More than $500 billion in loans to struggling businesses has been distributed through the program. Many companies held off on spending the funds once they learned that getting the government to forgive the loans was linked to worker retention.
The initial version of the program said that 75 percent had to spent on employees to qualify for forgiveness. That made the loans of little use to many businesses, since they couldn’t be used to pay things like rent, utilities, and vendors. After much wrangling, Congress grudgingly agreed last week to lower the requirement to 60 percent, still a high bar for many businesses to clear. Trump signed the updated version.
But the administration has now come up with its own interpretation, announcing Monday: “If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness.”
Florida Senator Marco Rubio asked Treasury Secretary Stephen Mnuchin on Wednesday to confirm that this meant borrowers would get forgiveness “equal to their payroll costs and a proportional amount to their non-payroll costs.” Mnuchin said they would.
A sliding scale doesn’t seem to be what lawmakers, especially Democrats, intended when they passed the updated version of the PPP program. Their union allies had pushed them to retain as much of the initial 75 percent requirement as possible. Thus far, the administration has received little blowback for this announcement. Nor should they. It is a reasonable compromise and a good sign that administration’s cooler heads are prevailing on how to get the economy going again.