As small-business coronavirus funds dwindle, here’s the latest bipartisan plan to save entrepreneurs
Published: May 7, 2020 at 1:10 p.m. ET
By Chris Matthews
Democratic Sen. Michael Bennet collaborates with Republican Todd Young on the RESTART program
Sen. Michael Bennet Getty Images
The $670 billion Paycheck Protection Program has been a lifeline for many U.S. small businesses impacted by the coronavirus pandemic, but with lockdowns in many parts of the country lasting longer than anticipated and the fund quickly running out of money, demands for further assistance are growing louder.
These calls are happening against a backdrop of an increasingly partisan debate over easing restrictions aimed at stopping the spread of COVID-19, and whether further spending is needed to help American businesses and workers through the crisis.
There is still at least one cross-party effort brewing on the topic of aid to small businesses, with Democratic Sen. Michael Bennet of Colorado and Republican Sen. Todd Young of Indiana releasing a proposal this week to amend PPP. It would set up an additional lending fund that would create an open-ended commitment to provide longer-term, partially forgivable loans to businesses severely impacted by the virus.
“We can’t throw up our hands and allow wide ranging bankruptcies of main street businesses just because the design of PPP wasn’t perfect,” Bennet told MarketWatch in an interview. “It’s a miracle in the Senate nowadays if a post office gets named in a bipartisan way. But if we listen to our constituencies we’ll hear almost of all of them say we need to make some changes to the small business program.”
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The Bennet-Young bill would amend PPP to extend the time period during which borrowers can deploy these loans from 8 weeks to 16 weeks, to account for the fact that many businesses owners don’t deem it safe to reopen their businesses, or cannot because of local restrictions. It would also create a new fund called RESTART that would allow businesses that have suffered a greater than 25% decline in revenues in 2020 to borrow money over a seven-year period, versus two years for PPP.
These loans would allow companies to borrow half of what they spent in 2019 on payroll, benefits, rent, utilities, mortgage payments and other debt service. PPP loans, by contrast, allow companies to borrow only two months of payroll costs, plus an additional 50% of that amount to pay for other expenses.
Now read: Mnuchin rejects calls to have less Paycheck Protection Program money go to employees, but Pelosi sounds open to changing 75% rule.
The loans would be less generous, however, in the type of companies that can apply, as the only eligible companies would be those that have seen a 25% or more decline in revenue in 2020, with loan forgiveness applied in proportion to the total size of a company’s revenue hit.
“The benefit of this is that it will give us a greater focus on the people who need the help more,” Bennet said.
RESTART would also not be limited to small businesses, typically defined by the government as firms with fewer than 500 people. Instead it would be available to firms with up to 5,000 employees, though loan size would be capped at 45% of revenue up to $10 million and larger firms would be eligible for less principal forgiveness.
By giving companies money to cover a greater variety of expenses, while allowing them to pay back the loans over a longer period of time, Bennet and Young hope to provide a more flexible form of financing that recognizes the reality that in many parts of the country, businesses will not be able to be back at full strength until many months from how.
“For people who are asking how we transition from the moment of the economic crisis that we’re in right now, to a more normal period, this gives businesses more runway to do that,” Bennet said. “That runway might make the difference between hundreds of thousands going out of businesses and a bunch being able to make it through to the other side.”