Washington, D.C.— Today, the House Small Business Committee, led by Chairwoman Nydia M. Velázquez (D-NY), held a hearing examining the current state of loan forgiveness under the Paycheck Protection Program (PPP). To date, the Small Business Administration (SBA) has received 5.6 million loan forgiveness requests and delivered over 5.2 million forgiveness payments.
“PPP helped millions of entrepreneurs hold on to their businesses during the darkest days of the COVID crisis. Small businesses have steadily progressed from the lows of the pandemic, and it is now time to turn our attention toward forgiveness,” said Chairwoman Velázquez. “Unexpected debt can hinder an individual firm’s recovery and hold our economy back on a macro level. That’s why this committee is working to ensure that the maximum amount of business owners receive the loan forgiveness they are entitled to.”
Over the course of the pandemic, PPP provided small businesses with over $800 billion in forgivable emergency loans. Program guidelines specified that these loans would be forgivable if recipients spent funds on payroll expenses and other related costs. Current statistics show that approximately 46 percent of all PPP loans have received forgiveness payments. During the hearing, lawmakers examined the challenges that small firms encounter throughout the forgiveness process and what Congress and SBA can do achieve maximum forgiveness.
“As a grant program structured as a forgivable loan, the fair execution of the forgiveness phase of the program is as important as was fair access,” said Tracy Ward, Director of the SBA 504 Loan Program at Self-Help Ventures Fund in Durham, NC. “Several fixes to the forgiveness portion of the program are needed so that the businesses that were denied fair access at the program’s outset are not disproportionately saddled with unanticipated debt on the back end. By eliminating ‘gotcha’ rules and undue bureaucratic burdens, Congress and SBA can deliver on the program’s promise.”
“SBA continues to place a substantial number of loan forgiveness applications under review, resulting in processing backlogs of loan forgiveness applications,” said Leslie Payne, Assistant Vice President of Commercial Lending at Affinity Federal Credit Union in Basking Ridge, NJ. “While the SBA stated they were revamping their process to focus on larger and higher risk loans, credit unions have not seen a meaningful reduction in the volume of loan forgiveness applications placed under review. We ask the Committee to urge the SBA to follow through on its commitment to focus its reviews on larger and higher risk loans.”
“Members we spoke to noted that, for the borrowers that do not submit forgiveness applications within the group of their CDFI’s PPP loans made; there is a significant risk of imposing a large-scale administrative burden on CDFIs that will need to begin collecting payments on said loans,” said Marla Bilonick, President and Chief Executive Officer of the National Association for Latino Community Asset Builders. “CDFIs have ultimately out-performed their $15 PPP billion set-aside from congress by making over $30 million in PPP loans. The implied administrative burden of non-forgiveness would only add to the out-sized administrative load that CDFIs have borne through their more intensive work with small business clients.”