As Paycheck Protection Program (PPP) "Part II" loans are anticipated to be exhausted in 72 hours by small businesses struggling during the financial distress of the COVID-19 pandemic, will there be a "Part III, IV and V" on the horizon for the program? Read Stinson LLP's Tom Salerno providing his latest perspectives on funding for small businesses during the COVID-19 crisis and government responses.
Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday that the next coronavirus relief legislation must include liability protections for business owners who reopen and indicated he would be open to some aid for beleaguered states, Bloomberg News reported. The House and Senate both plan to convene in Washington, D.C., on May 4 and resume business with the expectation of additional action to respond to the novel coronavirus pandemic that has shut down businesses and thrown millions of people out of work. As some states begin gradually lifting stay-at-home orders and other restrictions, McConnell said that without protection from lawsuits, business owners could end up with years of legal claims over their efforts to restart the economy.
The Trump administration is blocking companies in bankruptcy from receiving stimulus funds Congress has authorized to help small businesses survive the coronavirus pandemic, putting them at risk of closing permanently, the Wall Street Journal reported. The Small Business Administration, which administers the Paycheck Protection Program, says on the program’s loan applications that companies in bankruptcy aren’t eligible for the emergency funding. That has caused banks to deny requests from such applicants. But nothing in the CARES Act, the law authorizing the PPP, indicates Congress meant to withhold stimulus funds from troubled companies that have turned to chapter 11 bankruptcy to save their business, legal experts, affected companies and at least two federal judges say. A handful of these companies as well as three Catholic archdioceses have sued the SBA over the issue in recent weeks. A Texas judge on Friday ordered a local bank to waive the SBA’s bankruptcy restriction when considering an ambulance company’s request for a $2.6 million PPP loan. Bankruptcy Judge David R. Jones said that the PPP isn’t a traditional loan program but rather “a support program” for businesses during an unprecedented crisis. “This can’t be what Congress intended,” Judge Jones said during a telephone hearing. Small Business Administration chief Jovita Carranza, in consultation with Treasury Secretary Steven Mnuchin, determined that providing PPP loans to companies in bankruptcy “would present an unacceptably high risk of an unauthorized use of funds or non-repayment of unforgiven loans,” the SBA said Friday. Read more.(Subscription required.)
In related news, the Archdiocese of Santa Fe (N.M.) has filed a complaint against the U.S. Small Business Administration, saying that the federal agency is illegally blocking it from applying for a low-interest loan from a program aimed at helping small businesses impacted by the novel coronavirus because the archdiocese is involved in a bankruptcy proceeding, the Santa Fe New Mexican reported. The complaint was filed on Tuesday in the archdiocese’s pending chapter 11 bankruptcy case in U.S. Bankruptcy Court. In it, the Catholic organization says the federal government specifically ruled nonprofit entities and those in bankruptcy are not ineligible to receive 1 percent interest loans from the Paycheck Protection Program, which is part of the more than $2 trillion federal relief package being dispersed to help steady the economy during the pandemic. But the archdiocese says that the form applicants must complete says applications from entities involved in bankruptcy proceedings will not be approved. The archdiocese is asking the court to rule that the Small Business Administration overstepped its authority when it determined entities going through bankruptcy weren’t eligible for the money and change the part of the form that keeps them from applying. The petition acknowledges the Small Business Administration announced April 16 that the $349 billion set aside for the Paycheck Protection Program was already exhausted. But it says “upon information and belief, Congress has reached a deal to allocate additional funds” to the program and the archdiocese wants to be able to apply for them. Read more.
The U.S. House of Representatives overwhelmingly approved a $484 billion coronavirus relief bill yesterday, funding small businesses and hospitals and pushing the total spending response to the crisis to an unprecedented near $3 trillion, Reuters reported. The measure passed the Democratic-led House by a vote of 388-5, with one member voting present. House members were meeting for the first time in weeks because of the coronavirus pandemic. Lawmakers, many wearing masks, approved the bill during an extended period of voting intended to allow them to remain at a distance from one another in line with public health recommendations. The House action sent the latest of four relief bills to the White House. Republican President Donald Trump, who backs the measure, said he would probably sign it into law on Thursday evening. The $484 billion aid bill was the fourth passed to address the coronavirus crisis. It replenishes funds to small businesses and provides hospitals struggling with the economic toll of a pandemic that has killed almost 50,000 people in the United States and thrown 26 million out of work, wiping out all the jobs created during the longest employment boom in U.S. history. Read more.
In related news, a Reuters analysis of Small Business Administration data shows Utah, along with heartland manufacturing powers and key political battlegrounds like Ohio, Pennsylvania and Wisconsin, punched above their weight in the race to get loans from the $349 billion “Payroll Protection Program” that ran out of money in under two weeks. A comparison of local industry mix and payroll against national averages signals that important sectors in a handful of places — manufacturing in the heartland of the country, construction and oil and gas in the West — mobilized quickly and helped their states receive billions of dollars more than otherwise expected. Utah, for example, received about $600 million in SBA loans beyond what would have occurred if its firms had borrowed at national averages. In Indiana, with a heavy manufacturing presence, small businesses overall received about $1.2 billion more than if their industries had borrowed the same share of payroll as national firms. Read more.
Congress has pumped out almost $3 trillion to deal with the coronavirus pandemic, mostly on a bipartisan basis. But there is a bruising election-year confrontation ahead over the next, and perhaps final, round of aid for the economy, Bloomberg News reported. House Speaker Nancy Pelosi (D-Calif.) is gathering a long and expensive wish list from her fellow Democrats that would expand the social safety net as well as provide $500 billion to struggling state and local governments. Senate Majority Leader Mitch McConnell (R-Ky.) hasn’t yet committed to another big aid package and indicated that he’s girding for a massive fight over aid to states, a central issue for Democrats. He and other Republicans also say they want to tap the brakes on the blistering pace of new deficit spending. The next phase of economic stimulus likely will be the last before the 2020 elections, and any stalemate will escalate the political consequences with control of the Senate, House and White House at stake.
Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday that he favors allowing states struggling with high public employee pension costs amid the burdens of the pandemic response to declare bankruptcy rather than giving them a federal bailout, Bloomberg News reported. “I would certainly be in favor of allowing states to use the bankruptcy route,” he said yesterday. “It’s saved some cities, and there’s no good reason for it not to be available.” The host cited California, Illinois and Connecticut as states that had given too much to public employee unions, and McConnell said that he was reluctant to take on more debt for any rescue. “You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs,” he said. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.” McConnell’s remarks drew a biting response from state and local officials. New Jersey Governor Phil Murphy (D) said that he was stunned by McConnell’s comments, which he called “completely and utterly irresponsible.” Without cash to states, Murphy said, governors will be forced to “gut the living daylights out of every state of America,” slashing budgets and eliminating the services people need. New York Mayor Bill de Blasio (D) tweeted that McConnell “wants police officers to lose their jobs. He wants firefighters to go broke. He wants hospitals to close and sick people thrown out on the street.” McConnell’s statements also set up a conflict with House Speaker Nancy Pelosi, who said yesterday that a “major package” of aid for state and local government will be in the next stimulus legislation considered by Congress. McConnell may also find himself in conflict with President Donald Trump. The president said on Tuesday after meeting with New York Governor Andrew Cuomo that states will need assistance. “And I think most Republicans agree too, and Democrats,” Trump said. “And that’s part of phase four.”
Hundreds of members of the U.S. House of Representatives will gather in Washington today to pass a $484 billion coronavirus relief bill, bringing the unprecedented total of funds approved for the crisis to nearly $3 trillion, Reuters reported. The measure is expected to be approved with solid bipartisan support in the Democratic-led House, but opposition by some members of both parties forced legislators to return to Washington despite stay-at-home orders intended to control the spread of the virus. The Republican-led Senate passed the legislation on Tuesday, so approval by the House will send it to the White House, where President Donald Trump has promised to quickly sign it into law. The bill — which would be the fourth passed to address the crisis — provides funds to small businesses and hospitals struggling with the economic toll of a pandemic that has killed more than 45,000 Americans and put more than 22 million out of work. Read more.
While the House is expected to approve an additional $320 billion for the Paycheck Protection Program today, there are concerns by lenders and small-business advocates that the funding still won’t be enough to meet demand for the coronavirus aid, the Wall Street Journal reported. Banks, credit unions and community-based lenders say that they have a backlog of applications for the PPP loans, after the roughly $350 billion allocated for the program ran out last week. “We believe our members have as many applications pending as they submitted during the initial round of funding, and the funds Congress is set to approve this week will likely all be used,” a spokesman for the Consumer Bankers Association said yesterday. Read more. (Subscription required.)
The Senate passed a $484 billion deal yesterday to replenish a small-business loan program that’s been overrun by demand and to devote more money to hospitals and coronavirus testing, the Washington Post reported. President Trump said he would sign it into law. The legislation, which came together over days of intense negotiation that followed a bitter partisan standoff, would increase funding for the Paycheck Protection Program by $310 billion. It would also boost a separate small-business emergency grant and loan program by $60 billion, and direct $75 billion to hospitals and $25 billion to a new coronavirus testing program. The House is expected to approve the measure on Thursday. The Paycheck Protection Program was designed to help firms with fewer than 500 workers, but a number of larger companies found ways to obtain the funds in the past two weeks, leading to bipartisan outrage. Treasury Secretary Steven Mnuchin said yesterday that larger firms would now be blocked from using the program, and Trump called on some big companies that had already obtained taxpayer-backed loans to return the money.
The Trump administration and congressional leaders closed yesterday on an approximately $470 billion deal to renew funding for a small-business loan program that ran out of money under crushing demand during the coronavirus pandemic, aiming to pass the agreement into law within days, the Washington Post reported. The deal would also boost spending for hospitals and coronavirus testing by about $100 billion. President Trump expressed optimism yesterday evening about reaching an agreement by today. The deal would add about $310 billion to the Paycheck Protection Program for small businesses, which was swamped by demand in the three weeks since Congress created it as part of a $2 trillion coronavirus rescue bill. It also would add $60 billion to a separate emergency loan program for small businesses that is out of money, too, Senate Minority Leader Charles E. Schumer (D-N.Y.) said on CNN. The agreement would include $75 billion for hospitals and $25 billion for testing, which have been major Democratic demands. Some $60 billion in the new funding for the Paycheck Protection Program would be targeted specifically for smaller financial institutions to ensure loans for minority and lower-served areas, said people familiar with the plan who spoke on the condition of anonymity to describe it.
