Banks and SMEs come to Congress to streamline PPP forgiveness.

Banks and SMEs come to Congress to streamline PPP forgiveness.

Finance Minister Steven T. Mnuchin at a Senate Bank, Housing and Urban Affairs Committee hearing reviewing a quarterly CARES law report filed with Congress in Washington, DC, USA on September 24, 2020.

Drew Fury | Reuters

One of the major strengths of the payroll protection program was the ability to waive loans if the money was used in accordance with the law. 60% of the capital is used for salaries and 40% for other allowable expenses. But with forgiveness opened last month, some banks and small businesses are having a hard time navigating the process, and advocates are pursuing simplicity for companies that are already struggling.

According to the Consumer Bankers Association, banks estimate that up to 80% of applications for forgiveness submitted by small and medium-sized businesses require additional follow-up to correct errors or find missing information. The EZ form that companies that meet certain qualifications can apply through a simplified process is not as easy as advertised, says CEO Richard Hunt.

“Many of these aren’t simple problems to solve, so solving the problem requires an average of 4 to 5 communications between small businesses and banks. The SBA EZ form isn’t straightforward for the overwhelming majority of small business owners. There are still some complex calculations. Must be done,” Hunt said in a statement.

A recent report from the Office of Government Responsibility points out that questions remain about the forgiveness process and that the Small and Medium Business Administration has issued rules and guidelines on a “rolling basis.” The report added, “Applying for a loan forgiveness takes more time than applying for a PPP loan itself.” The CBA, together with the International Franchise Association, requested the Treasury and SBA to be finalized before all the rules and guidelines of the next PPP improvements come into force.

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The SBA did not immediately respond to requests for comment.

More than 100 trade organizations have asked Congress to pass legislation that simplifies the forgiveness process for loans under $150,000 that make up the majority of loans made under the PPP. When asked about potential legislative adjustments to the forgiveness process at a Senate Banking Committee hearing on Thursday, Treasury Secretary Stephen Mnuchin told lawmakers that there was adversarial support beyond the EZ form created for businesses, but added that businesses should not wait for it. . Legislation to proceed with the application.

“I think we need additional laws to simplify more than we have done. We want to keep fraud protection,” Mnuchin said. He added that borrowers with less than $150,000 in loans “move fast… don’t wait for legislation, but if we can get a great legislative.”

Data from the National Federation of Independent Enterprises Borrowers, released last month, discovered that lenders were waiting for loan forgiveness applications, and the group’s report said that “many small business owners still think the EZ form is complex and confusing.” The group said that 43% of the members surveyed planned to use the EZ form and 62% were unsure which form of forgiveness to use.

And some are discovering that even if they want to ask for forgiveness, they cannot do it right away. Paul Hoodless, Owner of Rose Dry Cleaners In San Antonio, Texas, he wants to see if the loan will be forgiven below the $150,000 baseline, adding that his bank wasn’t ready to accept his forgiveness application late last month.

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“We immediately filled out all the papers and submitted them for forgiveness, but we didn’t accept the forgiveness papers because we had the expectation that there would be changes going on in the process,” he said. “Potentially we are considered small, so we are most likely in the category of less than $150,000 for full forgiveness.”

Karen Kerrigan, chairman of the Small Business & Entrepreneurship Council, said both banks and businesses are waiting for clearer and more potential changes to the process.

“Small business owners are keeping an eye on further changes to the PPP and additional guidance, including forgiveness simplification, and many have advised that they have to wait a little longer. Of course, this has created a bit of anxiety,” said Kerrigan. “Banks are waiting for clarity, certainty and reassurance. Why spend so much resources setting up a forgiveness system when there are legislative or rule changes that enable less bureaucratic and costly forgiveness systems?”

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