By Andrew Kragie

Law360 (April 21, 2020, 6:50 PM EDT) -- The nation's political leaders on Tuesday broke a two-week stalemate and reached a nearly half-trillion-dollar deal for an "interim" pandemic relief package that includes another $310 billion in forgivable loans to small businesses, $75 billion for health care and $25 billion to boost testing capacity.

The bulk of the U.S. Senate-approved package goes to replenish the Small Business Administration's Paycheck Protection Program, or PPP, which offers government-backed private loans that can be forgiven if companies keep paying employees. President Donald Trump tweeted support for the plan Tuesday, and the U.S. House of Representatives is expected to approve it Thursday.

While the PPP gets $250 billion added without limits, the other $60 billion is reserved for small and midsize banks, credit unions and community development finance institutions. An additional $50 billion will be leveraged to support other SBA disaster loans along with another $10 billion for small grants. About $10 billion more will go toward administrative costs and other efforts.

Three fintech companies were approved as nonbank lenders in the PPP, creating new opportunities for government-backed loans to reach small businesses.

The $75 billion for health care will be distributed by the U.S. Department of Health and Human Services to providers treating COVID-19 cases. It can help pay for additional personal protective equipment as well as setting up additional hospital spaces. It can also reimburse providers for pandemic-related expenses as well as lost revenues "attributable to the coronavirus."

The $25 billion for testing and contact tracing goes to both state and federal authorities to develop and fund widespread testing for infection as well as possible immunity. It can be used for employer-administered testing.

With about a half-dozen senators in the building on Tuesday afternoon, the Senate approved the measure by voice vote, meaning that no member requested a roll call to record individual votes. House leaders expect a vote as soon as Thursday morning.

However, the additional funding could run out quickly. Sen. Marco Rubio, R-Fla., who chairs the Small Business Committee, said Monday on CNBC that he anticipates a backlog of nearly a million applications. Richard Hunt, president of the Consumer Bankers Association, told Politico he expects the new loan guarantees will be claimed within 48 to 72 hours.

Congress might add more funding, but that might wait until the next major relief package, which could be weeks away. Rep. Derek Kilmer, D-Wash., last week introduced a bipartisan bill with 22 co-sponsors to authorize $900 billion. Although that might not pass as a stand-alone measure, it illustrates lawmakers' willingness to keep adding money.

The PPP covers eight weeks of costs. The leader of a small-business group said Congress needs to consider longer-term support and address other issues, such as the barriers to loan approval for businesses that have not yet turned profitable or have owners with criminal convictions.

"This package should be a bridge to a more comprehensive program that addresses what will be an ongoing economic crisis until there is a vaccine," Main Street Alliance chief Amanda Ballantyne said in a statement. "Small businesses need direct support to weather this storm, especially beyond the eight-week timeline of the PPP loan."

Tuesday's action comes 12 days after senators blocked competing bills, which could not advance without unanimous consent. Democrats objected to a "clean" Republican measure that would have simply added $250 billion to the PPP. Republicans blocked a Democratic measure that would have set aside some of the small-business funding for community development financial institutions and added $100 billion for health care, $150 billion for state and local governments, and a 15% increase in the maximum food stamps benefit.

A week later, on Thursday, the money ran out and the SBA stopped processing applications. The nation's political leaders negotiated for two weeks while blaming each other for intransigence.

"When you look at the package that's going to be passed, it's almost exactly like the one we asked for 12 days ago," House Majority Leader Steny Hoyer, D-Md., told reporters Tuesday.

"It is unfortunate that Republicans' refusal to negotiate in a bipartisan way delayed agreement on this legislation," House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., said in a joint statement. "Democrats flipped this emergency package from an insufficient Republican plan that left behind hospitals and health and front-line workers and did nothing to aid the survival of the most vulnerable small businesses on Main Street."

McConnell blamed Democrats for the delay and cast the health care and testing money they sought as Republican ideas that only became necessary in the last two weeks.

"It's unfortunate that it took our Democratic colleagues 12 days to agree to a deal," he said on the Senate floor. "Republicans wanted more funding for Americans' paychecks nearly two weeks ago, before the program even shut down. But in the days that our Democratic colleagues delayed these urgent funds, additional federal help for hospitals, health care providers, and testing became timely as well."

The PPP offers two-year loans of up to $10 million at a 1% interest rate to cover payroll costs, health care benefits, mortgage interest payments, rent and more, and they'll be forgiven if businesses keep their end of the deal by retaining employees on payroll through the crisis.

Congress authorized over $340 billion last month. The SBA reported that $342.3 billion was approved for 1.7 million loans before the money ran out Thursday. About 55% of the total went to loans under $1 million, while about 9% covered loans over $5 million.

Although widely popular, the program has faced scrutiny over who has and has not gotten the forgivable loans. Democrats say the reliance on traditional banks has reinforced disparities in access to credit, with easier access for those who already have broad banking relationships. That's why they urged designated funding for community development finance institutions, which they say serve more minority- and women-owned businesses.

Bank of America faced a suit over its "gating" policy that only allowed PPP loan applications from its small-business checking customers that either are already borrowers at the bank or aren't borrowers at another bank; the bank notched a district court win and is allowed to keep the policy pending appeal.

Small businesses have filed class actions alleging Wells Fargo Bank NA and JPMorgan Chase gave preference to larger small businesses. Businesses fighting for a forgivable loan include tribal casinos, lobbyists, cannabis retailers and a strip club.

Lenders also face lingering questions about "know your customer" requirements, secondaries markets, loan forgiveness reporting and liquidity rules.

Along with the interim deal announced Tuesday, political leaders are discussing a broader relief package dubbed CARES 2, to follow up on the over $2 trillion CARES Act that became law March 27. Schumer said he expects a package "similar in size and ambition" to the original.

Democrats say a top priority is money for state, local and tribal governments that have lost revenue while expenses continue or grow during the pandemic; they also said the administration agreed that health care payments would not come from the Hospital Insurance Fund.

In his Tuesday tweet, Trump listed that item first, along with "much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth."

Trump and Democrats have voiced interest in a massive infrastructure plan to serve as economic stimulus, though it would take months if not years to see the impact. House Democrats touted the idea this month — with $760 billion for transportation infrastructure and $86 billion for broadband — before Pelosi dropped infrastructure from her list of priorities for CARES 2. Many congressional Republicans have been wary of a massive infrastructure plan.

Trump has for weeks urged payroll tax cuts to incentivize hiring, pitching the idea in his speech last month from the Oval Office. Democrats previously rejected payroll tax cuts as ill-suited to the crisis, arguing it would help the rich more than the poor and fail to do anything for the unemployed.

--Additional reporting by Jon Hill and Al Barbarino. Editing by Orlando Lorenzo.

For a reprint of this article, please contact reprints@law360.com.