WASHINGTON (CN) — While those participating in a federal loan program aimed at helping small businesses ride out the coronavirus pandemic generally praised the initiative to lawmakers Wednesday, they called on the government to take steps to make it run more smoothly.
Created as part of the $2 trillion CARES Act that became law in March, the Paycheck Protection Program allows businesses to take out federally guaranteed loans that can be forgiven if the money is used to cover payroll, rent and certain other expenses.
Through June 12, the program has approved $512 billion in loans spread across more than 4.5 million loans. The average loan size is $112,000, with more than 65% of loans coming in at $50,000 or less.
“There’s clearly a long way to go in this recovery, but it appears that the PPP is having a major impact in saving many American jobs,” Representative Steve Chabot, an Ohio Republican, said at a Wednesday hearing of the House Small Business Committee.
Congress approved a new round of funding in April, after a rush of applications from businesses forced to shutter or restrict their operations to limit the spread of Covid-19 quickly exhausted the nearly $350 billion initially approved for the program.
Last month, Congress passed a law giving businesses greater flexibility in how they use their loans, including upping the amount of time they have to spend the money and still be eligible for loan forgiveness.
Responding to concerns that the application borrowers must fill out to have their loans forgiven is too complicated, the Small Business Administration issued a new, shorter application on Wednesday.
But the program is set to stop accepting new applications at the end of the month, drawing concerns from business owners and advocates who say they are still struggling even as states begin to reopen.
“Many of my fellow restauranteurs are not going to make this,” Melissa Kelly, who runs a restaurant in Rockland, Maine, told the committee Wednesday. “They’re not going to survive the government-mandated restrictions on restaurant operations due to Covid-19.”
Kelly urged the committee to “revise and amend” the PPP program, focusing specifically on restaurants and other hospitality businesses. She noted that even though states are reopening, many people will not feel comfortable returning to restaurants.
“I want you all to think about restaurants in a different way,” Kelly said. “After 30 years of being in the business, our industry is in a crisis.”
Eduardo Sosa, senior vice president of Small Business Administration lending at Commerce National Bank, said the process of receiving a PPP loan has at times been difficult to navigate, and called on the federal government to give clear guidance on how the loans work.
“I’m an experienced lender, but I’ve never fully understood how to make a PPP loan from beginning to end,” Sosa said. “No one does.”
A side effect of the speed with which the Small Business Administration stood up the program, Sosa said quickly changing guidance and a lengthy loan application has kept some business owners away from the program over concerns about how the loan forgiveness will work.
He also said guidance issued in the wake of reporting that large companies were receiving PPP loans caused some business owners to unnecessarily repay their loans.
Ashley Harrington, senior counsel at the Center for Responsible Lending, told the committee the program’s complexities have fallen especially hard on businesses owned by minorities, which tend to be smaller and have less contact with large financial institutions.