Small Business Majority Applauds House Passage of Legislation to Reform PPP

For Immediate Release: 
Thursday, May 28, 2020

Washington, DC – Today, John Arensmeyer, Founder and CEO of Small Business Majority, released the following statement after the House of Representatives passed the Paycheck Protection Program (PPP) Flexibility Act (H.R. 7010), which would make critical changes to PPP to better serve struggling small business owners in the wake of the COVID-19 pandemic. 

“When PPP launched nearly two months ago, it was not designed to be able to withstand the size and scale of this economic crisis. At the time, we feared that the program’s terms, specifically the eight-week spending period and threshold that 75% of the funds must be spent on payroll, were too inflexible and millions of small businesses would face challenges meeting these requirements. 

Now, we are seeing this play out in real terms. Many small businesses are either still closed or in the very early stages of reopening, and to date, they have yet to be able to use or maximize their loan funds. For those who have, they worry that they are making rushed decisions that will eventually disqualify them from loan forgiveness. In fact, 80% of small business owners in our network worry the program’s rules are too restrictive and their loan will not be forgiven. 

Small businesses will be working towards recovery for months and years to come, and they need more time to make thoughtful decisions about how best to utilize PPP funds. While we remain concerned that PPP will not be enough to sustain a lasting recovery, we are pleased to see that there are bipartisan efforts to reform the program advancing in Congress. We commend Representatives Chip Roy (R-TX-21) and Dean Phillips (D-MN-3) for recognizing the program’s shortcomings and authoring legislation to help struggling business owners. 

Importantly, the Paycheck Protection Program Flexibility Act reduces the 75%/25% rule, where currently only a slim portion of the loan can be used on nonpayroll business expenses like rent, mortgage and utility payments. Lowering this threshold to 60%/40% is a step in the right direction, though this will still be too restrictive for business owners with high overhead costs. Additionally, the bill extends the length of time small business owners have to spend PPP from eight to 24 weeks, therefore easing the pressure on business owners to reopen and restructure their businesses before they are ready. 

However, we are disappointed that House Republicans blocked another PPP fix bill today, the Transparency and Reporting for the Underbanked and Taxpayers at Home (TRUTH) Act (H.R. 6782), which included PPP reporting requirements on how and where the money is being disbursed. After a troubled launch and reports that business owners of color may not be receiving PPP at the same rates as others, collecting this data is critical to recovery.

We encourage the Senate to act swiftly to pass the Paycheck Protection Flexibility Act while also incorporating vital reporting mechanisms on how PPP funds are being allocated. Time is of the essence: There are just a few weeks left before millions of business owners will need to start applying for forgiveness, and without these smart reforms in place business owners will be left with no choice but to spend PPP without maximizing it for recovery as Congress intended. Our economy cannot withstand any additional delays or confusion.”

About Small Business Majority

Small Business Majority was founded and is run by small business owners to ensure America’s entrepreneurs are a key part of a thriving and inclusive economy. We actively engage our network of more than 65,000 small business owners in support of public policy solutions and deliver information and resources to entrepreneurs that promote small business growth. Our extensive scientific polling, focus groups and economic research help us educate and inform policymakers, the media and other stakeholders about key issues impacting small businesses and freelancers. Learn more about us on our website and follow us on TwitterFacebook and Instagram.