Key senators support more small-business relief
WASHINGTON — Senators from both parties signaled support for additional legislative and administrative changes to the Paycheck Protection Program to ensure it provides optimal support to small businesses trying to stay afloat during the coronavirus pandemic.
Treasury Secretary Steven Mnuchin made waves at the hearing of the Senate Small Business Committee Wednesday where he backed legislation "to put more money into the economy."
But members on both sides of the the aisle called for additional adjustments to ease the process for firms seeking PPP loans and forgiveness on those loans. Some also urged steps to better enable fintech firms and community development financial institutions to distribute PPP funds.
“Without PPP, we would have faced the extinction of small business as we know it, countless blocks of urban and suburban America would have been hollowed out, vast expanses of empty lots where brick and mortar stores once sustained communities,” said Senate Small Business Committee Chairman Marco Rubio, R-Fla., at the hearing. “It is tough out there. There is still a lot of suffering economic pain.”
Sen. Ben Cardin of Maryland, the committee's top Democrat, added that Congress need " to do more to ensure that underserved small businesses have the tools and resources they need to adjust to the long-term economic effects of COVID-19."
Here are key takeaways from the hearing.
Mnuchin urges additional legislation
Months after enactment of the Coronavirus Aid, Relief, and Economic Security Act, the Senate has been slower than the House to craft subsequent stimulus proposals. The House in May passed the ambitious Health and Economic Recovery Omnibus Emergency Solutions Act, or Heroes Act, as an additional coronavirus relief measure, but its chances in the Senate are unclear.
Funds available to Treasury and the Small Business Administration, through the CARES Act, haven't run out yet.
SBA Administrator Jovita Carranza told members of the committee that roughly $130 billion in funds are still available for loans.
But Mnuchin said more legislation is necessary as businesses begin to open up after being temporarily shut down due to local governments’ economic closures.
“I definitely think we are going to need another bipartisan legislation to put more money into the economy,” Mnuchin said. “We don’t want to rush into that. ... Whatever we do going forward needs to be much more targeted particularly to the industries and small businesses that are having the most difficulty in reopening as a result of COVID-19.”
Mnuchin added that any additional support will need to focus on encouraging businesses to rehire laid off workers.
“We are going to need money for business to encourage businesses to rehire people,” Mnuchin said. “We are going to seriously look at whether we want to do more direct money to stimulate the economy.”
Sen. John Kennedy, R-La., added that he would like to add support for businesses that have been hurt by the unrest over the death of George Floyd.
“I'm going to introduce a bill that I would like you and your very able, and I mean that sincerely, colleagues in Treasury to look at to take some of that money and make it available to the businesses, mostly small businesses, businesses that have been lost as a result of the burning and the looting and the felony ... rioting,” Kennedy said.
Senators press for support for smallest businesses, easier loan forgiveness
Sen. Maria Cantwell, D-Wash., said that the smallest businesses, particularly those with less than 10 employees, will need additional support in upcoming legislation.
Future legislation should "prioritize" such businesses to "make sure [they are] getting access to capital,” Cantwell said.
And Sen. Joni Ernst, R-Iowa, said she was concerned that the application process for loan forgiveness provided through the PPP program is too complicated for the smallest companies. There is currently an 11-page application to apply for loan forgiveness.
“Our banks and our small businesses have told us that a team of lawyers and accountants would be necessary just to help those businesses fill out that forgiveness application,” Ernst said.
Rubio also asked Mnuchin to clarify that businesses that don’t meet the thresholds for spending PPP funds on payrolls can still get some loan forgiveness.
“Can you confirm that … borrowers failing to meet the 60% requirement will still receive loan forgiveness equal to their payroll costs and a proportional amount of non-payroll costs?” Rubio asked.
Mnuchin responded with a “yes.”
Senators push for role of CDFIs, fintech lenders
Sen. Jeanne Shaheen, D-N.H., pressed the SBA and Treasury to continue to work with CDFIs as a number of small businesses have been turned down by banks when applying for PPP loans.
“I can see in my state where the CDFIs are basically getting out and marketing themselves and getting access to capital to, frankly, small businesses who just got turned down by banks,” Shaheen said. “So, the CDFI process has been working, and we should figure out how to continue it.”
Carranza noted that Treasury and the SBA set aside $10 billion in Paycheck Protection funds for CDFIs, but that the administration can “do more” to ensure that those institutions are able to help businesses that don’t have banking relationships.
Sen. Tim Scott, R-S.C., said the administration should use fintech platforms to expand the reach of PPP loans to firms that lack ties to banks approved to make SBA loans.
“The fintech world also provided a lot of traction to smaller businesses that may not have had that relationship,” Scott said. “I certainly think that … fintech and unorthodox folks should be a part of that process going forward.”
Carranza noted that four fintech companies were authorized to be “preferred” SBA lenders for CARES Act programs.
Senators want more assistance for business owners with criminal records
Sen. Cory Booker, D-N.J., and Cardin urged Mnuchin to reverse a regulation that prevents individuals with criminal records from participating in the Paycheck Protection Program.
“Incredible entrepreneurs in cities and communities all across America, who are now denied the aid, are seeing their small businesses collapse,” Booker said. “Do you believe that an individual who has started a business, in contributing to their local economy, is creating jobs, who has prior unrelated convictions, should really be barred from participating in the PPP program?”
Mnuchin said the Treasury is willing to reduce the amount of time between when a business owner committed a crime and is barred from the program.
“We want to work with you and others to fix this and fix it quickly,” Mnuchin said. “The original 7(a) program had seven years. We reduced it to five years. We thought we’d reduce it. If there is bipartisan support, we are happy to make the change this week and reduce it even more. We obviously have some issues about people who were convicted for financial crimes and other things.”
Cardin said that a bipartisan group of senators have introduced legislation to change that regulation.
“There is bipartisan legislation and broad support in the Senate to allow those that have repaid their debt to society to be able to participate in the PPP program with the exceptions of those that have committed economic fraud type offenses,” Cardin said.
Senators raise concern about entities receiving PPP funds inappropriately
Rubio noted that a number of businesses that Congress did not intend to support through the PPP program received funds.
“Some companies who should not have received the loans received them,” Rubio said. “We have read all about it. It shouldn't have happened. They represent the minuscule percentage of the overall program, however, and most have since returned them.”
Other Republican senators homed in on PPP funds received by organizations associated with Planned Parenthood.
“Last month, we found out that Planned Parenthood affiliates received $80 million through PPP, despite the fact that SBA affiliation rules disqualify them,” Ernst said.
Carranza said she could not divulge information publicly specific to the loan that affiliates of Planned Parenthood received.
Sen. Josh Hawley, R-Mo., said he will be asking the Justice Department to investigate the matter.
“I want to know how it happened that $80 million was diverted to Planned Parenthood affiliates that is plainly not permissible under the statute,” Hawley said. “This committee has an obligation to perform oversight. And I want answers on that and I will not accept that you can't tell us or that you don't know. So, I want answers. So, we will follow up with you. We'll follow up with the Department of Justice.”