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On Paycheck Protection Program, streamlined forgiveness is key
September 9, 2020
The nation’s small businesses, and the millions of men and women who work at them, are the foundations of communities across the country and our nation’s economy. As a result of COVID-19, millions of small business owners have been forced to shutter operations with little to no revenue coming in.
Luckily, Congress extended them a lifeline with the passage of the Paycheck Protection Program and the banking industry quickly came together to implement this forgivable loan program. There were some hurdles along the way for both small businesses and lenders due to constantly changing guidelines and seemingly antiquated government computer systems, but in the end the nation’s financial institutions working with the Small Business Administration were able to make more than $525 billion in loans to more than 5.2 million small businesses — undoubtedly saving tens of millions of jobs in the process. In all, two decades worth of government-backed small business loans were made in a matter of months.
Now that the program has ended, small business owners are facing the challenges of reopening local economies in a time of uncertainty, retooling their businesses, and working to protect the health of both customers and employees. They are also facing the daunting process of applying for PPP loan forgiveness.
The tricky part? Forgiveness.
Despite attesting during the application process how the funds would be used in accordance with the program, the government is requiring these small business owners to complete and reverify how the loan was used. This might sound like a simply task, but the existing forgiveness guidance will require the smallest of small business owners to invest a significant amount of time and resources into completing complex forms. According to an independent estimate, the forgiveness process has an effective cost of $2,000 - $4,000 and requires between 20 to 100 hours of work per business — collectively, this amounts to a $7 billion hit to our nation’s small businesses.
To put it into context, one small business accounting firm we contacted said it took her team of CPAs and MBAs more than 100 hours to interpret the current PPP forgiveness guidance and build a template for their clients. Even with a “plug-and-play” template, it takes a trained accountant about three hours to fill in the required information and countless more hours by the business owners to collect the needed documentation and make the necessary calculations. Even the PPP EZ form is too complicated for most small business owners.
An immigration lawyer who received a PPP loan stated even with an outside bookkeeper, she spent hours collecting all the information — time taken away from helping her clients with their immigration cases.
The overwhelming majority of PPP recipients, however, do not have full-time financial professionals on their staff. Streamlining the forgiveness process for these businesses, those with loans less than $150,000, would help approximately 85 percent of total PPP recipients.
Rather than requiring small business owners to now hire accountants or play one themselves, the government should streamline the PPP forgiveness process for the smallest businesses so these entrepreneurs can focus on rebuilding local economies and helping their customers.
What’s the solution?
Fortunately, there is a growing bipartisan coalition in the Senate and House of Representatives led by Sens. Kevin Cramer (R-N.D.), Bob Menendez (D-N.J.), Thom Tillis (R-N.C.) and Kyrsten Sinema (D-Ariz.) and Reps. Chrissy Houlahan (D-Pa.) and Fred Upton (R-Mich.) to require SBA to create a simple, one-page attestation form to forgive covered PPP loans of less than $150,000. Nothing in the legislation prevents the audit of these loans for fraud, but it does prevent small businesses from spending limited resources completing government paperwork.A growing coalition of more than 140 groups representing businesses and lenders is urging Congress to quickly pass this legislation and a streamlined forgiveness process also has the support of Treasury Secretary Steven Mnuchin and the consumer group Center for Responsible Lending.
Congress acted correctly to help small businesses. Now it is time to finish the job.
Richard Hunt is president and CEO of the Consumer Bankers Association.