Two major bank trade groups, the Consumer Bankers Association and the Bank Policy Institute, said Tuesday that Congress should grant automatic forgiveness for all pandemic relief small business loans less than $150,000.
“These small businesses and their employees are the backbone of our nation’s economy and communities. Their time and resources would be better focused on getting the economy safely back up and running, not processing burdensome paperwork,” the associations wrote in a letter to relevant members of Congress.
The bank groups say the automatic forgiveness would collectively save up to 70 million hours of paperwork for small business owners and approximately $7.4 billion that could be allocated to reopening costs and other business costs instead.
The Small Business Administration’s relief program, called the Paycheck Protection Program, provides struggling small businesses with loans that would, under current law, only be forgiven as long as 75% of the loan went to paying for worker salaries and the loan was spent over an eight-week period. It was initially funded with $350 billion as part of the massive $2.3 trillion CARES Act relief package.
The groups said that automatically forgiving the smallest loans would significantly ease the financial burdens of the majority of small businesses that qualify for the smallest of relief funds, loans worth $150,000 or less. Typically this would be small local establishments or mom and pop stores that do not have full-time financial professionals on their payroll to help them through the complicated forgiveness application process.
Such small business owners would be required to pay a third party or attempt to complete the paperwork on their own, which could take anywhere from 20-100 hours, based on analysis from AQN Strategies.
Loans less than $150,000 account for 85% of total small business relief loans but make up less than 26% of the actual loan dollars.
Congress is expected this week to pass major changes to the small business pandemic relief program to make it easier for companies to access and use the loans.
