By: Andy Medici
6/18/2020
Some small businesses may be able to get a second Paycheck Protection Program loan if legislation introduced Thursday in Congress becomes law.
The Prioritized Paycheck Protection Program, or P4, Act would allow some small businesses that have already exhausted their PPP loans, or are on track to do so, to apply for a second one. The measure was introduced in the Senate by Sen. Ben Cardin, D-Md., ranking member of the Committee on Small Business & Entrepreneurship, as well as Chris Coons, D-Del., and Jeanne Shaheen, D-N.H., and in the House by Reps. Angie Craig, D-Minn., and Antonio Delgado, D-N.Y.
The program would be open specifically to small businesses with fewer than 100 employees, including self-employed and sole practitioners, and whose revenue dropped at least 50% because of the ongoing Covid-19 pandemic.
Publicly traded companies are explicitly barred from tapping into any additional loan funds. The PPP’s original inclusion of public companies in the program earlier this year caused a backlash after several well-known national brands received PPP loans, including Ruth’s Chris Steak House (NASDAQ: RUTH), Shake Shack (NYSE: SHAK) and the Los Angeles Lakers. (All three gave their money back.)
Treasury Secretary Steven Mnuchin had said companies would be exposed to criminal and civil liabilities for taking PPP money if they didn’t need it. Later, SBA guidance dialed back that rhetoric, though SBA did indicate it would audit all loans topping $2 million. Legal experts expect those audits and investigations for PPP loans could take years.
Under this new legislation, restaurants and other franchise-operated businesses can apply for additional funds as long as individual locations don’t exceed the employee cap and the second loan doesn’t exceed $2 million. Some nonprofits are eligible, specifically the same 501(c)3 organizations that were eligible under the original PPP.
The new legislation would also:
- Extend the application deadline for the original PPP loans through the end of the year or longer, at the SBA’s discretion. The new, additional PPP loans would have an Oct. 1 application deadline, though the agency could choose to extend that. Businesses could apply for forgiveness as soon as eight weeks after disbursement of the loan.
- Require the SBA to reserve either $25 billion or 20% of the remaining PPP funding, whichever is less, to small businesses with 10 or fewer employees, for either an initial or a second PPP loan.
- Prioritize processing and disbursement of loans to underserved and rural businesses. Advocates have said that many minority-owned businesses were unable to get PPP loans.
It is unclear how likely passage is for this legislation. Congress has shown a willingness to alter key components of the original PPP, having advanced the Paycheck Protection Program Flexibility Act earlier this month. But the HEROES Act, which the House passed in May, has not been taken up by the Senate. The funding for this P4 legislation would come from the existing pool of money that has yet to be expended by the SBA — about $130 billion remains out of the $649 billion earmarked for loans under the program.
“Many small businesses will continue to struggle in the weeks and months to come,” Cardin said in a statement while announcing the legislation. “Congress must once again act urgently to support our most vulnerable small businesses through this crisis, so our economy can recover as quickly as possible after the pandemic. Every business we prevent from failing now, is a business that will be in a position to create jobs during the recovery.”