Monday, September 26, 2022
Cash FlowThe Senate's New Paycheck Protection Program for Small Businesses

The Senate’s New Paycheck Protection Program for Small Businesses


On Monday afternoon, Senate Majority Leader Mitch McConnell revealed more details of the new economic stimulus package written by the Senate. Besides several features for individuals, there is a part of the package that should interest small businesses across the nation. The Paycheck Protection Program (PPP) has been continued with some new features.

The PPP is part of the Senate’s package to provide a second-round of funds for a struggling economy. The package, as decided from the start, limited the total package to $1 trillion. This is in stark contrast to the Democrats bill passed in May which came to $3.4 trillion and contained everything on their wish list. Now that the Senate has finally created a bill, the discussions (and tempers) are going to fly as the two parties try to agree.

A Smaller Version of PPP

The new Paycheck Protection Program can be viewed as a smaller version of the original package. The original package provided funds for companies that had 500 or fewer employees. The new plan, which has designated $190 billion for the program, calls for helping companies that have fewer than 300 employees. It will also be aimed at helping those small businesses that have been deeply affected by the current economic problems.

For Hard-Hit Businesses

A definition of being financially hard-hit is also included in the PPP proposal. In order to fit into this category to qualify, a business will need to have lost as much as 50-percent of their income compared to a quarter in the previous year.

According to Marco Rubio, the Senate Small Business Chair, other businesses may also be included in this category – even those with up to 500 employees. They also would need to show a 50-percent loss and it may include seasonal businesses or businesses in low-income areas. Some businesses may be able to get a second loan from the PPP.

Money Designated for Businesses with 10-Employees or Less

Some of the money in the new plan – $25 billion of it – is going to be designated to particularly small businesses. This amount will only be available to businesses that have 10 employees or less.

Usage of the Money

As in the previous package, 60% of the money borrowed has to be used for salaries if the business wants the loan to be forgivable. A change in the new bill is that some of the money can be used to provide protection for the employees and customers. A business, such as a restaurant, can also include expenses needed toward enabling customers to eat outside.

Repayment Loan Terms

The bill also includes $60 billion to provide non-forgivable loans to small businesses. The terms for repaying the loans are generous. There is a one-percent interest rate on the loan and borrowers may be given up to 20 years to repay it.

The Total Package

The total economic stimulus package presented by the Senate, which is called the Health, Economic Assistance, Liability protection, and Schools Act, or HEALS Act, is expected to be hotly contested by the Democrats. The Senate has previously said that the bill should be looked at as a starting point for negotiation.

One very urgent deadline that the bill faces is that it contains a continuation of the moratorium on rent and mortgages, which will expire on August 1. The bill extends the deadline but it must be passed on time.

Other features include $26 billion for the development of a coronavirus vaccine and therapeutic treatments to ensure a more thorough recovery and funding for more personal protective equipment (PPE). Individuals will be getting another round of $1,200; money will be given to schools to help them open safely; and more.

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