The House voted overwhelmingly on Thursday — 388 to 5 — to approve the $484 billion coronavirus relief package, the latest round of stimulus funding that includes another $310 billion to replenish the Paycheck Protection Program, or PPP, for small businesses impacted by the COVID-19 pandemic.
The package includes another $10 billion for the Economic Injury Disaster Loan, or EIDL, program, and sets aside $60 billion for smaller community banks and credit unions that typically serve mom-and-pop borrowers. The bill — which was passed unanimously by the Senate on Tuesday — goes next to the President, who is expected to sign the bill into law on Friday.
“We are all painfully aware that the American people are worried about their health, their jobs, the economy and what life will look like after the emergency subsides,” House Ways and Means Chairman Richard E. Neal (D-Mass.) said. “That’s why we fought to increase funding for the Paycheck Protection Program. ... But I want to be clear, this does not come close to addressing the staggering needs of the American family.”
The funding will refill the coffers for the Small Business Administration loan program, which has come under criticism this week after many larger companies with relationships with larger banks were able to win loans as soon as the program launched April 3. The funding quickly ran out last week.
The loans were designed for small businesses with fewer than 500 workers, but restaurants were given a specific exemption. Restaurant companies with any physical location with fewer than 500 employees could apply, so companies like Ruth’s Chris Steak House, Shake Shack and Potbelly won PPP loans.
Facing backlash, Shake Shack, Kura Sushi, Sweetgreen and Ruth’s Chris announced they would return the loans.
And the Treasury Department has now issued stricter guidelines for the PPP, making it more difficult for publicly traded businesses to receive the loans meant for small businesses.
“Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere borrowers still must certify in good faith that their PPP loan request is necessary,” the new guidelines, updated on April 23, stipulate. “Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”
According to Treasury Secretary Steven Mnuchin, returned funds will be recycled to make loans available for other businesses who need the funding. However, even with some companies publicly committing to returning their money, experts believe that the amount of funding passed Thursday by Congress is not enough to sustain demand, particularly from smaller businesses.
But Christopher Grimm, a representative of the Innovative Lending Platform Association said the guideline tweaks would “help a bit” but were not enough and argued that Congress should have added closer to $1 trillion in funding to keep up with demand from the truly small businesses.
“It is all but impossible to ensure that what we saw with the first round of PPP funds publicly-traded multi-million-dollar companies receiving hundreds in millions in loans [won’t happen again] because the way we define small businesses is so broad,” he said. “It encapsulates companies with anywhere from 1 to 500 employees, and over the past 12 years, businesses with fewer than 100 employees have been mostly ignored by banks.”
The industry remains in flux, despite the recent Congressional win for small businesses:
“No industry has suffered more job losses, closed more locations or lost more revenue than ours. For an industry that is the second-largest private-sector employer in the country, this should be an alarm call to elected officials at the state and local level and in Washington," the National Restaurant Association said in a statement thanking Congress and the President for providing relief for businesses. "Every restaurant model, from the beloved corner diner, to the favorite independent restaurant, to the well-known chain has an uncertain future as economic damage wrecks an industry that is only marginally profitable even in the best of times."
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