ORDINARILY, IT’S cause for celebration when a large federal program comes in well under budget. That’s not the case, however, for the government’s key program to stabilize the private sector during the novel coronavirus-related economic crisis: the Paycheck Protection Program (PPP), administered by the Small Business Administration. The PPP expires on June 30, yet as of May 18, only $513.3 billion of a potential $649 billion worth of soft loans had been delivered to the businesses Congress intended to bolster. The fundamental reason: the law, and Trump administration rules interpreting it, have imposed conditions on how the money may be used that are deterring companies from applying for it. This must change, and soon.

The PPP was created under the Cares Act on March 27, and by April 16 the first $350 billion tranche had run out, as businesses that qualified — generally those with 500 employees or fewer — flocked to banks for two-year, 1 percent interest loans of up to $10 million, but usually far less. Crucially, the loan would convert to a grant as long as the company used it within eight weeks to fund payroll, rent, mortgage, interest and utility costs incurred between Feb. 15 and June 30. The offer attracted even certain big-name, well-funded firms such as publicly traded chain restaurants and professional sports franchises. Their access to multimillion-dollar loans, while technically legal, caused a public backlash, and Treasury Secretary Steven Mnuchin responded by tightening eligibility. That is one reason for the relative lack of demand for the second tranche of PPP money.

A more significant cause, though, is a rule Mr. Mnuchin himself wrote that requires loan recipients to use 75 percent of the money on payroll. Ostensibly imposed to honor the job-protection intent of Congress, this requirement has turned into a deterrent for thousands of small businesses, especially independent restaurants, whose main need is rent money — as a recent Small Business Administration inspector general report confirms. Many small firms also worry that they cannot spend the loans within eight weeks.

Broadly speaking, the PPP was created at a time when the task facing Washington was to keep small businesses afloat during a 60- to 90-day crisis; the problem has morphed into something much different and more durable. Policy must take account of that new reality.

Fortunately, bipartisan legislative efforts are underway to make the PPP more flexible. In the House, Speaker Nancy Pelosi (D-Calif.) has promised a vote next week on a measure backed by Minnesota Democrat Dean Phillips and Texas Republican Chip Roy that would eliminate the 75 percent payroll-spending minimum, extend the eight-week window for using the loans and give businesses more time to rehire laid-off employees. Several similar proposals, also bipartisan, are under discussion in the Senate. Ms. Pelosi’s willingness to bring a stand-alone bill narrowly targeted to PPP modification to a vote in her chamber is a significant political concession, given her promotion of the much bigger $3 trillion Heroes Act. If a PPP fix passes the House, Senate Majority Leader Mitch McConnell (R-Ky.) should promptly move it toward President Trump’s desk.

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