Congress Extends PPP To August, Mulls 2nd Round Of Loans

By Andrew Kragie
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.

Sign up for our Employment newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!

Law360 (July 1, 2020, 9:55 PM EDT) -- The U.S. House of Representatives passed a bill Wednesday to reopen the Paycheck Protection Program through Aug. 8, sending the Senate-approved measure to the president as lawmakers discuss a possible second round of forgivable loans.

The bill gives eligible employers another five weeks to seek loans guaranteed by the Small Business Administration program, which lapsed on Tuesday night with more than $130 billion still available. The bill passed the House by unanimous consent, meaning that no member objected or demanded a roll call vote, after gaining Senate approval late Tuesday, also by unanimous consent.

The bill's sponsor, Sen. Ben Cardin, D-Md., said the new end date will give lawmakers time to address small business needs in the next comprehensive coronavirus relief package, which could authorize a second round of PPP loans.

"When Congress passed the CARES Act in March, we thought that small businesses would be operational by the end of June, but it is now clear that our nation's small businesses will still need support in the weeks and months to come," Cardin, the top Democrat on the Senate's Small Business Committee, said in a statement on Tuesday.

Cardin said Congress "acted responsibly to keep PPP open for small businesses while Congress continues bipartisan negotiations on the next economic relief legislation."

House passage was in question on Wednesday, as the House Small Business Committee leader argued the Trump administration needed to provide more loan details to allow for congressional oversight.

"Until we know where the money's going and how our very small businesses — which includes independent contractors and sole proprietors and minority- and women-owned firms — are faring, we cannot blindly extend the program," Chairwoman Nydia Velázquez, D-N.Y., said at a hearing on Wednesday morning.

She apparently agreed to the extension in the following hours, clearing the way for approval, although she called for clearer guidance for recipients and equitable distribution to underserved businesses.

More than $130 billion remains available for PPP loan guarantees. Some lawmakers want to use that money for a second round of forgivable loans targeted to the smallest businesses hit hardest during the pandemic. Democrats on the Senate's Small Business Committee offered such a proposal last month, restricted to companies with fewer than 100 workers that saw revenue drop by at least half. Their plan explicitly included sole proprietors and the self-employed.

Many Republicans seem interested in a second round, including the committee's chairman, Florida Sen. Marco Rubio.

"My preference is that we hold on to the $130 billion ... to fund a second round of assistance to small businesses," Rubio told reporters on Tuesday. "We're talking to the White House about it. They've expressed to us that they have no intent of repurposing that money for something else, but our hope is that we can use that as the foundation for building a second round of assistance in a more targeted way."

Sen. Susan Collins of Maine, a senior Republican on the panel, said a deal is close.

"As the shutdowns have grown longer, it has become clear that millions of small employers need additional help if they are to keep their heads above water and survive," Collins said on the Senate floor on Wednesday. "It's so important that we reach bipartisan agreement to allow those small businesses that have been especially hard-hit by the pandemic to receive an additional forgivable loan."

Collins endorsed the requirement of a 50% revenue loss, as Democrats proposed, but called for a higher cap of 300 employees, "with a special provision for seasonal employers." She said businesses should be able to spend funds through Dec. 31.

The PPP extension approved this week might not draw many more applicants. The U.S. Census Bureau reported last month that 72% of small business owners surveyed said they received PPP loans, with another 2.9% awaiting action on their applications.

Demand peaked in April. The first round of nearly $350 billion ran out in less than two weeks. The program lapsed for 12 days before Congress approved another $310 billion.

Applications have since tapered off, as millions of businesses receive funds or decide to skip the application because of uncertainty about eligibility and loan forgiveness. Some recipients returned their money, fearing government scrutiny or public outcry.

The SBA reported more than $513 billion approved in the program's first six weeks. Over the next six weeks, that number changed little, nearing $521 billion as of Tuesday.

Demand could grow if coronavirus case spikes impact more businesses, Boies Schiller Flexner LLP partner Jesse Panuccio pointed out. He told Law360 by email that a "continued economic downturn could yield a new crop of businesses that might need to turn to such loans."

In areas where coronavirus cases are slowing down, more businesses might apply as workplaces reopen and beefed-up unemployment benefits end, Elizabeth Stork of Reavis Page Jump LLP said in an email.

"Companies that previously may not have been able to use the PPP for payroll costs may have reason to apply for the loans now," Stork said. "Businesses will also be able to benefit from the increased flexibility in loan terms and forgiveness restrictions from the PPP Flexibility Act, which was signed into law in June."

Both of those attorneys emphasized that the raft of federal guidance may be deterring potential applicants.

An extension would give more time for at least one group that was blocked from relief programs for months: small-business owners with criminal records.

"It may seem like companies that need these loans would have applied already," Roscoe Jones Jr. of Gibson Dunn & Crutcher LLP said in an email. "But not everyone who desperately needs these loans has [had] access to them."

Loan applications asked broad questions about recent criminal history until changes last month, not long before the Tuesday deadline, according to the Collateral Consequences Resource Center, a criminal justice nonprofit.

Earlier this week, a Maryland federal judge found that the earlier rules violated federal law and ordered the SBA to give another three weeks for three business owners to apply for funding. The ruling did not apply beyond the individual plaintiffs, but Congress could likely resolve the issue for all similarly situated people with its general extension.

Lawmakers of both parties have recently touted entrepreneurship as a way for people leaving prison to avoid barriers to employment and rebuild their lives.

--Editing by Nicole Bleier.

For a reprint of this article, please contact

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Ask a question!