If lawmakers, small business advocates, and banking institutions obtain way, small businesses that are presently saddled with Paycheck Protection Program (PPP) loan debt may be able to receive automatic forgiveness soon.
That’s the center from the Paycheck Protection Small Business Forgiveness Act, a bipartisan bill introduced last month by Sens. Kevin Cramer, R-N.D., Bob Menendez, D-N.J., Thom Tillis R-N.C., and Kyrsten Sinema, D-Ariz. This bit of legislation provides automatic loan forgiveness for PPP loans under $150,000. Qualifying businesses would only have to complete a one-page form to become entitled to forgiveness.
According to data in the Sba (SBA), the $150k cutoff represents 86% of the over 4.9 million businesses that got loans via the PPP. However, those businesses underneath the $150k threshold only received 27% from the total money administered with the PPP.
Proponents from the bill reason that it might be a time saver for small businesses, his or her paperwork needs would drop. Some also suggest that blanketed forgiveness could alleviate the workload for that banks which have processed PPP applications.
In their announcement introducing the Forgiveness Act, the sponsoring senators specifically estimated that automatic forgiveness could retain $2,000 for every affected small business and $500 per loan for that lenders — ultimately saving roughly $9.4 billion as a whole.
“We are able to steer clear of the burdensome cost of superfluous bureaucracy required to reach the formality of loan forgiveness by implementing several commonsense changes,” Cramer said inside a statement. “The Paycheck Protection Small Business Forgiveness Act would give small businesses reassurance through the elimination of unnecessary bureaucratic requirements and simplifying the procedure for forgiving smaller loans.”
The PPP Automatic Forgiveness Bill Has Backers
The bill — or variants from it, at least — has received support from numerous parties beyond Capitol Hill.
Perhaps especially is Steven Mnuchin, the Secretary of the Treasury. While Mnuchin hasn’t thrown his weight behind the introduced bill specifically, he has suggested the requirement for automatic forgiveness.
“One thing we’ll discuss is don't let just have forgiveness for all the small loans? I think that’s something we should consider,” Mnuchin said during a House Small Business Committee hearing on July 17.
Organizations have also chimed within their support. For example, over 130 trade associations sent instructions to Congress on July 9 urging for passage from the bill. Among the letter’s cosigners included the united states Chamber of Commerce, the International Franchise Association, and also the National Restaurant Association.
In a July 17 letter, the American Bankers Association, the financial institution Policy Institute, and the Consumer Bankers Association pleaded with Mnuchin and SBA head Jovita Carranza for automatic PPP loan forgiveness as high as a minimum of $150,000 so that as almost as much ast $350,000.
Most recently, the online payments giant PayPal — that has been processing PPP applications for the SBA — joined the throng of voices urging for forgiveness on PPP loans under $150k.
“As Congress considers proposals for automatic loan forgiveness for PPP loans below a certain dollar amount, we feel it is within our small business customers’ welfare to make sure their voices are heard with their representatives concerning the loan forgiveness process,” PayPal’s Senior V . p . of worldwide Credit Doug Bland told the Washington Business Journal via email.
Opponents Fear Fraud, Lack Of Data
However, not everyone is aboard having a blanket forgiveness bill.
A chief concern is fraud. Currently, the SBA has refused to reveal the companies that received PPP loans under $150k. Instead, the SBA only has shared what they are called of those businesses that got larger PPP loans.
Rep. Katie Porter (D-Calif.), part of the Financial Services and Oversight committees, told Politico:
“Thus, there is absolutely the opportunity of waste and fraud when awarding and later forgiving these financing options — companies that don’t need assistance receiving essentially free taxpayer money, but more importantly, our smallest, most vulnerable businesses being prevented from obtaining the help they require.”
Liz Hempowicz, the director of public policy for The work on Government Oversight, added (per Politico) that “we should begin to see the names of [the smaller] borrowers before we discuss automatic loan forgiveness.”
Another critique comes from the concept that automatic forgiveness goes beyond the initial intent of the PPP.
“This program may be the Paycheck Protection Act to protect payroll and also to protect workers,” Sen. Ben Cardin, D-Md., said in an interview with the Washington Business Journal. “To give a blanket forgiveness without requiring the verification of how the cash was spent, to me, goes beyond the extent from the bill.”
How PPP Forgiveness Works Right Now
Currently, PPP forgiveness is a wonky mess. And, based on market research by the Consumer Bankers Association, only 20% of banks have begun accepting forgiveness applications.
At time of writing, all businesses that received PPP funding must hit numerous requirements before receiving forgiveness. These requirements include:
- Funds can be used for qualifying purposes, such as payroll or rent
- The loan must be spent within 24 weeks of disbursement
- Borrowers must maintain their full-time staff and payroll expenses
