NAICU Washington Update

House Holds Hearing on Future of the Paycheck Protection Program

March 12, 2021

The House Committee on Small Business held a hearing on the future of the Paycheck Protection Program (PPP), which is set to expire at the end of the month, and examined possible next steps for the initiative.  Specifically, the committee discussed the First and Second Draw loans and loan forgiveness.

Yesterday, just a day after the hearing, Chairwoman Nydia Velazquez (D-NY) and Ranking Member Blaine Luetkemeyer (R-MO) introduced legislation to extend the program by two months and provide an additional 30 days for the Small Business Administration (SBA) to process loans submitted prior to the proposed new May 31, 2021 deadline.  The bill’s chances of passage are not clear.

During the hearing, Rep. Velazquez stated the PPP was one of the most effective means of distributing relief to small business. Adding that the changes the Biden Administration made with the goal of getting money to smaller businesses has resulted in a 20% increase in loans approved to minority-owned businesses, a 14% increase in loans approved to women-owned businesses, and a 12% increase in loans approved to businesses in rural areas.

Rep. Luetkemeyer emphasized, as did many of his Republican colleagues, that the program was intended to be temporary in response to the pandemic and should not be expanded. 

The hearing hit on a number of issues that have hindered the effectiveness of the program. For example, witnesses recommended that the SBA should consider providing resources, such as calculators, to program participants, take actions to avoid changing program rules midstream, and provide clearer guidance pertaining the funds. 

Witnesses also testified that the loan forgiveness calculation process was not clear, which has caused some businesses not to apply for a second draw loan. They also advocated for a more streamlined loan forgiveness process. To help facilitate the process, witnesses suggested that the SBA should have a live Help Desk to assist applicants.

Although the American Rescue Plan expanded the program by providing an additional $7 billion in funding, it did not extend the deadline beyond the end of this month. During the hearing, all witnesses urged the committee to extend the program’s deadline 60-90 days beyond March 31. 

Some lenders have reported that they have closed down their loan applications in order to dedicate the final weeks of the program to serving pending applications. The SBA has issued a number of Hold codes that hold lenders responsible for certifying the veracity of the information they provide to borrowers.  As a result, thousands of borrower’s loans have been held in limbo jeopardizing their ability to receive their loans ahead of the March 31 deadline. 

Chair Velazquez closed the hearing saying the SBA Committee will continue to make the PPP more equitable and accessible for small businesses.  

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