Tag Archives: Paycheck Protection Program

U.S. Congress approves extension of small business Paycheck Protection Program

By Richard Cowan

WASHINGTON (Reuters) – A majority of the U.S. Senate on Thursday agreed to extend the coronavirus pandemic Paycheck Protection Program (PPP) until the end of May, giving small businesses more time to apply and the government more time to process requests.

The bill, passed on a vote of 92-7, has already been approved by the House of Representatives and now goes to Democratic President Joe Biden, who is expected to sign it into law.

The PPP provides loans to small businesses struggling to survive during the COVID-19 pandemic, which has resulted in millions of businesses curtailing their operations or even shutting down for periods.

The loans convert into grants if the recipients meet certain conditions.

Without congressional action, the program would expire at the end of this month.

Senate Small Business Committee Chairman Ben Cardin said that applications could not be completed by then, adding that the $1.9 trillion COVID-19 aid approved by Congress this month expanded eligibility to more first-time borrowers, including non-profit organizations such as the YMCA.

“We are reaching the most needy,” Cardin said in a speech on the Senate floor on Wednesday urging passage of the extension.

The legislation gives the Small Business Administration 30-days, beyond May 31, to complete processing loan applications.

The PPP was designed to stanch the loss of millions of businesses, such as restaurants that were particularly hard-hit by the pandemic. Critics complained that large companies and well-to-do law firms won millions of dollars in funding, especially in the early days of the program nearly a year ago.

Republican Senator Susan Collins called the PPP “a life-line for small businesses,” saying more than $718 billion in loans already had been approved. He said it had secured tens of millions of jobs.

(Reporting by Richard Cowan; Editing by Tim Ahmann and Edmund Blair)

Under government pressure, big U.S. lenders rush to launch more pandemic loans: sources

By Koh Gui Qing, Michelle Price and Pete Schroeder

WASHINGTON (Reuters) – The U.S. government is pressuring large lenders to go live this week with another round of a key federal pandemic loan program despite many unresolved issues, sparking an industry scramble to get lending platforms ready, five people familiar with the discussions said.

The Paycheck Protection Program (PPP) reopens to large lenders on Tuesday, with many big banks including JPMorgan Chase & Co, Wells Fargo & Co and Bank of America, ready to start accepting applications, their representatives said.

But with dozens of changes to the rules and government technology system, the latest round is much more complex. Some industry executives worry that the government pressure to launch with so many unresolved issues could cause a rerun of the paperwork and technology snags that dogged last year’s launch.

While the program helped millions of small businesses, last year’s problems contributed toward some needy borrowers missing out while some ineligible companies and fraudsters got funds, oversight watchdogs have said.

A spokesman for the Small Business Administration (SBA), which jointly administers the PPP with the Treasury Department, said Congress expected the latest round to be launched swiftly to get cash to needy businesses as quickly as possible.

“SBA, in consultation with Treasury, is working around the clock to fulfill this congressional desire … and urges lending partners of all sizes to continue assisting eligible small businesses,” he added in an emailed statement.

As of Friday, the industry was circulating an eight-page document, seen by Reuters, of questions on the rules, required documentation and technology processes.

“Everyone is trying to move really quickly … but it’s just really difficult to launch a $300 billion program in a few weeks. People are struggling,” said Dan O’Malley, chief executive of Numerated, which provides PPP loan processing software to banks.

“The SBA and Treasury are pushing because of the economic need. They’re just trying to do the right thing,” he added.

Last week, officials contacted large lenders to ensure they would start accepting applications on Tuesday, said one of the five people, who spoke on condition of anonymity. Another person with knowledge of the discussions said officials are also anxious to get as much cash out the door as possible before Democratic President-elect Joe Biden takes over on Wednesday.

Under the program, lenders make loans to be repaid by the government provided borrowers spend the cash on eligible costs.

Last year, lenders issued 5.1 million loans worth $525 billion. As the pandemic drags into a second year, Congress granted $284 billion more in funds and changed the rules on eligible borrowers and expenditures.

Richard Hunt, chief executive of the Consumer Bankers Association, said the industry had “dedicated thousands of bank employees to make the process as efficient as possible.”

In addition to changes to the rules for first-time PPP loans, borrowers will be allowed a second loan provided they can show a 25% hit to their revenues. To fix technology capacity issues seen last year, the SBA has introduced a new loan application technology platform for lenders.

Combined, lenders say these amount to substantial changes. As of Friday, outstanding questions ranged from how to calculate employee numbers, which revenue documents were needed and how closely lenders must review them, to how borrower affiliates should be treated and requirements for loans to be forgiven, according to the document and sources.

The second source with knowledge of the discussions said more time to iron out the wrinkles could help mitigate “bad behavior.” But the first industry source said with so much confusion over who was eligible for second-time loans, he was more worried the SBA would reject applications.

Still, some small lenders which went live last week noted they’d had longer to prepare than last year and that their experience had so far been positive. A different industry source said big banks had tested their systems over the weekend and were “cautiously optimistic” Tuesday would go smoothly.

(Additional reporting by Pete Schroeder; editing by Jonathan Oatis)

After months of inaction, U.S. Congress approves $892 billion COVID-19 relief package

By Richard Cowan and Andy Sullivan

WASHINGTON (Reuters) – The U.S. Congress on Monday approved an $892 billion coronavirus aid package, throwing a lifeline to the nation’s pandemic-battered economy after months of inaction, while also keeping the federal government funded.

President Donald Trump is expected to sign the package into law.

Following days of furious negotiation, both legislative chambers worked deep into the night to pass the bill – worth about $2.3 trillion including spending for the rest of the fiscal year – with the House of Representatives first approving it and the Senate following suit several hours later in a bipartisan 92-6 vote.

The virus relief bill includes $600 payments to most Americans as well as additional payments to the millions of people thrown out of work during the COVID-19 pandemic, just as a larger round of benefits is due to expire on Saturday.

The stimulus package, the first congressionally approved aid since April, comes as the pandemic is accelerating in the United States, infecting more than 214,000 people every day and slowing the economic recovery. More than 317,000 Americans have died.

House Speaker Nancy Pelosi, a Democrat, said she supported the virus relief bill even though it did not include the direct aid for state and local governments that Democrats had sought.  The bill, she said, “doesn’t go all the way but it takes us down the path.”

Republican Representative Hal Rogers, who also supported the package, said “it reflects a fair compromise.”

At 5,593 pages, the wide-ranging bill that also spends $1.4 trillion on an array of federal programs through the end of the fiscal year in September, is likely to be the final major piece of legislation for the 116th Congress that expires on Jan. 3. Congress included a measure continuing current levels of government spending for seven days, ensuring no interruption to federal operations.

MCCONNELL CLAIMS VICTORY

It has a net cost of roughly $350 billion for coronavirus relief, Republican Senate Majority Leader Mitch McConnell said, adding that more than $500 billion in funding comes from unspent money Congress had authorized.

Both Democrats and Republicans claimed victory but McConnell argued that the final bill came close to what Democrats rejected months ago as insufficient.

The measure ended up far less than the $3 trillion called for in a bill that passed the Democratic-controlled House in May, which the Republican-controlled Senate ignored.

“Compare the shape of this major agreement with the shape of what I proposed all the way back in late July. Yes, some fine details are different,” McConnell said in a statement after the vote. “There is no doubt this new agreement contains input from our Democratic colleagues. It is bipartisan. But these matters could have been settled long ago.”

A months-long impasse on relief that played in the background of the U.S. presidential election was broken after a group of centrist lawmakers from both parties put forward a proposal that served as a framework for the final bill.

Even so, the bill was so unwieldy that it caused congressional computers to malfunction. It includes a hodgepodge of tax breaks and other proposals that failed to pass on their own, including two new Smithsonian museums and limits on surprise medical billing.

The legislation also renews a small-business lending program by about $284 billion and steers money to schools, airlines, transit systems and vaccine distribution.

PUBLIC COMPANIES EXCLUDED

The small-business loan and grant program, known as the Paycheck Protection Program, would exclude publicly traded companies from eligibility.

State and local governments, which are struggling to pay for the distribution of newly approved COVID-19 vaccines, would receive $8.75 billion from Washington, with $300 million of that targeted at vaccinations in minority and high-risk populations.

The deal, worked out in a rare weekend session of Congress, omits the thorniest sticking points, which included Republicans’ desire for a liability shield to protect businesses from coronavirus-related lawsuits as well as Democrats’ request for a large outlay of money for cash-strapped state and local governments.

If signed into law, the bill would be the second-largest stimulus package in U.S. history, behind the roughly $2 trillion aid bill passed in March. Experts said that money played a critical role as social-distancing measures shuttered wide swaths of the economy.

(Reporting by Richard Cowan and Andy Sullivan in Washington; Additional reporting by Susan Heavey and Lisa Lambert in Washington; Writing by James Oliphant; Editing by Scott Malone, Matthew Lewis and Peter Cooney)

U.S. bipartisan lawmakers propose $908 billion COVID-19 relief bill

WASHINGTON (Reuters) – A bipartisan group of U.S. senators and members of the House of Representatives on Tuesday proposed a $908 billion COVID-19 relief bill that would fund measures through March 31, including $228 billion in additional paycheck protection program funds for hotels, restaurants and other small businesses.

State and local governments would receive direct aid under the bipartisan bill, the lawmakers said. Senator Mitt Romney, a Republican, said the plan contains $560 billion in “repurposed” funding from the CARES Act enacted in March.

The lawmakers, speaking to reporters, said they have not yet secured backing for their plan from the White House, Senate Majority Leader Mitch McConnell or House of Representatives Speaker Nancy Pelosi.

Their support would be essential for a compromise bill to advance in the House and Senate.

But it does contain provisions that Republicans have been pressing for: new liability protections for businesses and schools grappling with the coronavirus pandemic.

Pelosi and her Democrats would win a central demand: aid to state and local governments.

A compromise $300 per week in additional unemployment benefits would also be in the package, according to the lawmakers.

Pelosi and Treasury Secretary Steven Mnuchin were expected to discuss coronavirus aid and a must-pass government funding bill later on Tuesday.

(Reporting by Richard Cowan and Doina Chiacu; Editing by Franklin Paul and Chris Reese)

Fed’s Kaplan concerned about next six months as virus surges

By Ann Saphir

(Reuters) – Dallas Federal Reserve President Robert Kaplan said on Tuesday he was “cautious and concerned” about downside economic risks in the short run because of the resurgence of the coronavirus, but more optimistic in the longer term.

“The next two quarters are going to be very challenging, very difficult,” Kaplan told Bloomberg’s Future of Finance virtual conference. “Downside risks are growing with this resurgence.”

Still, he said, the U.S. economy will likely rebound strongly in the second half of next year, after a vaccine is widely available, adding that his business contacts have told him they are gearing up for exactly that.

The United States is experiencing a rise in cases, hospitalizations and deaths from COVID-19, with some state and local governments re-imposing restrictions to slow the spread.

With millions of out-of-work Americans dipping into savings built with government aid distributed earlier this year, Kaplan said, household income and spending will drop off “at some point” unless more fiscal aid is forthcoming.

Aid to small businesses in the form of a renewed Paycheck Protection Program would be particularly helpful, he said, because while financial conditions are broadly fairly loose, that is not the case for smaller businesses that rely on banks for credit.

“While we are in the teeth of the pandemic I believe we need to do what we need to do to fight the pandemic,” Kaplan said in a separate event sponsored by UT Dallas.

As long as the pandemic is ongoing, the U.S. central bank should not back away from its programs supporting economic growth, which include bond purchases totaling $120 billion a month and lending programs to corporate America, he said.

Once it subsides, he said, the U.S. will need to moderate government debt.

(Reporting by Ann Saphir; Editing by Paul Simao and Chizu Nomiyama)

Fed’s Powell, Mnuchin see promise in reallocating unused aid

By Ann Saphir and Howard Schneider

(Reuters) – Hundreds of billions of dollars in unused funds from a $2.3 trillion coronavirus aid package could be reallocated to help U.S. households and businesses, Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin said on Thursday.

About $200 billion in money allocated to the Treasury to backstop U.S. central bank loans remains uncommitted, Powell and Mnuchin said in a hearing before the Senate Banking Committee.

Mnuchin also pointed to the $130 billion left in the now-expired Paycheck Protection Program to help small businesses, funds he said would his first priority to get approval from Congress to tap and send to needy firms.

In addition, Powell, in response to a question, said most of the $75 billion allocated to the Fed’s largely untapped Main Street Lending Program remains unused.

The focus on reallocating those sums has emerged as Congress has remained deadlocked over providing new fiscal relief that Powell said could make the difference between continued recovery and a much slower economic slog.

While households are spending what’s left of their stimulus checks and unemployment benefits, “the risk is they will go through that money, ultimately, and have to cut back on spending and maybe lose their home or their lease,” Powell said.

“That is the downside risk of no further action. We don’t see much of that yet, but it could well be out there in the not-too-distant future,” Powell said in the last of three hearings in which he testified before Congress this week.

Asked by Republican Senator Mike Crapo, the committee chair, what the best use of the unused funds might be, Powell said it could be spent to help small businesses and households.

Prospects for new fiscal aid are dim less than six weeks before the Nov. 3 presidential election.

(Reporting by Howard Schneider, Ann Saphir; Editing by Paul Simao)

Thousands of small-business loans may have been fraudulent, U.S. House panel finds

By Susan Cornwell and David Morgan

WASHINGTON (Reuters) – Tens of thousands of loans worth billions of dollars may have been subject to fraud, waste and abuse in the $659 billion taxpayer-funded Paycheck Protection Program (PPP) aimed at helping small U.S. businesses survive the coronavirus pandemic, according to a report released by Democratic lawmakers on Tuesday.

Over $1 billion went to companies that received multiple loans, in violation of the program’s rules, the House of Representatives Select Subcommittee on the Coronavirus Crisis said.

At an afternoon hearing, the panel’s chairman, Democratic Representative James Clyburn, chided Treasury Secretary Steven Mnuchin for saying previously that delivering aid quickly made it inevitable for Treasury to run into issues of waste.

“That is a false dichotomy. Taxpayers should not have to choose between quickly getting aid to those who need it and wasting federal funds. And there are simple steps that could have been taken to improve oversight and reduce fraud,” Clyburn said.

Democrats in Congress and the Trump administration have been at loggerheads since July over further steps to bolster the economy after Congress approved trillions of dollars in March to respond to the coronavirus pandemic.

“We are sensitive to the fact that there is more work to be done and certain areas of the economy require additional relief,” Mnuchin told the committee.

The PPP provided more than 5.2 million forgivable loans through the U.S. Small Business Administration (SBA) by the time it ended on Aug. 8.

The SBA did not immediately respond to requests for comment.

The Trump administration says the PPP has saved some 51 million jobs at a time when much of the U.S. economy has been shuttered due to the coronavirus.

Economists say the actual impact is far lower, likely between 1 million and 14 million jobs.

Republicans on the committee issued their own report saying the small business loan program had avoided fraud to the extent that is typical with other large government relief programs, such as those following Hurricanes Sandy and Katrina.

The Democratic-led panel found more than 600 loans went to companies that should have been ineligible because they had been barred from doing business with the government. Another 350 loans went to contractors with previous performance problems.

Nearly $3 billion went to businesses that were flagged as potentially problematic by a government-contracting database.

Staff found evidence that as few as 12 percent of Black and Hispanic business owners received the full funding they requested.

The SBA’s internal watchdog has also found “strong indicators” of potential PPP fraud.

(Reporting by Susan Cornwell and David Morgan; Editing by Andy Sullivan, Chizu Nomiyama, Steve Orlofsky and Richard Chang)

Treasury’s Mnuchin open to blanket forgiveness for smaller business relief loans

WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin said Friday policymakers should consider blanket forgiveness for all smaller businesses that received “Paycheck Protection Program” loans.

Mnuchin told lawmakers that they should consider such an approach to reduce complexity, coupled with some form of fraud protection.

He also said the Trump administration supports adding more funds to the $660 billion program, as well as allowing especially hard-hit businesses to apply for a second emergency loan.

He did not define how small a loan would have to be to qualify for automatic forgiveness, and added it should be paired with some form of fraud protection without going into detail. Several business and banking groups have pushed for blanket forgiveness for all loans under $150,000, arguing the requirements for applying for forgiveness under the program are too complex.

His comments come as Congress is preparing further economic relief legislation to support businesses and people harmed by pandemic lockdowns. Roughly $100 billion remains in the PPP, a forgivable loan program created by the initial stimulus package, is set to expire on Aug. 8.

Mnuchin added that he would also support applying some sort of “revenue test” to future PPP loans to make sure the remaining funds go to businesses that need it the most. The PPP has come under criticism after wealthy and larger companies secured loans under the program, which was billed as relief for small businesses.

“This time, we need to have a revenue test and make sure that money is going to businesses that have significant revenue declines,” he said.

He also said he would support efforts to set aside a portion of remaining PPP funds for minority-owned businesses, amid concerns from some lawmakers that those businesses were struggling to secure funding.

(Reporting by Pete Schroeder; Editing by Nick Zieminski)