Issue 210| June 2020
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 Good News for Small Businesses as Senate Passes
PPP Reform Bill
 
CNBC Published Thu, Jun. 4, 2020 2:12 PM EDT 
Key Points

  • The Paycheck Protection Program Flexibility Act eases rules around how small businesses can use their PPP loan funds.
  • The Senate passed the legislation Wednesday night. It now heads to the president’s desk for signature. 
  • Self-employed entrepreneurs and businesses that don’t expect to reopen soon would benefit most. 

Senate passes PPP fix even as second round of funds remain untapped.

Business owners who received a forgivable loan through the Paycheck Protection Program are likely getting more leeway on how to spend those funds.  

The Senate passed legislation Wednesday night that restructures how entrepreneurs can use loans issued through a new federal relief program for small businesses ailing from the economic contagion unleashed by the coronavirus pandemic. 

Many business owners have called on Congress to update the Paycheck Protection Program as they struggle to meet its terms and fear they may be forced to take on debt even as their businesses haven’t fully recovered. The bill, the Paycheck Protection Program Flexibility Act of 2020, now heads to President Donald Trump’s desk for his signature. The House passed the legislation last week. 

The bill addresses concerns around loan forgiveness, one of the main attractions of the Paycheck Protection Program. 

“We urge the President to sign the bill into law swiftly and deliver this much-needed flexibility for small-business owners,” said Kevin Kuhlman, vice president of government relations at the National Federation of Independent Business, a trade group representing businesses. 

Loan Forgiveness Rules

PPP loans convert into a federal grant if business owners meet certain conditions.

Current rules require business owners to spend their money within eight weeks and direct 75% of funding toward payroll costs to get their loan fully forgiven. 

The new legislation extends the deadline to 24 weeks from eight weeks and reduces the share of funding that must be directed toward payroll costs to 60%. It also pushes back a June 30 deadline to rehire laid-off workers.

The Small Business Administration, which oversees the lending program, had approved 4.5 million PPP loans worth $510.6 billion as of Wednesday evening. More than $120 billion in funding is still available .   

The legislation comes as most borrowers are poised to extinguish their funding by the end of June.

The current eight-week spending period ends for 30% of borrowers by June 14, according to a recent NFIB survey. Another 36% will do so in the second half of the month.

However, some businesses may not be able to re-open by the time their funding runs out due to existing state or city orders, leaving many wondering how they’ll continue to fund operations after PPP funds are gone. They may also be re-opening at a fraction of their prior capacity due to social-distancing concerns. People thought two months was probably going to be enough to get it done it turned out, it’s not.

It’s also proven challenging for the self-employed, businesses with few employees and those in metropolitan areas that have high rent payments to devote 75% of loan funding toward payroll costs. The PPP Flexibility Act would grant more leeway, so 40% of the loan could be directed toward non-payroll costs.

The President  signaled support for the new measure during a White House event on Monday with restaurant executives who sought changes to the Paycheck Protection Program. 

“We’re not asking for more money,” said Tim Love, a celebrity chef with restaurants in Texas and Tennessee, during the meeting. “We’re just asking for the opportunity to spend it the way it was intended.”

The bill’s passage comes amid debate between lawmakers over the contours of a potential future round of financial relief . The coronavirus pandemic pushed broad swaths of the economy to shut down in mid-March and nearly 43 million Americans are to file for unemployment.






















These 10 States are Showing Early Signs of a Job Market Recovery
 
by Zack Guzman , Senior Writer Yahoo Finance - June 4, 2020
The number of jobs lost due to the coronavirus shutdown continue to mount, with the latest weekly total of Americans applying for unemployment benefits coming in above 1.5 million , yet again.

The latest swath of applications brings the total amount of jobless claims to more than 42 million over the past 11 weeks, wiping out the 20 million jobs added over the last decade by a two-to-one margin.

But some states are beginning to show a recovery from the spike in unemployment applications as coronavirus lockdowns went into effect. A Yahoo Finance review of jobless claims data from the U.S. Department of Labor shows that Rhode Island, Vermont, and Michigan have seen the strongest early signs of a bottoming out to return to normal.

Comparing each state’s average weekly jobless claims totals over the past five weeks to the five weeks beginning in mid-March, which brought a record amount of unemployment applications, reveals that some states are stopping the bleeding faster than others. Comparing those first five weeks of pain to the latest five-week period shows that Rhode Island, Vermont, Michigan, Montana, and Idaho have all seen their average weekly initial jobless claims number fall by 75% or more. While each state is still averaging more unemployment, applications compared to weeks before the coronavirus pandemic rattled the employment picture in the U.S., the data shows a trend of unemployment applications relatively slowing.

Ohio, West Virginia, Utah, Pennsylvania, and Indiana round out the top 10 states showing the largest drop in average weekly unemployment claims.

To be sure, even these states have a long way to go to return to normal. Michigan, for example, shows the third most optimistic trend in slowing job losses, but after weeks of continued unemployment applications it has still racked up the country’s third highest insured unemployment rate in the country at 22.9%. That is to say, while the most recent job destruction might be getting less steep, the mountain it has to climb is still rather large.

More worrisome, the data also reveals the trends aren’t slowing in some of the hardest hit states. As we’ve highlighted, Georgia and Florida have led the country in seeing average unemployment claims skyrocket the most over the past few weeks . But those states have also yet to show a sustained improvement in their unemployment picture, with their average weekly unemployment applications only coming down about 30% over the past five weeks compared to the first five weeks since the U.S. coronavirus lockdowns began. That could be a result of Florida locking down its economy later, but it would seem at odds with the fact that Georgia reopened its economy sooner than others.

Economists will get another update of the country’s employment picture with Friday’s May jobs report. The update is expected to show an increase in the national unemployment rate, from 14.7% to nearly 20%.














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