Small business owners show concern, criticism of PPP

Oct. 26, 2020
The Paycheck Protection Program has been essential in keeping small businesses afloat during the pandemic. However, there are significant criticisms and concerns about the program’s implementation and reliability.

The Paycheck Protection Program (PPP) was established as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which the U.S. Congress passed in late March to alleviate the health and economic crises of COVID-19. The program, which is operated by the Small Business Association (SBA), has distributed 5.2 million PPP loans totaling $525 billion. According to data released by SBA and the U.S. Treasury Department, auto repair shops received between $1.2 billion and $2 billion in loans for nearly 20,000 businesses. 

The Paycheck Protection Program has been essential in keeping small businesses afloat during the pandemic. However, there are significant criticisms and concerns about the program’s implementation and reliability. The SBA has been accused of overlooking certain safety and anti-fraud procedures in an attempt to get the program up and running as soon as possible. Additionally, small business owners have been frustrated with the confusing and evolving eligibility requirements and application process. 

On August 10, the SBA opened the loan forgiveness portal, which allows small businesses with a PPP loan to submit their application for full reimbursement. As of late August, the SBA reported that they have received 96,000 applications for loan forgiveness—less than 2% of the number of total loans dispersed. According to the CARES Act, the SBA has 90 days after receiving an application to remit payment for the loan to the lender. On October 2, SBA and the Trump Administration reported that applications have been processed and the first payments have been distributed.  

Although loan forgiveness and repayment is in process, many small business owners and lenders remain wary of the program and nervous their loan will not be forgiven. The United States House of Representatives Committee on Small Business held consecutive hearings in September in which they discussed the loan forgiveness process with SBA officials, small business owners, and lenders.  

During the hearing, witness Lynn Ozer, President of SBA Lending at Fulton Bank, testified that lenders were struggling to understand their role in the loan forgiveness process, and they felt the SBA was not fulfilling their role to guide them effectively. She stated: 

“When it comes to forgiveness, significant concerns need to be addressed now. Piecemeal guidance continues to create confusion. There is still no guidance for major issues, and without answers, I cannot help my borrowers… More importantly, borrowers are confused by the burdensome forgiveness process and panicked that the loans they believed would be grants if they followed the rules may become burdensome debt because they can’t muddle through the paperwork.”

Other small business owners at the hearing echoed Ozer’s concerns and implored the subcommittee to establish clear, simple guidelines for loan repayment. Additionally, the witnesses expressed their hope for Congress to pass “automatic forgiveness” legislation, allowing for small loans under $150,000 to have an automatic or expedited forgiveness process.  

Currently, stimulus legislation is stalled on Capitol Hill. For the last couple of weeks, U.S. House Democrats and Republicans in the U.S. Senate have clashed over the size and scope of the fifth stimulus bill. Democrats are seeking a large, comprehensive package of over $2 trillion, while Republicans have proposed a smaller, less expensive bill.  

On Tuesday, President Donald Trump ordered stimulus negotiations to a halt, stating that Speaker of the House Nancy Pelosi is “not negotiating in good faith.” Shortly thereafter, however, the President indicated that he may be open to certain economic legislation, such as airline assistance and individual stimulus checks. He did not directly reference the Paycheck Protection Program in his statements.  

The Paycheck Protection Program still has an allotted $138 billion remaining for loans, if Congress is able to pass a new stimulus that includes a second round of PPP. In one of the hearings, SBA Chief of Staff William Manger stated that, for the SBA, implementing a new round of PPP would be “as easy as flipping a switch,” since infrastructure for the program is already established.  

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