Last Thursday afternoon, Congress voted to pass the Paycheck Protection Program Flexibility Act. The reform bill passed by a wide margin, receiving 417 “yays” and just a single “nay,” the dissenting vote cast by Rep. Thomas Massie (R-KY). Thirteen Republican representatives didn’t vote on the bill.
Yesterday evening, June 3, 2020, the Senate passed the House bill by unanimous vote. The House version of the reformed PPP legislation is expected to be signed into law by the President.
The National Restaurant Association (NRA) was among the first hospitality industry organizations to call for changes to the initial version of the PPP. Restaurants, bars and nightclubs have been decimated by the COVID-19 outbreak and resulting stay-at-home orders, mandated business closures, and economic downturn. The NRA has reported that around eight million restaurant workers have lost jobs due to terminations, layoffs or furloughs. In 2019, the NRA reported the industry employed 15.3 million people; the industry has lost half its workforce, and counting.
Back in April, the Independent Restaurant Coalition (IRC), which represents a half-million small businesses across the United States, asked Congress to make a number of changes to legislation to better serve the needs of independent restaurant operators. One of these requests was to make changes to the PPP, which has finally been addressed and embraced.
Changes made to the PPP via the Paycheck Protection Program Flexibility Act include:
- When signed into law, the Flexbility Act states that PPP loan funds can now be spent within a period of 24 weeks instead of the intitial legislation’s eight-week period.
- Rather than non-payroll expenses being limited to 25 percent of overall PPP loan expenditures (for borrowers seeking loan forgiveness), the new limit is 40 percent.
- PPP loans secured after the Flexibility Act is signed into law will have five-year terms, compared to the two-year terms of the initial loans. The new act includes language that states lenders and borrowers of prior PPP loans can negotiate to modify maturity terms.
- Borrowers will have full access to payroll tax deferment when the act is signed into law.
- Borrowers will not face reduced loan forgiveness if a lower number of full-time employees return to work if an employer: can’t rehire a previous worker; can show it wasn’t possible to hire employees of similar qualifications before December 31, 2020; can prove they were unable to achieve the “same level of business activity” as they had before February 15, 2020 because of new social distancing or sanitization requirements, or other health and safety requirements.
It’s impressive and heartening that the PPP Flexbility Act passed through bipartisan efforts. Members of Congress and senators reached across the aisles to work with one another, recognizing the need to act quickly and decisively to help save as many restaurants and bars (and other businesses, of course) as possible. Unfortunately, hundreds of bars and restaurants closed permanently before the Flexbility Act could be drafted and passed. Some of the businesses we’ve lost operated for several decades prior to the destruction wrought upon the world by the novel coronavirus.
Much more needs to be done if this industry, which employees millions of Americans, is to recover. The NRA and IRC have both proposed additional measures to meet the needs of bars and restaurants. These include a $50 to $100 billion stabilization fund providing grants for business owners; replenishment of the PPP fund; support from the federal government in the form of grants or tax credits so owners can modify their venues to comply with social distancing requirements, educate workers on enhanced sanitization techniques, and obtain more personal protection equipment and disposable items; expand funding for Economic Injury Disaster Loans to the tune of $50 billion; new tax rebates to provide relief; adding COVID-19, which most insurance providers classify as an exemption, to business interruption insurance.
Click here to review the NRA’s Restaurant Industry Blueprint for Recovery.
Click here to learn more and join the IRC.
I’ve been studying and writing about the hospitality industry since 2006. Like so many people, I started my journey in this business by working as a host, server and bartender. I was introduced to nightlife in Chicago, learning the ins and outs of nightclubs and after-hours hot spots.
After moving to Las Vegas nearly 20 years ago, I both co-owned a valet company and helped promote the club it serviced. That led to me taking on the role of editor for a Las Vegas hospitality industry publication.
A few short years later, I continued along my journey of hospitality industry reporting. I went from contributing to a major industry outlet to taking on the role of editor and content curator.