December 5, 2022

House PPP forgiveness plan is better than nothing, bankers say

Bankers have mixed views of the latest proposal to revamp the Paycheck Protection Program.

Though underwhelmed by the PPP plan outlined in a new stimulus bill introduced by House Democrats, lenders are eager to see any progress on legislation to reauthorize and improve the program. And they are still concerned the effort will remain mired in an ongoing impasse over a new round of economic stimulus.

Under a proposed $2.2 trillion stimulus package, PPP loans of $50,000 or less would be automatically forgiven. A simplified forgiveness application would be offered for loans of $50,000 to $150,000.

“If this is an opening salvo, it’s a good first step,” said James Ballentine, executive vice president of congressional relations at the American Bankers Association. “Our goal is for them to get something done before they leave town.”

Bankers who have lobbied for automatic forgiveness for loans of up to $150,000 expressed disappointment with the lower cutoff.

About 85% of all PPP loans would benefit from the higher cap, said John Buhrmaster, president and CEO of the $559 million-asset 1st National Bank of Scotia in Scotia, N.Y.

“Those are the small businesses that really needed the money,” Buhrmaster said, adding that a smaller threshold “statistically doesn’t make a lot of sense.”

But any progress would be welcome news. The PPP has been on hiatus since early August, and lenders have grown increasingly frustrated with the complexities of having their borrowers’ loans forgiven.

Ten trade groups, including the ABA and the Independent Community Bankers of America, recently sent a letter to legislative leaders urging them to pass legislation reauthorizing the Paycheck program.

“The PPP provided over 5 million small businesses the financial lifeline they desperately needed to weather the start of the pandemic and the economic shutdown,” the letter stated. “As these businesses continue to recover, they will need additional resources to maintain business operations, and the PPP remains the most efficient and effective means to assist them through this challenging period.”

Other industries are making the same plea.

“We understand the arguments” blocking broader stimulus, said Chip Rogers, president and CEO at the American Hotel Lodging Association. “We’re asking Congress to act on the parts they can agree on.”

There are efforts to focus only on PPP fixes. Legislation providing automatic forgiveness for PPP loans of $150,000 or less has been introduced in the House and Senate, attracting more than 120 co-sponsors. But none of those efforts have gained meaningful momentum.

“Instead of coming up with a complicated, multitiered, burdensome government process for struggling small businesses, Congress should take up and immediately pass” those bills, said Richard Hunt, president and CEO of the Consumer Bankers Association.

Under the initial stimulus package, which authorized PPP, loan proceeds spent on a number of operating expenses, including payroll, are eligible for forgiveness.

Another mounting concern has been the radio silence from the Small Business Administration on forgiveness applications that have already been submitted. Though the SBA opened its forgiveness portal on Aug. 10, it has yet to act on any of the tens of thousands of applications that have been uploaded.

“We’ve submitted a number of applications,” Burhmaster said. “We’re four to six weeks into this and we have not heard one word back.”

“For borrowers who were well organized, took the initiative and were quick to complete their applications, it’s perhaps frustrating that they’re still waiting without any response for forgiveness,” said Daniel Sheehan, chairman and CEO of the $2 billion-asset Professional Holding in Coral Gables, Fla.

Despite the confusion, Sheehan said Professional would consider participating if Congress clears the way for a new round of PPP lending.

“Generally speaking, if it’s a program that’s designed to help our clients and benefit our communities, we absolutely want to participate,” Sheehan said.

“We want to see everybody do well,” he added. “We want to see small business rebound, the economy come back and we certainly want to support those industries, companies and people that have been adversely impacted by the” pandemic.

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