Last Saturday, President Donald Trump signed a bill that reopened the application window for the Paycheck Protection Program (PPP). It was just a few hours until it was scheduled to close when the U.S. House of Representatives and the Senate approved the legislation by unanimous consent. Through it, the PPP would last until 8 August 2020.
The five-week extension was needed to be a source of funding for the many struggling small businesses while Congress works on a more targeted funding program. The PPP was launched in April and was created to help alleviate the toll that the COVID-19 pandemic was able to inflict on the U.S. economy. Many businesses were forced to close down, but with the PPP, they would be able to provide forgivable loans to qualified small businesses and other entities. It can be used to cover payroll and select costs.
Understanding the Paycheck Protection Program (PPP)
The lending program was created as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. Through the PPP, each small business or borrower will be funded forgivable loans of up to $10 million. They can use it for payroll, rent, utilities, mortgage interest, and more.
Small businesses in operation on February 15 with 500 or fewer employees will be able to avail of these loans. This also includes veterans’ organizations, not-for-profits, self-employed individuals, tribal concerns, independent contractors, and sole proprietorships. Aside from them, businesses in certain industries that have more than 500 employees can also apply.
Why is it so important to extend it?
This program was designed to give support to those who faced economic hardship amidst the pandemic. The PPP loan recipients would have the benefits of having their loans forgiven in full if the funds were used for qualified or eligible expenses. Also, the amount of loan forgiveness can be reduced, depending on the following:
- percentage of eligible costs in relation to non-payroll costs
- a decrease in employee headcount
- reduction of salaries or wages per employee
Updates on the Paycheck Protection Program
According to the U.S. Small Business Administration (SBA), the program has not yet officially reopened. The SBA alongside the Treasury Department are the ones who oversee the PPP. They had stopped accepting loan applications on 30 June 2020. The number of loans that the SBA has approved as of 30 June 2020 at 5:00 p.m. E.T. is nearly 4.9 million loans for a total of more than $520 billion.
Most senators have also expressed their support as to the extension. According to Senator Chris Coons, the extension of the PPP was crucial and that it would pave the way for the next step, which would be to pass the second round of PPP loans to help the smallest businesses in need.
This was the same with Senator Marco Rubio, the chair of the Senate Small Business Committee. He also agreed with the extension of the deadline. But, he also noted that although it is a great decision, most small businesses that wanted the PPP funds have already used the program. He then stated the following:
“What we really need to pass very soon is targeted help for those who need a second round of aid.”
Suffice it to say that the PPP has been doing its part when it comes to aiding small businesses that require its help. Hopefully, with the five-week extension, more businesses will be able to get the financial support they need amidst this economic crisis.