Lenders press Congress to restart — and revamp — PPP

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As Congress returns to Washington after a summer break, lenders are pressing lawmakers to resuscitate the Paycheck Protection Program.

While the first two rounds of the $659 billion program centered on getting loans into the hands of new participants, lenders want the next iteration to focus on quickly getting many of those borrowers' loans forgiven or helping those still struggling secure another round of funding.

Specifically, lenders want a streamlined forgiveness process for loans of $150,000 or less. They would also like permission to make new loans to PPP participants that can show ongoing stress from the coronavirus pandemic.

The viability of scores of small businesses is at stake, lenders said.

“It’s critical we do an additional round of stimulus,” said Christopher Maher, chairman and CEO of the $11.3 billion-asset OceanFirst Financial in Red Bank, N.J. “This round needs to be far more targeted on the people who are feeling continuing pain.”

Though Democrats and Republicans have struggled to find common ground on extending unemployment benefits, aiding state and local governments and another round of direct stimulus for Americans, broad agreement exists on the need to reinvigorate the Paycheck program, lenders said.

“There’s a lot of agreement around PPP,” said Lendio CEO Brock Blake. “I’m disappointed we didn’t get it done before the recess.”

PPP “seems to be the one thing everyone agrees on,” added Ryan Metcalf, Funding Circle’s head of U.S. regulatory affairs and social impact.

The Small Business Administration, which is administering the Paycheck Protection Program in partnership with the Treasury Department, approved 5.2 million PPP loans totaling $525 billion before the program closed on Aug. 8. That left more than $133 billion unallocated.

With the timing of a recovery unclear, demand for capital is surging after many small businesses exhausted their original loans, Blake said.

“PPP was a great shot in the arm, but that was back in April,” Blake said.

“Most of that money has run out," he added. "A lot of businesses are in a tough spot and they’re not sure they’ll make it through. A lot of them are asking how they can set up their application so that the exact moment something passes they’ll be ready to go. That demand is surprisingly strong.”

The stimulus package that created the Paycheck Protection Program did not allow for small businesses to obtain second loans.

Funding Circle is backing proposals that would provide new PPP loans to businesses with 100 or fewer employees that can demonstrate pandemic-related reduction in revenue of 50% or more.

“It’s another issue where there’s a lot of bipartisan support in both chambers,” Metcalf said.

Blake said he would be comfortable with a 25% revenue-loss threshold, and that he hoped Congress will avoid limiting relief to specific industries or types of businesses.

“There should be broad, universal criteria,” Blake said. “I don’t think it’s Congress’s job to pick and choose which businesses or industries were hit the hardest."

Meanwhile, a simplified forgiveness process for smaller PPP loans has been championed by groups such as the Independent Community Bankers of America, which has criticized the current applications as being unwieldy for many of the program's participants.

For now, PPP proceeds spent on rent, mortgage interest, utilities, payroll, benefits and select other business expenses are eligible for forgiveness. Lender groups are continuing to lobby strongly for automatic forgiveness for loans of $150,000 or less if the borrower completes a one-page attestation certifying funds were spent properly.

“Giving automatic forgiveness to sub-$150,000 loans and a streamlined process for sub-$2 million loans is better for small businesses, better for the economy, better for lenders — and better for the SBA, by the way,” Metcalf said.

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Small business lending Community banks Paycheck Protection Program Law and regulation