Congress has made important adjustments to its small business lending program, offering more support to companies that are struggling during the Coronavirus Pandemic. Approved in the House and then unanimously passed in the Senate, the new law will make it easier for businesses to tap federal funds and keep their workforces intact.
The bill will now be sent to President Trump for his signature, with no pushback expected from the White House.
Massive Support in Both Sides of the Legislature
Changes to the Paycheck Protection Program were almost unanimously approved by lawmakers in Washington. Voting passed in the House with 417 in support of, and just 1 representative against the changes. In the Senate, there was not a single dissenting vote.
The latest update, called the Paycheck Protection Program Flexibility Act, will extend the availability of federal loans from 8 weeks to 24 weeks. This will ensure that businesses have financial support while the Coronavirus Pandemic continues to spread in the United States.
It will also allow small business borrowers to spend as little as 60% of borrowed funds on worker salaries and wages, compared to a minimum of 75% stated in the original package. Businesses that spend the lower amount on workers will still be eligible for loan forgiveness.
The added flexibility will allow businesses to spend loan money on items like rent and utilities. Some lawmakers saw the original wording as too rigid, preventing some small businesses from meeting their costs during the pandemic.
More than 20 million U.S. workers were laid off in April, but May’s figure is expected to be below 10 million. The worst of the pandemic may have passed, but companies still need support to prevent bankruptcies and worker layoffs.
Good News for Investors
For investors, particularly those with portfolios exposed to smaller business sectors, this latest news will be relieving. Federal support will help to prop up the economy in a year when GDP is expected to shrink by more than 5%.
The stock market has been following a recovery pattern this week, with indexes approaching their peaks before the pandemic. This updated relief package, and the fact that job losses are beginning to taper off, could help to drive the market this month.
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