Update For Small Businesses And Community Lenders On Covid Relief Legislation

December 21, 2020 – Congressman Andy Barr (R-KY) supported H.R. 133, the Consolidated Appropriations Act of 2021, which will provide much-needed assistance to small businesses struggling amid the COVID-19 pandemic. The bill includes many of Congressman Barr’s legislative priorities related to small businesses, access to capital and financial regulation. Further details are provided below.
PAYCHECK PROTECTION PROGRAM UPDATE
In March, Congress created the Paycheck Protection Program (PPP) to support American small businesses and keep workers on the payroll. The Program was a resounding success, supporting over 50,000 small businesses in Kentucky with $5.2 billion in forgivable loans. Today’s bill restarts and replenishes the PPP and makes needed adjustments, including many that Congressman Barr advocated for.
The bill:
Re-Opens and Replenishes PPP
• Provides $284.5 billion to re-open and strengthen the PPP. Allows certain businesses that already received a PPP loan to apply for a second draw. Second draw loans are limited to businesses with 300 or fewer employees that can demonstrate 25% reduction in revenue and are capped at $2 million.
o Note: To date, PPP has provided approximately $967 million in loans to nearly 10,000 small businesses in Kentucky’s Sixth District, impacting over 118,000 jobs.
Simplifies PPP forgiveness for small businesses
• Creates a streamlined forgiveness process for borrowers with PPP loans under $150K. The bill requires SBA to publish a one-page forgiveness form for these loans, which will require borrowers to list the loan amount, the number of employees retained, and the estimated amount of the loan spent on payroll costs. SBA will publish this form within 24 days.
o Note: Congressman Barr led multiple efforts in the House to secure streamlined forgiveness for small businesses, including organizing a bipartisan group of nearly 100 Members to push for this fix and co-sponsoring bills to streamline the process.
Provides needed tax relief for small businesses
• Allows small businesses to deduct money paid using PPP funds as business expenses, overturning an April 2020 IRS regulation that prevented this deduction. This change will constitute massive tax relief for struggling small businesses.
o Note: Earlier this month, Congressman Barr joined a bipartisan group of Members publicly calling for this fix.
Helps struggling hotels and restaurants
• Allows for hotels, restaurants and other hospitality businesses (i.e., those with NAICS code 72) to apply for a PPP loan that is 3.5x monthly payroll v. 2.5x for other businesses
o Note: Since the onset of the pandemic, Congressman Barr has advocated for hard-hit hospitality industry and its employees. He co-authored a bill (H.R. 7809) to create a federal assistance facility for struggling commercial real estate, including hotels, restaurants and retail (that bill has over 70 bipartisan co-sponsors). He also organized a letter to the Treasury Secretary and the Federal Reserve Chairman requesting assistance for the hospitality industry via their existing authority. That letter had over 100 bipartisan co-signers. Further, he has had conversations directly with the Treasury Secretary and Chairman of the Federal Reserve on the need to help the hospitality industry.
Holds lenders harmless if they help small businesses in good faith
• Strengthens lender liability protections for PPP lenders. Specifically, it provides that a lender may rely on any certification or documentation submitted by a borrower for an initial or second draw PPP loan, and that no enforcement action may be taken against the lender if they act in good faith and satisfy all relevant federal, state, local and other statutory and regulatory requirements.
o Note: Congressman Barr was a leading proponent of “hold harmless” language included in the CARES Act. The provisions in this bill expand on that effort.
Opens PPP to certain additional nonprofits and Destination Marketing Organizations
• Expands PPP eligibility to certain 501(c)6 organizations and destination marketing organizations (DMOs), such as VisitLex.
o Note: Congressman Barr co-sponsored standalone legislation (H.R. 6697) to support VisitLex and local chambers of commerce and advocated for this provision’s inclusion in the final bill with congressional leadership.
Helps small businesses that received both PPP and EIDL
• Repeals the provision that requires PPP borrowers to deduct their Economic Injury Disaster Loan (EIDL) Advance from their PPP forgiveness amount. Many small businesses received both EIDLs and PPP loans. The CARES Act required businesses to subtract any EIDL advance from the forgivable portion of their PPP loan, which caused confusion for both lenders and borrowers. This bill fixes that problem.
FINANCIAL SERVICES REGULATORY CHANGES TO HELP LENDERS AND BORROWERS
Congressman Barr is a senior member of the House Financial Services Committee and has been actively involved with making necessary policy changes to ensure businesses, workers and families have access to capital that they need.
The bill:
Helps lenders continue to work with their customers to modify loans
• Extends for one year the relief provided to lenders from requirements under generally accepted accounting principles (GAAP) for Troubled Debt Restructuring (TDR) classifications on loans. This important accounting policy change made it possible for lenders to work with their borrowers to modify loans and make adjustments needed to respond to challenges from COVID-19. The extension of TDR relief will provide support to consumers and small businesses.
o Note: Congressman Barr actively advocated for the extension of TDR relief, noting its importance for retail and commercial borrowers. He discussed this issue directly with
Federal Reserve Chairman Jay Powell earlier this month, and played a key role in the provision’s original incorporation in the CARES Act.
Further delays an ill-advised accounting standard that could limit access to credit
• Extends for one year relief for financial institutions from complying with the Current Expected Credit Loss (CECL) accounting standard.
o Note: Congressman Barr has long opposed CECL because it would limit access to credit for borrowers during times of crisis and would impose an immense compliance burden on community lenders.
Helps community credit unions serve their members
• Extends for one year the CARES Act provision that enhanced the National Credit Union Administration’s (NCUA) Central Liquidity Facility by temporarily increasing its maximum borrowing limit and allowing more credit unions to participate. This ensure credit unions can meet liquidity needs to serve their members and small business customers.