Rep. Chip Roy sent the following letter on PPP and restarting the economy to his colleagues:

April 21, 2020

To: Congressional Colleagues

From: Chip Roy

Date: April 18, 2020

Re: PPP Program Fixes Necessary for Small Businesses, Particularly Restaurants

As we work to address the Paycheck Protection Program (PPP), which was designed as a bridge back to economic re-start, in order to keep employees employed and businesses afloat, I am concerned we are leaving many small businesses behind. I represent over 52,000 workers from some 2,300 restaurants, in addition to hundreds of hotels, live music venues, and others in the hospitality industry.

Many of them were hoping the federal PPP would provide relief from the mostly state and local government decisions to close down their livelihoods in pursuit of public health priorities. History will judge those decisions, but the question now is: are most small businesses getting relief? The answer is yes and no, and it is industry dependent.

For example, Texas has received $28.5 billion of the almost $350 billion that has gone out, helping fund 135,000 loans. That is great news, and the PPP program and its authors should be applauded for getting relief out the door in an unprecedented timeline (context: SBA normally does about $30 billion in loans in a year, much less $350BB in two weeks).

Many businesses are on the outside looking in on the process. Moreover, many of the business owners I speak with on a daily basis say simply throwing more money at the problem will NOT solve it. Many I have spoken to in the Central Texas restaurant and hotel industry are not getting relief that will work for them. The result could be devastating for many in our communities. Here are some of the problems as I currently understand them:

Difficulty getting loans: The larger companies with resources for lawyers and deep lending relationships were able to navigate more quickly to get capital, while some banks were offering loans and others weren't as a result of complicated rules, making it difficult for many businesses to get capital. Furthermore, corporations had a 1-week head start over sole proprietors. By Monday of last week, $296BB of the $350BB was already out. Now, the PPP is out of funding and being held up for political posturing in Washington. The last data I saw showed HALF of all restaurants were still on the outside looking in, unable to get capital.

Unemployment Insurance catch-22: Many of these small businesses had to take a gamble on whether to furlough employees. If they furloughed them, they would be sending their employees into an environment where they can be paid FAR more money for not working (boosted unemployment insurance) than for working for at least up to 4 months (which is a lifetime for these small businesses). If they didn't furlough them, they would gamble they could get money in time to survive in a world in which their ability to have customers at all has been decimated or eliminated. Furthermore, many were furloughed already because of mandates put in place in the "Phase 2" package requiring paid sick leave, which many of these small businesses believed they wouldn't be able to afford. (Note: I voted against that measure for that reason).

Unattainable eight-week timeline: The law under the PPP requires that forgiveness of the loan is tied to payroll over an 8 week time period, and the SBA has guidelines saying that this time period kicks off no later than 10 days after the loan is approved (at the time the funds are disbursed). Even worse, some businesses are seeing the trigger date actually pre-date the loan – based on a date put on the documents. There are several problems – but in short, we are asking restaurants, hotels, and others who are stuck with zero to few customers, to now go re-hire their laid-off workers to try to get forgivable financing, and do so 1) not knowing if they will get future financing if needed, 2) not knowing when they will be "allowed" to reopen, and 3) recruiting workers from a more lucrative unemployment insurance program!

Limited ability to have expensive rent/mortgage forgiven:The PPP requirement that 75% of the forgivable loan must be for employee payroll means that restaurants in areas with expensive rent (e.g. Austin, Texas), who are trying to figure out how to stay afloat (and in the process, make sure our real estate markets don't collapse) are put in an untenable position. If their rent is more than 25% of the total, that portion will not be forgiven. We aren't accounting for differences in business structures (payroll versus other operating expenses / liabilities) This means the government is picking winners and losers in the survivability lottery through PPP and will make it harder for these restaurants to stay afloat.

Loan repayment timeline: Given the complexity of the small businesses getting most hammered for trying to get their loans forgiven (per above), the 2-year loan repay is another "risk" for them to roll the dice on during a tumultuous period filled with uncertainty. How are these small businesses supposed to navigate getting a loan, trying to hire folks, and hoping they can get some of the loan forgiven, only to find out they can't. On top of that, then they have to start repaying the loan on the timeline in 6 months, and finish repaying it in 2 years.

Previous losses from shutdown are ignored and no firm re-open date is known: Many businesses, particularly restaurants, took massive amounts of losses at the hands of government calls for "stay in place" measures and limits on ability to stay open. Restaurants lost mass quantities of food and perishable goods. Without being able to count previous losses toward the "forgivable" loan, it makes it difficult for those businesses to gamble on re-opening and having to stock up on more perishable items without risking massive losses. The PPP was designed to focus on keeping people employed, but for those for whom that was too late or who have much deeper issues, "keeping people employed" requires some adaptability in how, when, and where those funds can be used.

In summary, if you are a small restaurant, live music venue, hotel operator, or similar entity – you are being extraordinarily hammered by government restricting your livelihood (for better or worse). You are in some cases having trouble getting financing. Even if you can, you are being forced to gamble that you can meet the criteria of the "forgiveness" rules, even as the government has stacked those rules against you.

You are asked to take a leap to get a giant loan that you will have to begin to repay in 6 months, and complete in 2 years. All the while, hoping to be forgiven if you can hire your workers back, even though those workers can make much more from unemployment insurance. You are asked to do this on a timeline that you likely cannot achieve. You are being asked to eat all the losses you took because you couldn't get a loan due to a system that wasn't able to help people equally. On top of all of that, you are being asked to eat more costs if you have significant rent and mortgage. All of it amounts to massive problems for these businesses, their employees (who will want to go back eventually), and the economy built around them.

We must fix these fixable problems within PPP, or otherwise. We can change the repay timeline, we can adjust the UI to be capped at 100% of the job the employee lost, we can modify the 8 week timelines (both the start date and time to complete), we can allow past expenses to count toward the forgiveness amounts, and we can adjust the 75% requirement — to say 50/50 — to allow coverage for food/perishables and higher rents and mortgages as a percentage of their business.

The problem, however, is even more acute. The government should never pick winners and losers, and to avoid that the best thing we can do is 1) re-start as fully as possible as soon as possible, and 2) to adjust this program, or consider alternative approaches, that will have funds flow to all businesses in a way that consider the predicament in which they have been placed. We're not there yet.