Includes Key Fixes to PPP and Support for Businesses in Second Half of 2020
Washington, D.C. – Today, U.S. Senators Michael Bennet (D-Colo.) and Todd Young (R-Ind.) introduced the Reviving the Economy Sustainably Towards a Recovery in Twenty-twenty (RESTART) Act to support the small- and mid-sized businesses most affected by the Coronavirus Disease 2019 (COVID-19) crisis. Answering the calls of the hardest-hit restaurants, gyms, hotels, retailers, and other businesses, the RESTART Act would give business owners who took out Paycheck Protection Program (PPP) loans the flexibility they need to utilize the PPP effectively. The RESTART Act would also create a loan program to provide funding to jump-start the hardest-hit businesses for the remainder of 2020 and provide loan forgiveness as a backstop against ongoing economic challenges.
“This is the first and only bipartisan proposal that supports the hardest-hit businesses by fixing the Paycheck Protection Program and providing relief through the rest of the year,” said Bennet. “Based on input from business owners across Colorado, we’ve proposed a bill that provides the flexibility they need to weather the next six months and get their businesses back up and running.”
“The Paycheck Protection Program has been a tremendous asset, providing nearly $10 billion in loans to Indiana recipients, and saving more than 50 million American jobs. However, after speaking with some of the hardest hit businesses, it’s clear there are fixes needed to help more job creators navigate this pandemic. The RESTART Act addresses these issues by providing longer-term loans and more flexibility so that the businesses who have suffered the greatest economic hardship can resume essential operations. The RESTART Act provides the next phase of recovery to allow businesses to open, paychecks to continue, and people to get back to work,” said Young.
“The RESTART program is the first time our Congress has looked beyond June to address small business needs. Thank you Senator Bennet for listening to Colorado small businesses during your teleconferences and responding with action. We need more of this type of support to make it into 2021.” — Rich and Jessica Fierro, Owners of Atrevida Beer Company in Colorado Springs & Winners of the 2019 Governor's Minority Small Business of the Year
“Senator Bennet has been an advocate for small business owners in Colorado, and this legislation reflects his understanding of the practical day-by-day agenda items that entrepreneurs will have to face. This legislation provides thoughtful and practical solutions to the challenges that lay ahead for business owners on the road to recovery.” — Denise Burgess, President and CEO of Burgess Services in Denver
“When bars and restaurants closed at the front end of the COVID-19 pandemic, it was like the rug was just pulled from underneath us. We scrambled to apply for the PPP loan in its early stages, as we faced a very uncertain future. Although we received the loan, we are well into our eight-week period and still not operating at full capacity, so it’s unlikely that much of our loan will be forgiven. The RESTART Act addresses this, allowing for an extended covered period for the hardest-hit businesses like ours, and helps us navigate the tough months ahead as the economy gradually reopens.” — Dave Thibodeau, President and Co-Founder of Ska Brewing Company in Durango and Co-Founder of Peach Street Distillers in Palisade
“We fully support Senator Bennet’s RESTART loan proposal. This type of aid would prove invaluable in sustaining an industry that makes up the fabric of so many communities nationwide. Hospitality workers everywhere are looking forward to continuing to serve our guests in the safest way possible, and this type of program would ensure the future success of our businesses.” — Phil Armstrong, Owner and Proprietor of four Colorado restaurants, including Aurum in Steamboat and Breckenridge
”The sudden loss in revenue to our businesses has been devastating—putting paychecks, employees, and hard-working families at risk. Businesses forced to close for the responsible social distancing mandates and to support public health safety as we work together to fight the COVID-19 pandemic will never recover without business continuity funding in their hands. The long-term impacts to their employees, families, business owners and the trickle effect through our economy will create irreparable harm if we don’t band together as a country and get them the economic help they need rapidly. We support the RESTART program as one way to help both our businesses and individuals at this time of need.” — Chris Romer, President and CEO of Vail Valley Partnership
“The RESTART program will be a lifeline for businesses such as ours that have been highly affected by the virus shut-down. We have significant financial hurdles to clear in order to re-open, such as replacing our perishable inventory that we donated when we shut down and re-hiring our laid off employees. We will be faced with reduced capacity for many months to come even after we re-open. Without a RESTART program, many local businesses will simply have to remain closed when those jobs could have been saved.” — Bill Carver, Co-Founder of Carver Brewing Company in Durango
"The RESTART Act is a critical step toward improving the Paycheck Protection Program and enacting new relief measures that match the scale of disruption caused by the economic crisis. EIG applauds Senators Bennet and Young for their bipartisan leadership, and we urge Congress to ensure the next relief package builds upon this approach to providing flexible and sustained support for deeply affected businesses as they navigate the difficult road to recovery in the months ahead." — John Lettieri, President and Chief Executive Officer of the Economic Innovation Group (EIG)
Summary of the RESTART Act:
Near-Term Fix to PPP for Hardest-Hit Businesses
Background: PPP has an 8-week “covered period” that begins immediately following the origination of a PPP loan. As funds were limited and there was much uncertainty, businesses rushed to apply and were unable to adjust the timing of their application to a point when they were actually prepared to relaunch their business. Payroll during this 8-week period is used to determine what amount of loan forgiveness a business receives. Businesses are also required to rehire their full headcount by June 30, 2020, regardless of whether their business is back up to anything near full capacity. Businesses that have already laid-off employees are having difficulty rehiring. Some businesses may be shuttered for most or even all of the 8-week period and may even be prohibited from operating at anything near full capacity by June 30, making the decision to rehire employees for a short timeframe even more difficult.
Proposal: Bennet and Young propose a simple fix to address a shortcoming of the PPP for many of the most-affected businesses: extend the 8-week covered period to deploy PPP funds and earn loan forgiveness to 16 weeks after the loan is disbursed for the hardest-hit businesses that have seen revenues decline by at least 25%.
Longer-Term Strategy: The RESTART Program
Background: The PPP has worked well for some businesses, but is often less effective for the businesses that should be receiving the most assistance – the smallest businesses or those who have seen revenues decline the most. Its limited duration will also leave many of the most-affected businesses without support in the difficult months ahead.
Proposal: Bennet and Young propose a new RESTART Program, to provide funding to cover the next 6 months of payroll, benefits, and fixed operating expenses for businesses that have taken a substantial revenue hit during the COVID-19 pandemic. A share of that loan will be forgiven based on the revenue losses suffered by the business in 2020, and the remainder can be repaid over 7 years, with no interest payments due in the first year and no principal due for the first two years. This program is designed to provide small- and medium-sized businesses with loans to get their businesses going again, and ensure that they receive loan forgiveness to help fill in a loss in revenues.
Following are the basic terms of the program:
- 7-year loan, capped at 45% of 2019 gross receipts up to $12 million
- 100% federal guarantee for life of the loan
- Employment cap of 5,000, with streamlined procedures for less than 500 employee firms
- No cap on loan size based on multiple of payrolls
- Self-certify a revenue loss of 25%
- Interest Rates/Payment Schedule:
- No principal payments required for the first 2 years
- Fixed interest rate between 2% and 4% for the first 2 years
- No interest payments due for first 12 months
- Payments of interest only for next 12 months
- Interest rate for years 3 to 7 is the Applicable Federal Rate (AFR) plus a spread of 250 – 450 bps, based on revenue decline
- Restrictions on dividends/share buybacks/executive compensation for duration of loan with special rules for pass-through entities
- Nonprofits have access to longer-duration loan (up to 10 years), with a lower interest rate in the first four years
Use of Funds:
- Businesses can borrow to pay for an array of business costs including the following:
- Total payroll (up to $100k per employee)
- Employee benefits (for both current and furloughed employees)
- Mortgage interest payments on existing mortgages
- Other scheduled debt service
- Personal Protective Equipment
- Level of forgiveness based on decline in revenues and may be received within 2 years of the loan origination
- No requirement to increase staffing beyond what business conditions dictate
- Smaller business forgiveness (<500 employees) more generous than for larger businesses
- Small Business Forgiveness based on a formula including percentage decline in revenues for Payroll + Benefits + Operating Costs
- Larger businesses follow same forgiveness, except for payroll (i.e. benefits and operating costs fully included but not payroll)
- Nonprofits with up to 500 employees would have access to either partial loan forgiveness or enhanced loan terms.