Senate passes small business loan revamp, overcoming resistance

The Senate on Wednesday passed legislation to ease restrictions on emergency small business loans intended to avert mass layoffs during the pandemic, sending the first major overhaul of the program to President Donald Trump for his signature.

The bill, passed by unanimous consent, would relax rules under the $670 billion Paycheck Protection Program to give borrowers more time to spend the money and use it on a broader set of expenses while still qualifying to have the loans forgiven — a key feature offered in exchange for employers maintaining payrolls. The House last week passed the bill in a 417-1 vote.

The House and Senate votes were a rare show of bipartisanship in support of a program that the Trump administration says has saved 50 million jobs.

But passing the bill in the Senate proved to be a challenge for Majority Leader Mitch McConnell and Minority Leader Chuck Schumer. Republicans including Sen. Ron Johnson (R-Wis.) resisted at first, with Johnson on Wednesday blocking an initial attempt by Schumer to pass the bill unanimously and demanding assurances about the legislation's intent. He dropped his objections later in the day, allowing the Senate to quickly pass the bill and send it to Trump.

"We can't wait any longer," Schumer said on the floor. "Businesses are really suffering for lack of these changes."

The legislative slowdown was the latest cloud of uncertainty over the popular Paycheck Protection Program, which has approved more than $510 billion in loans despite a rocky rollout. But passage of the legislation will likely help ease fears among businesses worried they will be stuck with the debt because requirements to have the loans forgiven are too burdensome.

The concerns addressed in the House bill are urgent for many businesses that are facing a closing window in which they can use the loans and still qualify for forgiveness. The House legislation would give borrowers 24 weeks instead of eight weeks to use the funds, in a recognition that the Covid-19 pandemic has kept businesses sidelined longer than lawmakers expected.

The bill would also give businesses greater flexibility in where they use the money by lowering the amount they must spend on payroll to qualify for full loan forgiveness — to 60 percent instead of 75 percent.

A National Federation of Independent Business survey released this week found that the eight-week window is ending for 7 percent of small businesses between now and Monday. Another 23 percent say the period ends for them between Monday and June 14. Just over one-third will have to finish spending the money in the second half of June.

More than $120 billion remains available for loans under the program, and some lenders believe demand could be rekindled if the forgiveness rules are further relaxed.

But the pleas for flexibility ran into complaints from some Republicans that the House bill would keep the program alive for too long and that the aid has gone to businesses that didn't need it.

Johnson stood in the way of the bill after publishing a Wall Street Journal op-ed in which he said "a significant number of businesses that weren’t in danger of going under also received these grants."

"Congress also should enact reforms that will prevent future funds from flowing to organizations that don’t need them," he wrote. "This crisis is far from over, and pressure will build to authorize even more spending. Our ability to expand federal debt is not unlimited. Any funding must be carefully distributed."

Johnson voiced concern on the Senate floor Wednesday that the legislation would reauthorize the program through the end of the year without further reforms. He asked that committee chairs sign a letter saying that wasn't the intent. Lawmakers disagree on that interpretation of the bill, a point Johnson acknowledged, with some reading its date changes as just allowing program funds to be spent until the end of December. Sen. Mike Lee (R-Utah) raised similar objections to Johnson's.

A senior House Democratic aide said House Small Business Committee Republicans signed off on the language the House passed and that "this is more about internal Senate R politics."

Other Republicans raised concerns with the drafting of the House bill but didn't try to block Senate passage. Senate Small Business Chair Marco Rubio (R-Fla.) and Sen. Susan Collins (R-Maine) say there is a serious drafting error in the House legislation that would deprive businesses of having any portion of their loan forgiven if they don't hit the 60 percent payroll requirement.

"Current law allows proportional forgiveness of the loan," Collins said. "If a small employer cannot hire back all of his or her employees or find new ones, then the employer receives partial forgiveness for the amount used to retain or recall or otherwise pay the employees that were available. Under the House bill, however, there is a cliff: If the small business does not pay out the full 60 percent of the loan to its employees, then the small employer receives no credit at all for paying the employees that he or she was able to pay even if 59 percent of the loan went to paying workers."

The Small Business Administration and the Treasury Department, which run the program, have not said how they will implement the changes in the bill.

McConnell on the Senate floor Wednesday evening acknowledged the concerns of Rubio and Collins.

"I know they have identified further technical fixes in addition to the issues we're addressing today," he said. "I hope and anticipate the full Congress will look at addressing those as well in the future."

The National Restaurant Association, representing one of the industries hardest hit by required social distancing measures, applauded Senate passage of the bill after weeks of lobbying Congress to relax the program's rules.

"In an era where political discord is the norm and agreement is fleeting, the voice of the restaurant industry has been a unifying theme," said association executive vice president Sean Kennedy. "This bill passed because Congress heard from us loudly and clearly."

Separately, Rubio and Sen. Ben Cardin (D-Md.) on Wednesday sent a letter to Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza urging them to disclose more information on loans issued under the Paycheck Protection Program, including the names of borrowers.

The SBA has yet to disclose the individual recipients of the loans, and it has yet to provide loan data sought by senators weeks ago.

At a Senate Small Business hearing Wednesday, Cardin said committee members "have heard promises that information would be made available yet we are still not getting the granular information that's necessary for us to properly evaluate this program."

“Given the grave nature of this crisis and the unprecedented level of funding that has been appropriated, it is critical that the public and Congress have timely and complete information about where these funds are going, and the committee expects an increased level of transparency and accountability from the SBA," Rubio and Cardin said in their letter.