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Congress hustles to extend spending window as COVID-19 loan deadlines loom

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Rep. Ben McAdams, D-Utah, gets a haircut from stylist Chantalisa Bigelow after holding a press conference about Paycheck Protection Program loans at Nailed! in Millcreek on Thursday, May 14, 2020. McAdam’s last haircut was back in March before he was diagnosed with COVID-19, from which he’s now recovered.

Spenser Heaps, Deseret News

SALT LAKE CITY — Congress is scrambling to make adjustments to fast-approaching deadlines for companies that secured COVID-19-related emergency funding but haven’t spent the money within a stipulated time frame.

Borrowers that haven’t used the cash within eight weeks of receiving funding could be facing a rough payback schedule for money that was intended to function more like a grant than a loan.

Earlier this week, the U.S. Small Business Administration reported almost 48,000 Utah businesses had received some $5.2 billion in emergency help via two rounds of the federal stimulus-backed Paycheck Protection Program. Under the program rules, businesses with fewer than 500 employees are eligible to borrow up to 2.5 times total monthly payroll expenses, and as long as 75% of the money is dedicated to issuing paychecks, the loans can be forgiven if the funds are disbursed within that two-month window.

As the U.S. House gets set to cast a vote Thursday on a proposal to extend that forgiveness window to 24 weeks, Utah Democratic Rep. Ben McAdams said the initial rules just didn’t take into account the variable circumstances companies are facing depending on what kind of business they conduct.

“This proposal will give borrowers some added flexibility, address some of the concerns and fix some of the unintended rough edges,” McAdams said. “If you own, say, a restaurant that was closed down for weeks and only recently reopened up with limited seating ... and not able to operate at full capacity, that loan you received on your full payroll is going to be very difficult to spend in eight weeks.”

McAdams said the House bill is also looking to ease back on the requirement for borrowers to spend at least 75% of their loan on payroll, another recognition he said takes into account some business structures that have larger, nonpayroll overhead expenses.

Earlier this month, Utah Republican Sen. Mitt Romney announced his co-sponsorship of a Senate proposal to extend the forgiveness window to 16 weeks and make other changes to the Paycheck Protection Program to help businesses earn payback relief.

“For many of Utah’s small businesses, the eight-week period they are allowed to use their (Paycheck Protection Program) loan is quickly approaching, but they remain closed or far from full capacity as our economy remains paused to fight the spread of COVID-19,” Romney said in a statement. “Our legislation doubles the amount of time business have to use their loan, which will help provide the flexibility they need to reopen and rehire their employees without risking their eligibility for loan forgiveness.”

While an effort was afoot late last week in the Senate to move the bipartisan bill to passage ahead of a weeklong Memorial Day break, it didn’t come to fruition. However, Senate Small Business Committee Chairman Sen. Marco Rubio, R-Fla., tweeted Friday that the body was continuing to work on changes including extending the fund usage window to 16 weeks, extending rehire dates and allowing employers to use some of the funds to purchase personal protection equipment.

Utah Bankers Association President and CEO Howard Headlee said the payback window extension and other efforts to ease the path to loan forgiveness are critically needed changes.

“The vast majority of Utah businesses that were going to pursue help from the Paycheck Protection Program have already done so,” Headlee said. “Now, we’re focused on the next phase, which is doing what we have to do to get these loans forgiven.

“We’re anxious to help the borrowers achieve 100% forgiveness and believe that was the spirit of the program.”

Headlee said his organization has been working with congressional members to make changes to both increase the payback window as well as ease the administrative process guidelines, which were updated last Friday by the U.S. Treasury. That procedure, Headlee said, will be an hourslong process for each borrower and one that is likely to only become more complex as the paperwork is handed up the chain of institutions and agencies involved in the loan process.

“The burden they’ve outlined falls first on the borrowers, which we believe is undue and then transfers to the local bank, where the loan resides and eventually will get passed to the Small Business Administration,” Headlee said. “Like some of the issues we saw when the first round of the program launched, it’s unnecessarily complicated.”

Headlee said his organization is advocating for a simplified and streamlined process for all borrowers under the $150,000 loan threshold which would cover about 80% of recipients.

As of Tuesday, the Small Business Administration was reporting that 4.4 million U.S. businesses had been approved for $511 billion in two rounds of Paycheck Protection Program funding for an average loan value of $116,000. The program remained open to new business applicants.