Legislation would extend length of time businesses could use funds, eliminate regulation that limits only 25% of funds to non-payroll expenses
“I’m proud to work with my colleagues on a bipartisan solution to protect North Carolina jobs and our small businesses,” said Senator Tillis. “From my countless conversations with North Carolina’s small businesses, it’s clear that the Paycheck Protection Program needs reforms in order to provide more flexibility to keep small businesses open and protect the jobs of workers. I’ll continue to work across the aisle to get these commonsense, bipartisan solutions turned into law to provide more relief to small businesses and their employees.”
So far in North Carolina 106,197 loans have been approved totaling $12.7 billion. 61% of North Carolina small businesses eligible for the program have been approved for the PPP.
Specifically, the Paycheck Protection Flexibility Act legislation will:
- Allow forgiveness for expenses beyond the 8-week covered period. The 8-week timeline does not work for local businesses that are prohibited from opening their doors, or those that will only be allowed to open with restrictions. Businesses need the flexibility to spread the loan proceeds over the full course of the crisis until demand returns. Otherwise, employees will simply be furloughed at the expiration of the 8 weeks. This provision will allow the businesses to choose between using their loans in the initial 8 weeks or extending the period for up to 24 weeks.
- Eliminate restrictions limiting non-payroll expenses to 25% of loan proceeds. In order to survive, businesses must pay fixed costs. The PPP loans require that 75% of the loan go to payroll. For many businesses, payroll simply does not represent 75% of their monthly expenses and 25% does not leave enough to cover mortgage, rent, and utilities. Retaining employees is not possible if a business cannot retain their physical location
- Eliminate restrictions that limit loan terms to 2 years. According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. This is the same for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenue to pay back the loan.
- Ensure full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis. Receiving both should not be considered double-dipping. Businesses need access to both sources of cash flow to survive.
- Extend the rehiring deadline to offset the effect of enhanced Unemployment Insurance. To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020. However, the enhanced Unemployment Insurance created through the CARES Act is higher than the median wage in 44 states. Many businesses have reported an inability to rehire employees because they are making more on Unemployment than they made working. To mitigate this unintended consequence, the deadline to rehire employees under PPP should be extended to align with the expiration of enhanced Unemployment Insurance.
- Adjusts program’s standards to account for economic realities following the coronavirus pandemic. If economic conditions prevent businesses from reaching pre-coronavirus revenue levels and businesses aren’t able to rehire all employees, this legislation would make sure businesses are still able to receive loan forgiveness.
The Paycheck Protection Flexibility Act is supported by the International Franchise Association, American Hotel and Lodging Association, National Federation of Independent Business, National Restaurant Association, US Travel Association, Small Business Majority, U.S. Hispanic Chamber of Commerce, National Small Business Association, National Association for the Self-Employed, Small Business and Entrepreneurship Council, and Economic Innovation Group.