WASHINGTON—A litany of trade groups is calling for the automatic forgiveness of Paycheck Protection Program loans for under $150,000.
A letter sent to federal legislatures supports Senate Bill 4117, the Paycheck Protection Program Small Business Forgiveness Act, a measure that's receiving bipartisan report.
"We can avoid the burdensome cost of superfluous bureaucracy required to arrive at the foregone conclusion of loan forgiveness by implementing a few commonsense changes," said U.S. Sen. Kevin Cramer (R-S.D.), one of the bill's sponsors.
PPP went into place earlier this year as a lifeline to businesses impacted by COVID-19, and the program is part of the federal Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. More than $500 billion in loans have been given to businesses to help with paying employees and covering other expenses.
"The Paycheck Protection Small Business Forgiveness Act would give small businesses peace of mind by eliminating unnecessary bureaucratic requirements and simplifying the process for forgiving smaller loans," Cramer said in a statement.
More than 85 percent of PPP loans to small businesses are less than $150,000, according to the Specialty Equipment Market Association, one of dozens of trade group signatories to a letter seeking automatic loan forgiveness.
"Under the current program, the loan has restrictions on how monies are spent, including a requirement that 60 percent be spent on payroll cost, and company officials must then spend many hours completing paperwork to document the spending," SEMA said. "The proposed legislation would instead simply require borrowers to submit a one-page forgiveness document."
Other trade groups signing the letter include the Tire Industry Association, Auto Care Association and Motor & Equipment Manufacturers Association.
PPP forgiveness could occur when Congress considers another COVID-19 stimulus package later this month. That relief could be in the form of a stand-alone measure or part of a larger measure, SEMA said.
"The bipartisan Paycheck Protection Small Business Forgiveness Act cuts these struggling small businesses a break when they need it most by providing them full forgiveness on PPP loans of $150,000 or less," U.S. Sen. Bob Menendez (D-N.J.) said in a statement. "Automatically forgiving PPP loans for these small businesses allows them to focus their limited resources on keeping their business going and makes it easier for them to have their PPP loans forgiven."
Law makers said the cost to apply for PPP forgiveness is $2,000 for small businesses and $500 for lenders. Creating automatic forgiveness could save small businesses $7.4 billion and banks nearly $2 billion.
The trade groups estimate the cost to business at between $2,000 and $4,000 as between 20 and 100 hours of work will be needed to complete current requirements.
Borrowers would fill out a one-page form to their lenders seeking forgiveness under the new idea. Lenders would be held harmless if borrowers lie on the form, but those receiving funds could face enforcement action if they deceive.
"The current forgiveness application is unnecessarily burdensome for many businesses, particularly the smallest of small businesses without the administrative support needed to complete the form," Consumer Bankers Association CEO Richard Hunt said in a statement.
PPP program guidelines originally required 75 percent of borrowed money be spend on employee costs to have a loan considered for forgiveness. That later was lowered to 60 percent.