New Proposed Legislation for Second Round of PPP Loans Prioritizes Small Businesses
On Wednesday, June 10, key Senate Democrats promised to push forward the Prioritized Paycheck Protection Program Act (P4), legislation that would guarantee another round of forgivable loans for the smallest small businesses through October 1.
If enacted, P4 would have stricter eligibility requirements than was the case in the first round of Paycheck Protection Program (PPP) loans: Only sole proprietors, self-employed individuals and companies with no more than 100 workers who exhausted their first PPP loans, and whose revenue dropped by at least half as a result of the pandemic, would qualify for loans under P4. In addition, efforts would be made to prioritize sole proprietors, self-employed individuals and businesses with 10 employees or less in the processing and disbursement of P4 loans, and the lesser of $25 billion or 20 percent of PPP funds would specifically be reserved for them as well as small businesses in underserved and rural communities. No publicly traded company would be eligible for a P4 loan at all.
Smaller businesses certainly welcome these developments, considering that in the initial round of PPP funding, large public companies applied for and received sizable PPP loans, despite their having access to other forms of capital and even as many small businesses were desperately struggling to stay afloat. Moreover, PPP loan applications from larger businesses—particularly large businesses with which the lenders had existing relationships—tended to be prioritized over the loan applications from small businesses and non–profits that more urgently needed the funds. Indeed, the initial funds allocated for PPP loans were depleted before many of the smaller businesses’ applications had even been processed. Proponents of the P4 Act seek to address such issues with the proposed new legislation.
Law360’s recent article, “Senate Dems Want 2nd Round Of PPP Loans for Small Biz,” for which RPJ Partner Deena Merlen and Associate Liz Stork were consulted as sources, provides further information on these developments and can be viewed here.
This article is intended as a general discussion of these issues only and is not to be considered legal advice or relied upon. For more information, please contact RPJ Attorneys Deena R. Merlen and Elizabeth Stork, who counsel both companies and individuals on employment matters. Attorney Advertising