Bipartisan group of senators asks Treasury, SBA to loosen coronavirus loan restrictions

A bipartisan group of 19 senators has asked the Trump administration to allow recipients of small-business coronavirus relief loans to spend more of the money on nonpayroll expenses without penalty.

In a letter to Treasury Secretary Steven Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza released Wednesday, the senators called for increasing the loan forgiveness cap on the SBA’s Paycheck Protection Program (PPP) as some firms struggle to stay afloat.

The PPP allows small businesses facing financial peril because of the pandemic to receive a loan to cover eight weeks of payroll and other essential expenses. The loan can be converted entirely into a grant if at least 75 percent of it is used to cover payroll and keep workers off of unemployment insurance.

The bipartisan group of senators is asking Treasury and SBA to reduce that threshold for forgiveness to 50 percent, citing the high costs of rent, mortgage and utility payments for many businesses who’ve received aid.

“If they are unable to cover these expenses, they will have to decide between keeping their doors open, at personal financial risk, or closing shop and laying off employees,” wrote the senators.

“These are businesses that will not recover. Such an outcome would result in mass layoffs that would shift more Americans onto unemployment, presenting significant long-term costs to families, businesses, and states,” they continued.

The signatories included Republican Sens. John Cornyn (Texas), John Barrasso (Wyo.), Marsha Blackburn (Tenn.), John Boozman (Ark.), Lindsey Graham (S.C.), Cory Gardner (Colo.), Roger Wicker (Miss.) and Kelly Loeffler (Ga.) and Democratic Sens. Bob Menendez (N.J.), Chris Van Hollen (Md.), Dick Durbin (Ill.), Michael Bennet (Colo.), Ron Wyden (Ore.), Kirsten Gillibrand (N.Y.), Kyrsten Sinema (Ariz.), Cory Booker (N.J.), Christopher Coons (Del.), Patrick Leahy (Vt.) and Richard Blumenthal (Conn.).

The SBA is amid the second round of funding for PPP loans after approving $349 billion during a first round that lasted less than two weeks. The SBA is expected to deplete the second pot of $310 billion in funding by the end of this week after opening applications last Monday.

While there is wide bipartisan support for PPP, lawmakers and small businesses advocates have grown increasingly concerned about the impact of the program’s quickly written requirements.

Small businesses advocates have urged the administration to give PPP recipients greater flexibility to use those loans to cover nonpayroll expenses or hold onto some of the money beyond the eight-week period targeted in the program.

Even so, Mnuchin said Monday that he doesn’t “have the flexibility” to alter the terms of the program and said businesses who need help covering overhead costs should apply for an SBA Emergency Injury Disaster Loan (EIDL), which includes a smaller grant attached to a loan.

“Really, the purpose of this was to get workers back to work. And every dollar we spend here is a dollar we save on unemployment insurance,” Mnuchin said in an interview on Fox Business Network. 

“The idea is that taxpayers would forgive the majority of the money that was going to the workers, which saves unemployment, and a reasonable amount of overhead. I think 25 percent overhead is very fair,” he continued.