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Congress Amends CARES Act with New PPP, EIDL Funds

Issues: Small-Medium Business Loans 

Date: April 23, 2020

Action Taken:  On April 23, 2020, the House of Representatives approved the bill (H.R.6322) that the Senate passed on April 21 that adds $310 billion in funding for the Paycheck Protection Program (PPP). The legislation also adds $50 billion for the Economic Injury Disaster Loan (EIDL) program and $10 billion to the amount allocated for EIDL grants. The President says he will sign the bill into law as soon as it reaches his desk.

The new law also specifically allocates $60 billion of the $310 billion in new PPP funding for smaller financial institutions serving small businesses that are under-banked. And, despite considerable lobbying by many private sector interests, the new funding for the PPP and the EIDL program contains only one programmatic change—it makes agricultural businesses eligible to seek PPP loans.

NAIFA, in conjunction with tens of thousands in the association community, has urged Congress to open PPP eligibility to trade associations, but lawmakers decided to defer PPP programmatic changes to the next coronavirus response bill. There are many PPP programmatic issues Congress was asked to address and so, in the interest of enacting new funding quickly, the decision was made to address those issues after lawmakers had enough time to consider them.

The PPP is open to businesses with fewer than 500 employees. It allows these businesses to borrow enough money to meet payroll, pay rent/mortgage and utilities, and cover pre-existing debt obligations during the “coverage period” (between 2/15/20 and 4/30/20). If borrowers use at least 75 percent of the loan for payroll expenses, the loan will be forgiven. Most non-profit organizations, including trade associations, are excluded from eligibility to apply for PPP loans.

Originally funded at $349 billion, the PPP ran out of money less than two weeks after it took effect. Observers believe applications for this new $310 billion in PPP loans will come in just as quickly.

 The EIDL is an existing Small Business Administration (SBA) loan program that allows small businesses that have been hit by declared disasters to borrow at very low interest rates. The EIDL grants were newly created in the CARES Act—they allow for grants of up to $10,000 for EIDL borrowers. The EIDL program also ran out of authorized funds within two weeks of the grant program’s start.

There has been growing concern about a number of issues surrounding the PPP. For example, trade associations and other excluded non-profit organizations have been lobbying Congress to extend PPP eligibility to them. Another programmatic issue is the fact that some large businesses have been getting PPP loans, and that has crowded out the smaller entities that Congress intended to help most. There are tens of thousands of trade associations, including NAIFA, lobbying to open up PPP eligibility for all non-profit associations.

Next Steps: NAIFA will continue its effort to open trade associations eligibility for the PPP. Congress expects to begin work on the next coronavirus response bill (CARES 2/Round 4 legislation) right away, although it will likely take at least weeks for that bill to come together. Lawmakers hope to focus the next bill on economic recovery. The CARES Act and this latest amendment to CARES were focused on mitigating the early and devastating economic impact of the nationwide shut-down caused by the coronavirus crisis.

NAIFA continues to work with Congress on polices transitioning from relief to economic recovery. Specifically, NAIFA is focused on efforts to ensure Americans can maintain their health care coverage, adequately save for retirement, and access financial protection. You can join us  in urging your Members of Congress to include specific health coverage options, retirement enhancements, and life insurance tax changes in recovery legislation.

NAIFA   2901 Telestar Court    Falls Church  VA   22042   USA
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