funding question, it’s looking increasingly likely that lawmakers will try to revamp the program for businesses that have already received loans and for those that try to seek the aid in the future.
Among the ideas under consideration is a proposal from Bennet and Sen. Todd Young (R-Ind.) that would give businesses twice the amount of time to spend the loan money — 16 weeks instead of eight — if they can show they suffered a 25 percent revenue loss during the period they’re supposed to spend Paycheck Protection Program funds.
They’re also proposing a whole new program that would expand the availability of government-backed loans to mid-size firms with up to 5,000 employees — up from 500 under current rules — while making the terms more flexible and linking the level of loan forgiveness to revenue declines.
“The Paycheck Protection Program is working for many small businesses, but we know more needs to be done,” Young said. His bill with Bennet would “go a step further by helping to provide longer-term loans to businesses and non-profits that are experiencing economic hardship due to the coronavirus pandemic.”
But the most urgent problem for all businesses contemplating how to have their loans forgiven is the lack of detailed guidelines from the SBA and the Treasury Department on what to do next. The administration has yet to release comprehensive steps on how businesses should complete the process in the coming weeks.
It’s a huge concern because the forgiveness aspect of the loans — a measure that turns them into grants in practice — was one of the key selling points in convincing businesses to take on the debt in exchange for keeping workers on their payroll.
Lenders that were responsible for distributing the wave of loans are also desperate for more information on how forgiveness will work because they will once again serve as the go-between for businesses and the SBA.
“The forgiveness process is sure to be even more burdensome,” Consumer Bankers Association general counsel David Pommerehn said. “There’s no process that exists at this point that would make that easier. There’s no automation process. There’s no guidance out there.”
Lawmakers from both parties are demanding that the SBA and Treasury issue guidance as soon as possible. In a letter Friday to SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin, Sens. Doug Jones (D-Ala.) and Tim Scott (R-S.C.) said the terms for forgiveness “were and continue to be ambiguous.”
“No concrete information has been given to either lenders or small business owners about how they should go about getting their loans forgiven,” they said. “Conflicting information at a time of uncertainty can be harmful to the significant and successful goal of the Paycheck Protection Program.”
But even the minimal guidelines released by the SBA and Treasury have made many businesses uneasy.
Though the intent of the program was to make sure workers were paid and attached to their jobs — hence “Paycheck Protection” — some business owners say they need more flexibility in how they can spend the money.
Several business groups are urging Congress and the Trump administration to ease the loan forgiveness requirements. They include the National Federation of Independent Business, the National Restaurant Association, the Independent Restaurant Coalition and the American Institute of CPAs.