Paycheck Protection Program Act

As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.

With over $129 billion remaining in the Paycheck Protection Program (PPP), three senators have proposed a bill that would authorize new lending to small businesses as a supplement to the business’s additional PPP loan. Although this bill is still in Congress, it could provide a much-needed economic life raft as the COVID-19 pandemic continues to rage in the U.S.

New lockdown orders across the U.S. are forcing businesses to close and leaving many small business owners to wonder how they will survive with no revenue. The Prioritized Paycheck Protection Program (P4) Act would allow small businesses to receive additional funding on top of their initial Paycheck Protection Program loan to retain workers, maintain payroll, and pay approved business expenses.

What is the Paycheck Protection Program?

Introduced in early March as part of the CARES Act, the Paycheck Protection Program (PPP) authorized $349 billion worth of funds for small businesses impacted by the COVID-19 pandemic. The funds are part of fully forgivable loans, backed by a 100 percent government guarantee, that can be used by employers to keep employees on the payroll, hire them back quickly, or pay certain things like mortgage, utilities, et cetera.

The bi-partisan bill was authored by Senators Susan Collins (R-ME), Marco Rubio (D-FL), Benjamin L. Cardin (D-MD), and Jeanne Shaheen (D-NH) and the first allotment of $349 billion in funds ran out in 13 days. An additional $320 billion was put into the program and, since then, $518 billion worth of loans have been dispersed to more than 4.5 million businesses nationwide through the small business administration (SBA).

As of July 2, 2020, there is approximately $129 billion remaining in the program with application deadlines extended to August 8. However, for many small businesses, the first PPP loan has not done enough and they need more money to continue operating during the pandemic. That is where the Prioritized Paycheck Protection Program Act comes into play.

P4 Legislation: What is It?

The Prioritized Paycheck Protection Program (P4) Act was introduced on June 18, 2020, and authorizes new lending under the Paycheck Protection Program (PPP) to small businesses with 100 employees or less, including sole proprietors and self-employed individuals. The legislation was introduced in the Senate by Senators Ben Cardin (D-MD), Chris Coons (D-DE), and Jeanne Shaheen (D-NH), with companion legislation in the House by Representatives Angie Craig (D-MN) and Antonio Delgado (D-NY).

The P4 Act would authorize a second loan, using the $129 billion of PPP funding remaining in the program, for eligible small businesses. Recipients can receive up to $2 million in a P4 loan, which is determined based on average monthly payroll costs multiplied by 2.5, the same formula as the original PPP loan. Publicly traded companies cannot apply for this loan. The proposed application deadline is October 1, 2020, however, there may be flexibility with the deadline based on the SBA Administrator’s discretion.

“PPP has been the lifeline that has kept many small businesses from going under,” said Senator Shaheen in a press release. “Yet, revenues for many small businesses are still at unsustainable lows and a second loan is needed as soon as possible.”

Currently, the Senate bill is in the Senate Committee on Small Business and Entrepreneurship, which includes Senator Coons, Chairman Rubio, and Ranking Member Cardin, while the House bill is in the House Committee on Small Business, which includes Rep. Delgado. Both committees in the House and Senate have yet to hold a hearing on the legislation so we do not know when the legislation may reach a vote or authorize new funding.

Who Can Apply For and Use This Money?

The bill would create new lending opportunities under the PPP to provide a supplemental loan for small businesses that have suffered more than a 50 percent loss in revenues. Businesses must have already received an initial PPP loan and have exhausted, or be on pace to exhaust, those funds. To be a small business that qualifies for the P4 loan, the business must fit one of the following criteria:

  1. Have no more than 100 employees,
  2. Work as an independent contractor or sole proprietorship,
  3. Or be self-employed.

“Many small businesses will continue to struggle in the weeks and months to come,” Senator Cardin said in a Senate press release. “Congress must once again act urgently to support our most vulnerable small businesses through this crisis.”

The funding from the loans must be used by December 31, 2020, and borrowers may apply for loan forgiveness any time after eight weeks from receiving the loan or before the end of the year. As with the PPP loans, forgiveness is based upon:

  1. Keeping employees on the payroll with at least 75 percent of their wages and
  2. 60 percent of the loan being used on payroll.

These loans are meant for businesses that are not publicly traded, and businesses that have more than one location (but fewer than 100 employees) may apply for a P4 loan as well. The loans are capped at $2 million per business, and the funds must be used to retain workers, maintain payroll or cover eligible non-payroll costs like rent, mortgage interest, and utilites. With these P4 loans, the SBA Administrator and the Senators proposing the bill are specifically looking at aiding underserved and rural communities as well as firms with 10 or fewer employees. Within the bill, 20 percent of PPP funds (or, currently, $25 billion) have been reserved for this goal.

Any small business with 100 or fewer employees can apply for the P4 loan, as long as they have already received a Paycheck Protection Program loan and can prove

  1. They have exhausted (or are about to exhaust) the initial PPP loan funds and
  2. They have suffered a 50 percent loss in revenue due to COVID-19.

What is Congress Doing to Help?

On a webinar presented by Biz2Credit, Senator Susan Collins said that with $129 billion left in the paycheck protection program, she is hopeful for more SBA COVID-19 specific assistance, through the extension of PPP or through a second loan program like P4.

Although the Republican caucus is split over whether additional assistance is needed, Senator Collins has been encouraging her colleagues to check in with small business owners in their district while Democrats have also been drafting bills and program extensions. Senator Collins noted there is a broader COVID-19 package that will hopefully pass through Congress towards the end of July with additional assistance for small businesses.

“Even as closures are ending, countless Delaware businesses are struggling to survive this crisis,” Senator Coons said in a Senate Small Business & Entrepreneurship Committee press release. “Only by aggressively targeting aid can we save our small businesses, the jobs they provide, and the Main Streets that make our communities proud.”

With more than $518 billion worth of loans distributed to 4.5 million businesses nationwide, it is clear that businesses are hurting in this pandemic economy and need assistance, assistance which Congress is working to provide with the Treasury Department and SBA. Senator Collins noted in the webinar that she is working with Senators Rubio, Cardin, and Shaheen on legislation that would allow for hard-hit businesses to apply for a second loan. The priority for Senator Collins is on a PPP extension, liability insurance, and funding directed to food, accommodation, and retail services – industries that have been hit especially hard in the coronavirus pandemic.

Looking Forward

As small businesses are still hurting and waiting for additional assistance from the federal government, there are a few things to remember about the CARES Act and the $129 billion left for disbursement in Congress:

  • The Prioritized Paycheck Protection Program Act (P4) is making its way through Congress but has not been signed into law yet. The best bet for small businesses who have not received a PPP loan is to apply before August 1.
  • The P4 bill would focus coronavirus relief on small businesses (those with 100 or fewer employees or are self-employed) that can demonstrate a 50 percent revenue loss over the same period.
  • Loan recipients must have already received a PPP loan to be eligible for the P4 loan, and they must have already exhausted (or be near exhausting) the funds.
  • 20 percent of federal aid will be focused on rural and under-served communities as well as businesses with 10 or fewer employees.
  • The next priority for many in Congress is a PPP extension, liability insurance for businesses, and assistance to postal services and local governments.
  • Looking at the data from businesses impacted by the COVID-19 pandemic and shutdown, food, accommodation, and retail services are in dire need of monetary assistance to remain open.

As the United States tries to move forward in reopening the economy, many small businesses are suffering. They have been already closing because their funding has run out; most PPP has been covering 2 weeks of expenses, on average. Loan programs like the Paycheck Protection Program and the Prioritized Paycheck Protection Program are working to distribute federal aid nationwide through the CARES Act.

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