We are meeting today to conduct an important hearing on the Small Business Administration’s Paycheck Protection Program, or “PPP,” and specifically, a review of the loan forgiveness process.I want to thank each of the witnesses for their testimonies today. Over the past several months, this Committee has held numerous hearings on the PPP, and we’ve heard from borrowers and lenders about the challenges they’ve faced in accessing the program.
I’ve also traveled across my district of Burlington and Ocean Counties in New Jersey to speak with business owners about how they’ve fared during the pandemic, and I’ve heard some of the successes and challenges they’ve faced with PPP and uncertainty about what the future holds.
From borrowers who eventually did access a loan, the Committee heard concerns about complicated, unclear, and sometimes conflicting program rules and other requirements associated with loan forgiveness. Lenders also expressed a great deal of frustration over the needlessly complicated rules and reported feeling unable to adequately help their borrowers through the forgiveness process.
Through it all, borrowers simply wanted to ensure they were using loan proceeds consistent with the law so they could qualify for full loan forgiveness, and effectively convert the loan into a grant, which was the Congressional intent in the CARES Act.
Loan forgiveness is a centerpiece of the Paycheck Protection Program, especially since the expectation by many borrowers and lenders was that the loans would be fully forgiven. Less than full forgiveness for a large body of loans could have serious unintended negative consequences for borrowers and lenders who have developed business plans around full loan forgiveness.
As early as June, SBA and Treasury recognized how challenging the initial loan forgiveness application was and released an “EZ” application form. Unfortunately, borrowers and lenders alike have reported no material differences between the forms and calls for a streamlined application form for small-dollar PPP borrowers have increased.
In the meantime, lenders have remained limited in their ability to provide guidance to their borrowers, leading to great anxiety and helplessness among borrowers, who just want to do things the right way, and need clear and simple rules from SBA and Treasury in order to do so. And finally, we have some data to corroborate what the lending community has been reporting anecdotally.
This week, the Government Accountability Office, or “GAO,” published a new report showing that as of September 8, SBA had only received about 56,000 forgiveness decisions from lenders – representing just over 1% of the over 5.2 million PPP loans outstanding.
This figure substantiates what the lending community has been reporting anecdotally. First, borrowers are struggling to simply understand the terms and data needed to accurately complete the forms. And second, lenders are limited in their ability to provide technical assistance to borrowers completing the forms because of the insufficient guidance.
So as we enter the forgiveness period, it is timely to conduct this hearing dedicated specifically to loan forgiveness, so that our Subcommittee can assess the issues faced by borrowers and lenders and weigh proposals to provide relief for borrowers who need it. I look forward to our discussion today and thank each of you again for taking the time to testify before us today.