One of the main attractions of the Paycheck Protection program was the ability to get loans out when the money was used as permitted by law – with 60% of the capital being used for payroll and 40% for other allowable expenses. When forgiveness opened last month, some banks and small businesses reported difficulty controlling the process, and proponents pushed for simplicity for already weak businesses.
According to the Consumer Bankers Association, banks estimate that up to 80% of procurement requests submitted by small businesses require additional follow-up to correct errors or find missing information. The EZ form, which companies who meet certain qualifications can use to apply via a simplified process, is not as simple as advertised, says CEO Richard Hunt.
"Many of these problems are not straightforward to solve and require an average of four to five communications between the small business and the bank to resolve the problem. The SBA EZ form is not easy for the vast majority of small business owners and requires some complicated calculations." Hunt said in a statement.
A recent report from the Government Accountability Office raised questions about the award process, indicating that the Small Business Administration had issued rules and guidelines on a "rolling basis". The report added that "applying for lending is more time consuming than applying for the PPP loan itself". The CBA, along with the International Franchise Association, urged the Finance Department and the SBA to finalize all rules and guidelines for the next wave of PPP improvements before they go into effect.
The SBA did not immediately respond to a request for comment.
More than 100 trading groups have asked Congress to pass laws that streamline the process of granting loans under $ 150,000, which make up the vast majority of loans granted under the PPP. When asked about possible legislative changes to the procurement process at a Senate Banking Committee hearing on Thursday, Treasury Secretary Steven Mnuchin told lawmakers there was bipartisan support beyond the corporate development cooperation form, but added that companies don't wait should legislation to promote application.
"We believe we need additional laws to simplify beyond what we've done. We want to keep fraud protection up," Mnuchin said. He added that he would encourage borrowers who got loans below $ 150,000 to "act quickly and … not wait for laws. But if we could get laws that would be great."
Data from the National Federation of Independent Business released last month found that borrowers were waiting for lenders to accept loan applications. The group's report states: "Many small business owners still find the development cooperation form complicated and confusing." The group found that 43% of the surveyed members wanted to use the EZ-Form and 62% were not sure which award form to use.
And some find that although they want to ask for forgiveness, they cannot do so immediately. Paul Hoodless, owner of Rose Dry Cleaners in San Antonio, Texas, said he was curious to see loans below the $ 150,000 threshold, adding that his bank was unwilling to accept his request for forgiveness late last month .
"We immediately filled out all of our papers and submitted them for forgiveness, but they did not accept the forgiveness papers as the expectation seems to be that the process will keep changing," he said. "Since ours is classified as small, it will likely fall into a category under $ 150,000 for utter forgiveness."
Karen Kerrigan, President of the Small Business & Entrepreneurship Council, said banks and corporations alike are waiting for more clarity and possible changes to the process.
"Small business owners are on the lookout for additional changes to PPP and possibly more guidance, including simplifying forgiveness, and many have been advised to wait a little longer – this has of course raised some concerns," said Kerrigan. "The banks are also waiting for clarity, security and confirmation. Why should significant resources be devoted to setting up a forgiveness system when there can be changes in the law or rules that make a less bureaucratic and costly forgiveness system possible?"