House passes bill easing PPP restrictions

Yahoo Finance’s Brian Cheung joins Zack Guzman to discuss the latest changes lawmakers are enacting to the Paycheck Protection Program.

Video Transcript

ZACK GUZMAN: Just moments ago, the House overwhelmingly passed tweaks to the Paycheck Protection Program, of course, the program from the Small Business Administration meant to support small businesses and help keep employees on the payroll. Interesting tweaks there being passed by a vote of 417 to 1, so overwhelming bipartisan support to get these tweaks brought to you. We've been discussing them for the past few weeks here and talking about what can be changed to help support small businesses, including tweaks to changing how much money can be shifted away from payroll, as well as how long businesses have to spend that money.

And for more on that, I want to bring on Yahoo Finance's Brian Cheung. And Brian, I mean, this is something that we had been discussing. We've heard the White House discussing this, we've heard Democrats discussing it, and today, the House being able to bring both parties together to get this done.

BRIAN CHEUNG: Well, Zack, as you mentioned, it just passed a few minutes ago on the floor of the House, almost unanimous. 417 to 1 vote, it was just Kentucky Republican Thomas Massie who voted against it. Mostly bipartisan support for changing certain terms of the Paycheck Protection Program, again, that program that's supposed to help those small businesses get through this COVID-19 crisis.

But before we go into the minutia of exactly what changed, we need to remember exactly what the current terms of the PPP program are. So the current rules for getting the loan converted into a grant would be A, you have to spend it all on payroll costs within an eight week period. And then secondly, 75% of the PPP program loan has to go to costs that are payroll. You can spend up to 25%, but not more than that, on rent, utility, things like that. But if you want to get the loan forgiven, it has to be under 25% of the total principal. And then lastly, to show for all these things, you have to provide bank statements, tax forms, any sort of time sheets to the Small Business Administration when you are applying for loan forgiveness.

Now, the changes that were passed today by the House-- again, it still needs to go through the Senate-- would change some of the mechanics of this. First of all, the big headline being it would actually extend the forgiveness period from eight weeks to 24 weeks, meaning that you don't have to use all the money through that first eight week period. You have a little bit more time to do that. And then secondly, you don't have to spend 75% of it on payroll. It'll actually dial it back to 60%, which means that you could use 40% of it on rent, utility, which would be really impactful in those high-cost areas like New York or like California, which, as we know, have been particularly impacted by COVID-19.

And then lastly, it actually also changed the repayment program for those loans that are not forgiven and still need to be paid back. It was originally supposed to be two years. Now they're going to extend that to five years. But again, it did pass the House. It needs to pass the Senate, in which case it could take on a different form. But as passed just now, it would provide a lot of relief for these companies working through these PPP loans.

ZACK GUZMAN: Yeah, and you would expect it to get through the Senate, based on what we've heard from Secretary Mnuchin there. And talk about the compromise, you know, he didn't necessarily want to see that tweak, when we talk about 75% having to be used on payroll, dropping it down to 60%. But it's not going necessarily as far as Democrats may have wanted there, but at least they got the timeline changed too from eight weeks to 24 weeks. We'll see what happens on the Senate side.

We also got an interesting update today too, in terms of data looking into the impact to Americans-- we've talked about small businesses but how Americans are dealing with all of this as well, and particularly how households that have children have been hit a bit harder. What was the latest census update that we got there, Brian, in terms of actually showing why that's the case?

BRIAN CHEUNG: Well, Zack, the census bureau has been doing these kind of quick-hit surveys to try to see what the economic impact has been on the household level of the COVID-19 impact. And a pretty shocking statistic, 55% of households with a child under the age of 18 had at least one adult lose employment income since the start of this COVID-19 pandemic, which means that for those that are dealing with children and especially those who have to be sheltered up with their children because schools are shut down, there's been a massive shock in terms of those people and those parents actually losing their jobs as well.

Keep in mind that this survey is quite recent, but it doesn't necessarily capture the whole impact of the crisis. There were surveys that were done at the end of April and also the beginning of May. And as we know, this crisis is not over yet with a lot of businesses across the country still shuttered. So it seems like the impact-- as we talk about things like the PPP program at a job demand level-- we still need to understand that there's also a lot of supply issues with labor with a lot of these parents really having to deal with kids at home that are also struggling as well.

ZACK GUZMAN: Yeah, and in contrast, another thing that stood out to me, adults not living with children also indicating that they're more likely to return to work since it was temporary layoffs, a furlough, rather than more permanent unemployment there but interesting to see the bifurcation in households with children and without. But Brian Cheung, appreciate you bringing us that update.