Yahoo Finance's Jess Smith breaks down the latest from Washington, and what changes Senators want to see to the Paycheck Protection Program.
MYLES UDLAND: While we've been watching the markets very closely, I think we're losing a little bit of perspective on what is happening down in the capital where we stand with the PPP program, where we stand with potentially reloading unemployment benefits.
Jess Smith joins us now, Jess, for some potential movement on how companies can use their PPP loans. And I guess, my follow-up to that would be is this the beginning of discussing a third wave of funds that could be available for small businesses?
JESSICA SMITH: Well, right now, a bipartisan group of senators is asking Treasury and the Small Business Administration to give small businesses more flexibility in how they spend their Paycheck Protection Program loans. They want them to be able to put more money toward non-payroll expenses.
Right now, in order to get their loans forgiven, small businesses have to put 75% of this loan toward payroll costs. The other 25% goes to rent, utilities, mortgage, those non-payroll expenses. But senators say that's just too much. They-- too much for payroll. They want to see that 25% cap be raised to 50%.
Now some of the senators that are on this letter include Bob Menendez from New Jersey, a Democrat. Then you also have Republican John Cornyn from Texas, along with 19 others. So there is kind of a wide group of people who are pushing for this change.
They say if there isn't this change, then businesses with high rent and low labor costs are going to be hurt in the long run. They say more workers are going to be hurt in this letter. They went on to say these are businesses that will not recover. Such an outcome would result in mass layoffs that would shift more Americans onto unemployment, presenting significant long-term costs to families, businesses, and states.
Now we have also heard from restaurant and hotel groups urging the administration to make this change. And there is kind of this growing support in Congress to get small businesses more flexibility. In addition to this specific change, there are also lawmakers that want to give businesses more time to spend this money.
So far, Mnuchin has rejected these ideas. Treasury Secretary Steve Mnuchin says that this is a very fair ratio, is what he's saying. And he's also said in an interview that he thinks this is working how Congress intended it to. But clearly, some lawmakers don't think that's right. So they'll be pushing for these changes. We'll see what comes of it.
MYLES UDLAND: And I guess, again, though, it would seem that this is laying the groundwork for there to be another program, like, based on what we've seen so far, and for maybe that second-- or I guess, that would be the third round-- to have different rules. And also, this negotiation, I guess, reminds us of what the financial crisis was like. Things take a couple of months. Everyone gets to have their say, and they eventually get to it.
Perhaps we got to used to, oh, there's three days of volleys, and then they vote and pass something. We're probably back, I guess, to a more normal legislative schedule, if that makes sense.
JESSICA SMITH: Yeah, there are definitely issues that came up that lawmakers realized now that they'd like to change. And this-- these specific rules are things that Treasury and SBA put in place, not what Congress put in place. So now they want to go back and put some of these in legislation.
And yes, I think as you look for maybe a third round of PPP funding, it is going to be structurally-- potentially, it's going to be structurally different. I think there are going to be some changes that lawmakers really push for that they didn't necessarily push for in the first two rounds because the priority was to get out this money fast. So I do think we'll see some changes as we start negotiating here on this next phase of relief.
MYLES UDLAND: All right, Jess Smith with the latest down in DC.