Food & Beverage

Flexibility Act en route to president: Restaurant industry breathes sigh of relief

Better loan terms, loosened FTE rehire requirements and a longer coverage period are just some of the benefits of the PPP Flexibility Act passed by the Senate Wednesday night.

Image: iStock

June 4, 2020

The restaurant industry pulled off a win last night when the Senate passed house resolution 7010 — the Paycheck Protection Flexibility Act —  by unanimous consent. The bill now goes to the president for his signature. 

The National Restaurant Association and other restaurant organizations nationwide have been lobbying hard for the so-called "Flexibility Act" to pass into law for the last several weeks. The measure makes numerous retroactive changes in the previously passed Paycheck Protection Program that restaurant operators will benefit from, including:

• Changing the covered period for spending PPP loan funds from eight weeks to 24 weeks, or allowing borrowers to select to spend PPP funds until the end of this year, which is also the end of any covered period under the measure. 
• Modifying the split between non-payroll expenses, like rent and utilities) up from 25% to 40% of all PPP loan expenditures if borrowers are seeking full loan forgiveness. 
• Loan forgiveness will not be reduced or cut if an operator has a lower number of full-time employees if operators can't hire the former employee or a similarly qualified employee before the end of this year, or can't resume the same level of business activity they experienced before this past Feb. 15 due to new sanitation, social distancing or other safety requirements.
• New loans now have five-year 1% loan terms instead of the previous two years.
• Restoration of payroll tax deferment. 

The Paycheck Protection Program passed as part of the CARES Act earlier this year, and caused a great deal of pushback from the restaurant community due to allegations of uneven distribution of monies, often favoring larger restaurant companies. Loan forgiveness mandates were also balked at by restaurateurs and restaurant organizations who said the conditions made them very difficult to adhere to. 

National Restaurant Association Executive Vice President of Public Affairs Sean Kennedy was among the first in the industry to respond to the passage last night. 

Today's action in the Senate is a win for restaurants and small businesses across the country," he said in a statement sent to this website. "Exactly 68 days ago, the Paycheck Protection Program was created. It has helped countless businesses, but the restaurant industry has a unique business model and a particularly uncertain path to recovery–and these PPP improvements will help restaurants effectively utilize this vital tool.

"The National Restaurant Association was one of the first to call for improvements to PPP to preserve our imperiled industry. In an era where political discord is the norm and agreement is fleeting, the voice of the restaurant industry has been a unifying theme. This bill passed because Congress heard from us loudly and clearly." 

Kennedy said the action improves the PPP for many in the industry, though many others still face substantial challenges. He urged restaurateurs to get involved and "stay engaged in Washington."