Forty-seven Senate Democrats are pressing the Small Business Administration to set up a streamlined application process for “low-dollar” subsidized small business loan recipients, according to a letter released Friday by the office of Senate Minority Leader Charles E. Schumer (D-N.Y.).
“We are especially concerned that so many of these very small and underserved businesses will feel compelled to hire accountants and attorneys to complete the forgiveness form in a manner that provides comfort that the loans will be forgiven,” the senators wrote.
The lawmakers asked the SBA to create a separate, streamlined form that requires minimal documentation, allowing businesses to bypass existing forms that require extensive paperwork to prove costs such as payroll and rent; to lessen the legal jeopardy faced by banks that lend to small businesses ― a provision known as “safe harbor”; and to set up a well-staffed help line and provide more communications resources.
Mnuchin loosens restrictions on small-business loans to ease forgiveness, but borrowers to remain secret
Treasury Department and SBA spokesmen did not comment on the letter released Friday. Treasury Secretary Steven Mnuchin said in a hearing Wednesday that his agency is already working on new forms for people who check the safe harbor portion of the application.
“You don’t need to go hire lawyers and accountants … but I can assure you we’ll work with you very closely, we want to make this easy for people to do, and now with the safe harbor most people have the benefit of that,” Mnuchin said.
The Paycheck Protection Program is a $660 billion subsidized loan program that is meant to prevent small businesses from laying off employees because of the coronavirus. The loans are processed by a network of SBA-approved lenders and financial technology companies while the SBA and the Treasury Department play a regulatory role. Under the terms of the program, small business owners can receive low-interest loans that have the option of later being forgiven, contingent on keeping some portion of employees on the payroll.
The program was launched April 3 and scaled up quickly despite some early hiccups, lending at least $511 billion to millions of small businesses.
The opportunity to have the loan forgiven ― effectively converting it into a grant ― was seen as a critical element for small businesses who would rather not be burdened with additional debt.
The SBA and the Treasury Department have already significantly loosened the loan forgiveness process in ways that favor business owners, in part because roughly $130 billion has gone unspent in the most recent round of Paycheck Protection Program funding.
Congress and the Trump administration have already extended the period in which loans must be spent from eight to 24 weeks. They also reduced the percentage of funds that are required to be spent on payroll from 75 percent to 60 percent, after many small business owners complained that they would prefer to spend more of the money on rent and capital expenses.