WASHINGTON – U.S. Senator Chris Van Hollen and Congressman David Trone (both D-Md.) have sent a letter to Treasury Secretary Steve Mnuchin outlining their concerns with recently issued Treasury guidance contradicting the intended critical aid provided by the Paycheck Protection Program (PPP), as established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The lawmakers worked to craft PPP to provide relief and liquidity to businesses more swiftly than the traditional loan programs to help them get through this crisis.
“Recent guidance from the Treasury Department seems to weaken the program, which is meant to serve as a lifeline to these small and mid-sized businesses and their employees,” the lawmakers wrote.
In the letter, they call attention to three areas where Treasury guidance would negatively impact the effectiveness of PPP that include the loan term, permitted uses, and forgiveness for non-payroll spending.
Loan Term: The Treasury Department’s PPP interim final rule sets the maturity date of the loan for two years instead of the ten years provided for in the CARES Act.
Permitted Uses: The Treasury Department’s interim final rule indicates that the loan may only be used for payroll costs, interest on mortgage obligations, rent, and utilities, even though small businesses need flexibility to use PPP loan proceeds for working capital to keep their businesses alive.
Forgiveness for Non-Payroll Spending: The Treasury Department’s interim final rule indicates that forgiveness for non-payroll expenses would be capped at 25% of the forgiveness amount. The interim rule places additional restrictions on the borrower by requiring that 75% of the loan proceeds be used for payroll costs.
The lawmakers underscore that PPP loans should not require an existing line of credit or a credit card account, pointing to recent reports from Maryland constituents.
“Imposition of such requirements, which are outside the purpose of the program, are unnecessary at best and, in the case of some of our constituents, harmful to their ability to access the program,” the lawmakers wrote. “We therefore ask that Treasury firmly prohibit lenders from imposing PPP loan requirements outside the scope of the CARES Act in the Department’s final rulemaking.”
“We have fought successfully to ensure this rescue package throws an economic lifeline to those who need it most by extending help to small and mid-sized businesses struggling to stay afloat. The Treasury Department’s guidelines must not undermine Congress’s intent for PPP, and we urge you to provide updated guidance that fully addresses and corrects the matters of concern outlined above,” they conclude.