Another Failed Attempt At Providing PPP Loans To Americans

As of September 10, 2020, the below described bill has failed in the Senate. To learn about what that bill contained, and what I hope future bills will contain, continue reading.

On September 8th, Senate Majority Leader Mitch McConnell (R-KY) released an amendment (S.Amdt.2652) to Senate Bill 178 (the “UIGHUR Act of 2019”) which was passed by the House of Representatives last December with the stated purpose of “direct[ing] United States resources to address human rights violations and abuses, including gross violations of human rights, by the People’s Republic of China’s mass surveillance and internment of over 1,000,000 Uighurs and other predominantly Turkic Muslim ethnic minorities in China’s Xinjiang Uighur Autonomous Region.”

The proposed amendment would have provided for a complete substitution of all provisions of this totally unrelated bill, replacing it with the “Delivering Immediate Relief to America’s Families, Schools and Small Businesses Act.”

Coined as the GOP’s “skinny” COVID-19 relief bill, this targeted relief package came with a price tag of approximately $300 billion, a much smaller amount than the proposed $1 trillion HEALS Act which contains the widely-discussed bill by Senators Marco Rubio (R-FL) and Susan Collins (R-ME) from July. To read more about this bill, click HERE.

For many borrowers that are still struggling to keep the doors to their business open, this proposed Act would have been a great sigh of relief for many, as it would have provided new “second-draw” PPP loans for past borrowers who met the following requirements:

1. The borrower must have had at least a 35% reduction in gross receipts during the first quarter (January 1 to March 31) or second quarter (April 1 through June 30) of 2020, as compared to gross receipts for the same time period in 2019.  The Act would have also accommodated borrowers who were not in business during the first and second quarter of 2019 by establishing alternative tests for ascertaining eligibility, which are discussed in greater detail below.
2. The borrower would have been required to employ not more than 300 employees, or meet an alternative size standard under SBA published guidelines.
3. The new loan would not have exceeded $2,000,000 in most cases, and would have been restricted from exceeding $10,000,000 in the aggregate with other SBA loans approved in the last 90 days (including PPP loans).

For purposes of the above 35% reduction in gross receipts test, borrowers who were not in business during the first or second quarter of 2019, but were in business during the third and fourth quarter of 2019 (July 1 to December 31), would have compared their gross receipts in the first or second quarter of 2020 to their gross receipts in the third or fourth quarter of 2019. 

If the borrower was only in business during the fourth quarter of 2019 (October 1 to December 31), then such borrower would have compared their gross receipts in the first or second quarter of 2020 to their gross receipts during the fourth quarter of 2019. 

If the borrower was not in business during 2019, but was in operation on February 15th, 2020, the borrower would have compared their gross receipts in the second quarter of 2020 to their gross receipts in the first quarter of 2020.

The bill would have also established new loan restrictions on any entities that “did not exist” between February 15, 2019 and 2020. This restriction would have capped the maximum possible loan to these entities at the lesser of $2,000,000 or 2.5 times the monthly payroll payments paid or incurred for the covered periods, though most businesses would have likely fell below the $2,000,000 threshold.

Further restrictions were proposed that would have capped the maximum available loan amount for “seasonal employers” to $1,000,000. A seasonal employer, as defined in the bill, is an employer that does not operate for more than 7 months per year, has gross receipts for one 6-month period that are not more than 33.33% of the gross receipts for the other 6-month period, and that employs 250 or less employees for at least 5 months per year.

Unlike the initial round of PPP loans where borrowers were eligible to receive a maximum of $10,000,000, the proposed second draw loans would have been capped at $2,000,000 per borrower. Additionally, to the dismay of recent borrowers, the proposed Act would have also required that the combined loan amount could not exceed $10,000,000 if another PPP loan was taken within the last 90 days. By waiting for the 90-day period to pass before taking a second loan, borrowers could have avoided this limitation.

This bill would have also provided for the disqualification from loan eligibility for certain entities affiliated with the People’s Republic of China. Such disqualified entities, as defined in the bill, are any entities created in or organized under the laws of China or Hong Kong, or that have significant operations in China or Hong Kong, or those that retain a resident of the People’s Republic of China on the entity’s board of directors.

Many of the key provisions of the Rubio-Collins bill made it into this bill as well, such as the flexible covered period and the expansion of eligibility to cover 501(c)(6) organizations, just to name a few. 

While this bill shared many similarities with the proposed HEALS Act, one notable place where it differed was in allowing eligible entities to use their PPP loans to refinance pre-existing EIDL loans. For a better understanding of EIDL loans, click HERE.

Based on recent attempts at passing meaningful legislation, many predicted that this bill was destined to be filibustered, stalled, or voted down, meeting the same fate as the Rubio-Collins bill. During this time of constant instability and concern in peoples’ lives, it is unfortunate that a measure which would have provided at least some sort of help failed for a second time.

On top of the funding for PPP loans, among many other provisions, this bill would have also extended the federally-funded unemployment benefits, though cutting the amount to $300/week from the initial $600/week. This extension would have ensured these benefits to Americans who initially qualified under the terms set out in the CARES Act through December 27th.

September 11 rings a bell in the United States as a day when there was mass destruction. Mass destruction is going on for many small businesses right now, and a chance to rectify some of this was lost yesterday. Let’s all hope that the third time’s the charm, and that these provisions, and more, will have an easy time moving through Congress so millions of Americans can receive some much-needed relief. Until then, we will be patiently awaiting the ones that got away.