Rubio proposed targeting loans to seasonal employers and businesses in low-income communities, in addition to incorporating the 50 percent loss of income test. Supporters of the idea said they hoped lawmakers would consider expanding eligibility.
“PPP was designed for a short-term disruption, but it is now unequivocally clear that the small business community is facing a deep and protracted crisis,” said John Lettieri, executive director of the Economic Innovation Group expert group. “Congress must respond by providing a more flexible and long-term form of relief, one that allows vulnerable businesses to survive a prolonged period of business interruption and weak consumer demand. President Rubio’s proposal is an important step in that direction.” .
Additionally, the proposal would provide $ 10 billion to support businesses that invest in small businesses with significant Covid-19 income losses, manufacturing startups, and low-income communities. It would also set aside $ 25 billion for businesses with 10 or fewer employees and $ 10 billion for loans made by community lenders.
But Senate Republicans already face calls from business groups, Democrats, and even some Republican lawmakers to be more generous with helping small businesses.
Rubio’s proposal that employers show a 50 percent loss of income to qualify for a second Check Protection Program loan is a particular pressure point. The National Restaurant Association argues that restaurants, among those most affected by the pandemic, enter the red well before reaching that threshold and that it should be set at 20 percent. The International Franchise Association recommends a loss of income test of 25 percent.
While Congress is often criticized for choosing “winners and losers,” David Barr, a franchisee and former president of the International Franchise Association, questioned whether the 50 percent threshold was equivalent to “just betting on the losers.”
“I totally agree that you should have to drop sales,” he said. “I wonder if 50 percent is such a difficult threshold that you’re literally talking about people who are almost out of business.”
Banks could be another obstacle. Lenders responsible for delivering loans on behalf of the government have warned lawmakers not to introduce new variables that could complicate the application process. They have also been skeptical about the economy of taking new low-interest, long-term loans.
A growing bipartisan coalition of lawmakers is asking Congress to distribute more business aid in the form of grants rather than government-backed loans from private lenders.
“We know that PPP never reached many of the smallest small businesses, along with businesses owned by black and Latino entrepreneurs,” said Amanda Fischer, director of policy for the Washington Center for Equitable Growth. “For these businesses, loans are probably not the answer. These firms need grants to pay their rent or mortgage, and invest in social distancing measures. Creating complicated new programs that can trap them in more debt could make them worse.”
Rep. Lance Gooden (R-Texas), who co-sponsors legislation that would grant business subsidies in addition to the Paycheck Protection Program, said he did not believe that just covering payroll in the coming weeks would be enough to save suffering businesses.
“The government demanded all these forced closings, so it is up to us, I think, to make sure that we decrease the damage,” he said in an interview. “That is why we see so many people, especially Republicans, voting on bills they would never have considered otherwise.”
