Senate bill would permit bigger PPP loans for smaller borrowers

A bill unveiled late Tuesday by a bipartisan group of senators aims to offer more Paycheck Protection Program funds to farmers, ranchers and self-employed Americans.

The bill, introduced by Sen. Ben Cardin, D-Md., the chairman of the Small Business and Entrepreneurship Committee and cosponsored by six other senators, would allow eligible borrowers who received PPP funds between the program’s Jan. 11 restart and March 3 to recalculate, and potentially increase, the size of their loans.

The Biden administration in February ordered a revision of the calculation for PPP funds to let independent contractors and sole proprietors calculate PPP loan amounts using gross income rather than net income. The Small Business Administration implemented the new calculation on March 3, but it only applied to loans approved after the change was made.

The SBA said it lacked broad authority to approve retroactive payouts on its own.

Cardin called for quick action on the legislation to give borrowers enough time to secure more funding. About $44 billion of funds remained as of last week, and the program is set to end on May 31.

“Congress must pass this bill as quickly as possible so eligible small businesses have time to secure the aid they need before PPP closes,” Cardin said in a press release. “The Biden administration has taken steps to make PPP more useful to farmers, ranchers and sole proprietors so making the changes retroactive is a matter of basic fairness.”

For most independent contractors and sole proprietors — who typically file taxes using an 1040 Schedule C form — Tuesday’s bill would extend the gross income funding formula retroactively to Dec. 27, the date Congress passed the stimulus package that brought the PPP back.

Retroactivity for farming partnerships would extend to March 27, 2020, the date Congress passed the stimulus law that created the PPP.

If the new bill is passed and signed, the SBA would be required to write a rule outlining the recalculation process and how payments bridging the gap between the original and recalculated loan amounts would be made.

The bill announced Tuesday, entitled the PPP Flexibility for Farmers, Ranchers, and the Self-Employed Act, also adjusts a second formula used to calculate revenue loss for second-draw PPP loans.

Currently, second-draw applicants are required to demonstrate a 25% or greater reduction in revenue during any quarter of 2020 compared to 2019. The Cardin-led bill would allow them to use any contiguous 90-day period to determine eligibility.

The legislation does not include any additional PPP funding. Since the lending portal reopened Jan. 11, the SBA has approved 4.7 million loans for $240.2 billion. In all, the agency has approved 9.9 million PPP loans for $762.5 billion.

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