Congressional Hearing — The Next Steps for the Paycheck Protection Program (House, March 10, 2021)
Summary
This House Committee on Small Business hearing record, The Next Steps for the Paycheck Protection Program, covers a hearing on March 10, 2021, with Nydia Velázquez as Chairwoman and Blaine Luetkemeyer as Ranking Member. The witnesses listed are Hilda Kennedy of AmPac Tri-State CDC, Lisa Bombin of Unico Communications, Inc., Lisa Simpson of the American Institute of CPAs, and Alice Frazier of Bank of Charles Town. In the opening statement, Chairwoman Velázquez says PPP has approved 2.1 million loans, totaling $156.2 billion during 2021, and that Congress needs to consider a short-term extension beyond March 31.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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- Congressional materials
- Document type
- Congressional Hearing
- Case
- Chrg 117Hhrg43606
Cite this document
“Congressional Hearing — The Next Steps for the Paycheck Protection Program (House, March 10, 2021).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-117hhrg43606/
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THE NEXT STEPS FOR THE PAYCHECK
PROTECTION PROGRAM
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
HEARING HELD
MARCH 10, 2021
Small Business Committee Document Number 117–005
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
43–606 WASHINGTON : 2021
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
MELISSA JUNG, Majority Staff Director
ELLEN HARRINGTON, Majority Deputy Staff Director
DAVID PLANNING, Staff Director
(II)
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CONTENTS
OPENING STATEMENTS
Page
Hon. Nydia Velázquez ............................................................................................. 1
Hon. Blaine Luetkemeyer ....................................................................................... 3
WITNESSES
Ms. Hilda Kennedy, Founder and President, AmPac Tri-State CDC, dba
AmPac Business Capital, Ontario, CA, testifying on behalf of the National
Association of Development Companies (NADCO) ............................................ 5
Ms. Lisa Bombin, President and CEO, Unico Communications, Inc., San
Antonio, TX ........................................................................................................... 6
Ms. Lisa Simpson, CPA, CGMA, Vice President of Firm Services, American
Institute of CPAs, Durham, NC .......................................................................... 8
Ms. Alice Frazier, President and Chief Executive Officer, Bank of Charles
Town, Charles Town, WV, testifying on behalf of the Independent Commu-
nity Bankers of America ...................................................................................... 10
APPENDIX
Prepared Statements:
Ms. Hilda Kennedy, Founder and President, AmPac Tri-State CDC, dba
AmPac Business Capital, Ontario, CA, testifying on behalf of the Na-
tional Association of Development Companies (NADCO) .......................... 39
Ms. Lisa Bombin, President and CEO, Unico Communications, Inc., San
Antonio, TX ................................................................................................... 51
Ms. Lisa Simpson, CPA, CGMA, Vice President of Firm Services, Amer-
ican Institute of CPAs, Durham, NC .......................................................... 54
Ms. Alice Frazier, President and Chief Executive Officer, Bank of Charles
Town, Charles Town, WV, testifying on behalf of the Independent Com-
munity Bankers of America ......................................................................... 64
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
AICPA - The American Institute of CPAs ...................................................... 69
CUNA - Credit Union National Association ................................................... 72
Inclusiv .............................................................................................................. 74
Joint Trades Letter ........................................................................................... 77
NADCO - National Association of Development Companies ........................ 79
NAFCU - National Association of Federally-Insured Credit Unions ........... 80
National Association of Realtors ..................................................................... 83
NFIB .................................................................................................................. 85
(III)
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THE NEXT STEPS FOR THE PAYCHECK
PROTECTION PROGRAM
WEDNESDAY, MARCH 10, 2021
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:07 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velázquez
[chairwoman of the Committee] presiding.
Present: Representatives Velázquez, Golden, Davids, Mfume,
Phillips, Newman, Bourdeaux, Chu, Evans, Delgado, Houlahan,
Kim of New Jersey, Craig, Luetkemeyer, Williams, Hagedorn,
Stauber, Meuser, Tenney, Kim of California, Van Duyne, Donalds,
Salazar, and Fitzgerald.
Also Present: Representative Schneider.
Chairwoman VELÁZQUEZ. Good morning. I call this hearing to
order.
I want to make sure to note some important requirements. Let
me begin by saying that standing House and Committee rules and
practice will continue to apply during hybrid proceedings. All Mem-
bers are reminded that they are expected to adhere to the standing
rules.
House regulations require Members to be visible through a video
connection throughout the proceeding, so please keep your cameras
on. Also, please remember to remain muted until you are recog-
nized, to minimize background noise. If you have to participate in
another proceeding, please exit this one and log back in later.
In the event a Member encounters technical issues that prevent
them from being recognized for their questioning, I will move to the
next available Member of the same party. I will recognize that
Member at the next appropriate time slot, provided they have re-
turned to the proceeding.
For those Members physically present in the committee room
today, we will also be following the health and safety guidance
issued by the attending physician. That includes social distancing
and especially the use of masks. Members and staff are expected
to wear masks at all times while in the hearing room, and I thank
you in advance for your commitment to a safe environment for all
here today.
One year ago today, during the early stages of the pandemic, this
committee held our first hearing on the impact of COVID on small
businesses. Since that hearing, our committee has been working re-
lentlessly to get them the aid they need to make it through this
crisis.
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One of Congress’ earliest and most effective means of distrib-
uting relief to small businesses was through the Paycheck Protec-
tion Program. Congress created PPP through the CARES Act to
provide fully guaranteed, forgivable loans to meet payroll costs and
other business expenses.
Today, PPP is still providing urgently needed funding. The pro-
gram accepts applications for first- and second-draw loans, and has
approved 2.1 million loans, totaling $156.2 billion during 2021.
The high level of demand for PPP loans is a testament to the
program’s effectiveness and the lingering impact of the pandemic.
It is clear that small businesses still need help, but lingering issues
in the program have led to the need for Congress to consider a
short-term extension beyond March 31.
Across the country, case counts, hospitalizations, and deaths are
trending in the right direction. At the same time, we are vacci-
nating millions of Americans daily. This is cause for optimism, but
it does not mean this crisis is over.
The pandemic has caused unprecedented harm for small busi-
nesses, and it would be a mistake to withdraw support abruptly.
Congress must work to understand the current realities facing
small business owners and extend PPP to meet their needs.
We also continue to address the persistent issue of inequity with-
in the program. In the beginning, larger businesses with ties to big
banks received loans at the expense of the smaller businesses. We
have instituted numerous reforms to empower community lenders
to spread relief to underserved businesses.
The Biden administration also took decisive action to get funding
to small businesses that had previously been neglected. On Feb-
ruary 22, President Biden announced the implementation of a 14-
day exclusivity window for small businesses with fewer than 20
employees. The President also acted to get more money to sole pro-
prietors, make formerly incarcerated individuals and those with
federal student loan delinquencies eligible for PPP, and clarified
the use of ITINs.
I am pleased to report that these changes have been effective in
getting money to smaller businesses. According to the Biden ad-
ministration, there has been a 20 percent increase in loans ap-
proved to minority-owned businesses, a 14 percent increase in
loans approved to women-owned businesses, and a 12 percent in-
crease in loans approved to businesses in rural areas.
During the exclusivity period, the SBA has served more than
400,000 small businesses with fewer than 20 employees, nearly
200,000 of which are first-time PPP borrowers. This is meaningful
progress and a sign of the impact that delivered reforms can have
on businesses that are often neglected.
Today’s hearing is timely. I hope that it will give us the oppor-
tunity to examine the impact the Biden administration reforms
have made on small business owners and lenders and help us iden-
tify ongoing challenges we continue to hear about from borrowers
and lenders alike. I look forward to hearing from our panelists
about the current state of PPP and their recommendations on the
program’s future.
And now I would like to yield to the Ranking Member, Mr.
Luetkemeyer, for his opening statement.
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Mr. LUETKEMEYER. Thank you, Madam Chair, and thank you
for calling this hearing on this very important topic.
The title of this hearing is ‘‘The Next Steps for the Paycheck Pro-
tection Program.’’ This is a particularly important topic, given the
fact that the PPP is set to expire on March 31, just 3 weeks from
today.
I am interested to hear from the panel before us on how lenders
and businesses view the program, areas that should be improved,
and how to adjust the program moving forward. While discussion
on the next steps is critical, I want to reiterate how successful this
program has been to date.
With the State and local shutdowns sweeping the Nation to pro-
tect against the COVID-19—the spread of COVID-19, the Small
Business Administration and the Department of the Treasury im-
plemented the PPP in a matter of days.
From the day it opened in early April to the day it concluded on
August 8, 2020, the first round of PPP provided just over 5.2 mil-
lion loans, totaling $525 billion, with loans averaging approxi-
mately $100,000. According to the SBA, more than 50 million small
business jobs were either saved or assisted by the PPP through the
program’s first round in 2020.
The latest round of PPP includes a second-draw loan for busi-
nesses still struggling with the pandemic and has provided approxi-
mately 2.4 million new loans for $164 billion. The average loan for
the second round is just under $70,000.
Despite the success of the PPP, this program was always meant
to be temporary. As a reminder, the PPP was created under the
CARES Act, which was signed into law by former President Trump
on March 27, 2020. The program’s current end date on March 31,
2021, marks almost exactly one year to the day from when it
opened.
Across America, we are seeing vaccines in arms and lockdowns
being lifted. These actions are allowing businesses the ability to
start turning the corner and recover. The latest statistics from the
SBA on the PPP reiterate these facts, as the demand for PPP loans
has slowed.
Additionally, the SBA has informed lenders that on the March 31
deadline, the SBA will stop processing loans, which is very con-
cerning. This means that even if a small business files the applica-
tion and a lender submits it to the SBA before the deadline, the
SBA will stop any and all processing of the loan on March 31
I have spoken to many lenders on this issue, and instead of tak-
ing applications that will never be processed by the SBA, they are
planning to shut down the PPP lending until—entirely before the
March 31 deadline.
While the PPP has been a bipartisan product throughout its ten-
ure from the CARES Act, PPP Flexibility Act, and the December
COVID package, my colleagues on the other side of the aisle de-
cided to make the latest COVID relief package a strictly partisan
process. In their partisanship, they passed legislation that did not
extend the PPP deadline, despite adding over $7 billion in funding
to the PPP and increasing the applicant pool of the program. The
end result of this is the passage of a bill seeking to beef up a pro-
gram that is already winding down and will end shortly.
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Given these realities, I look forward to the hearing from the
panel—to hearing from the panel today regarding what changes we
need to make within the program and what steps Congress needs
to take.
Congress has important decisions to make, and it is my hope
that this hearing will assist us as we tackle the topics of small
business relief and small business recovery.
With that, Madam Chair, I yield back the time. And I also thank
the witnesses for being with us this morning.
Chairwoman VELÁZQUEZ. Thank you, Mr. Luetkemeyer.
I would like to take a moment to explain how this hearing will
proceed.
Each witness will have 5 minutes to provide a statement, and
each Committee Member will have 5 minutes for questions. Please
ensure that your microphone is on when you begin speaking and
that you return to mute when finished.
With that, I would like to introduce our witnesses.
Our first witness today is Ms. Hilda Kennedy, Founder and
President of AmPac Tri-State CDC in Ontario, California. AmPac
CDC is a nonprofit certified lender of the U.S. Small Business Ad-
ministration working to finance the growth of small businesses.
AmPac has provided funding to over 135 with greater than $200
million in loans under Ms. Kennedy’s direction.
Our second witness is Ms. Lisa Bombin. Ms. Bombin is the Presi-
dent and CEO of Unico Communications, Inc., in San Antonio,
Texas. Unico Communications is a Latino-owned micro business op-
erating in the events space. With assistance from the PPP and
EIDL programs, she has been able to adapt her business to the
changing reality of her industry and avoid layoffs.
Our third witness is Ms. Lisa Simpson, Vice President of Firm
Services at the American Institute of CPAs. Ms. Simpson leads the
Private Companies Practice Section team at AICPA and works on
the development of practice management tools that address topics
most important for accounting firm owners.
I would now like to yield to Ranking Member Mr. Luetkemeyer
to introduce our final witness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Next witness is Ms. Alice Frazier. Ms. Frazier is the president
and chief executive officer of the Bank of Charles Town in Charles
Town, West Virginia. She also holds several positions at the Inde-
pendent Community Bankers of America, which is also known as
ICBA, and, today, she is testifying on its behalf.
At ICBA, she is currently the organization’s secretary on the
board of directors and Chair of the Policy Development Committee.
With the Bank of Charles Town participating in both the first and
second rounds of PPP, along with her numerous roles of ICBA, I
look forward to hearing Ms. Frazier’s perspective on the program
as well as what Congress should be concentrating on over the next
few weeks.
Ms. Frazier, I would like to thank you and the other witnesses
for joining us today, and I anticipate a thoughtful, informative dis-
cussion.
Thank you very much.
Chairwoman VELÁZQUEZ. Thank you, Mr. Luetkemeyer.
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I welcome all the witnesses, and thank you for taking time to be
with us today.
Ms. Kennedy, you are now recognized for 5 minutes.
STATEMENTS OF MS. HILDA KENNEDY, FOUNDER AND PRESI-
DENT, AMPAC TRI-STATE CDC, DBA AMPAC BUSINESS CAP-
ITAL, ONTARIO, CA; MS. LISA BOMBIN, PRESIDENT AND CEO,
UNICO COMMUNICATIONS, INC., SAN ANTONIO, TX; MS. LISA
SIMPSON, CPA, CGMA, VICE PRESIDENT OF FIRM SERVICES,
AMERICAN INSTITUTE OF CPAS, DURHAM, NC; MS. ALICE
FRAZIER, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
BANK OF CHARLES TOWN, CHARLES TOWN, WV
STATEMENT OF HILDA KENNEDY
Ms. KENNEDY. Thank you, Chairwoman Velázquez, Ranking
Member Luetkemeyer, my Congresswoman, Judy Chu, and distin-
guished members of the Committee. Good morning, and thank you
for having me today.
My name is Hilda Kennedy, and I am the founder and president
of AmPac Tri-State CDC. We are based in Ontario, California. I am
thrilled to have the opportunity to tell you about AmPac and our
participation in the Paycheck Protection Program, our commitment
to providing access to capital to underserved borrowers, and poli-
cies that could help the Committee in determining next steps.
AmPac was established and approved as the first faith-based
CDC committed to helping businesses in economically disadvan-
taged communities and committed to walking hand-in-hand with
businesses throughout the lending process. I founded AmPac in
2005, became a CDC in 2007, and a micro lender and CDFI just
4 years ago.
Today, we have helped small businesses obtain more than half
a billion dollars in SBA 504 loans and served start-up, emerging,
and scaling small businesses with SBA microloans and CDFI loans,
and partnered with several local governments to help small busi-
nesses.
In the last year, we also served the Paycheck Protection Pro-
gram, but getting started was not without its challenges. At first,
we had to be approved as SBA lenders for PPP. Then when Con-
gress identified community financial institutions, or CFIs, to pro-
vide needed PPP funding—lending, CDCs, CDFIs, and microloans,
AmPac stepped in with a firm commitment to help the smallest of
businesses with loans under $50,000.
I want to publicly thank my Congresswoman, Judy Chu, for help-
ing us to get attention on the issue of establishing guidelines for
CFIs to start lending. As nonprofit lenders, CDCs also face liquid-
ity issues. The availability for CFIs to lend through the Federal Re-
serve liquidity facility, which the Fed just extended—thank you—
has been a lifeline for participating CDCs to continue to deliver
PPP loans.
Being designated as lenders for PPP and addressing the liquidity
issues were two of the major barriers to nonbank lenders partici-
pating in PPP. Once we got underway, AmPac funded 171 loans,
totaling over $3 million, with an average loan size of $17,000.
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And to put a face on these numbers, I am reminded of Leticia.
She got a loan for a party planning business for $2,875, and you
would have guessed she got a million dollar PPP loan. She came
to us saying, You have no idea what this means to my family.
When we reached out to Leticia regarding the Schedule C
changes for a second draw, Leticia qualified for a $20,000 PPP
loan.
In my written testimony, I shared a story about Calvin, a custo-
dial maintenance company, who had been rejected and waitlisted
by every emergency relief program. But when the Schedule C
qualifying calculation changed, Calvin qualified for a $13,000 loan.
He said, Hilda, I can’t believe somebody finally said yes. He is now
able to pay his employees and keep his business afloat.
We have many Calvins and Leticias in our community, and I
know several of my colleagues do as well. So many of the Schedule
C filers missed the opportunity for a higher PPP loan in the first
round and are in danger of missing out on this round of funding.
Since it took until March 3 to get the new forms, time is not on
our side. These businesses need a little more help, and they are
willing to do the work. Calvin and Leticia are among the 95 per-
cent Black and 91 percent Latino Schedule C filers who need this
relief, and we need time to serve them.
As PPP comes to a conclusion, long-term recovery is top of mind,
and we believe community advantage is a critical tool, especially
for targeting businesses in underserved communities, and to help
PPP stabilize businesses’ growth. SBA needs to move forward to
approve qualified lenders ready to serve.
As I conclude my comments, I want to thank the Committee for
the impactful aid to SBA’s small business borrowers via debt relief
payments. Unfortunately, as you know, there is a shortfall in this
aid. I cannot overstate the fact that these payments are critical for
these small business borrowers. AmPac and my CDC colleagues
across the country and in your communities are here and available
to serve small businesses, to help them recover, and to support
their growth.
I sincerely appreciate the opportunity to testify this morning and
share AmPac’s experience with the PPP program and our mission
to serve underserved borrowers. I look forward to answering any
questions you have.
Thank you.
Chairwoman VELÁZQUEZ. Thank you, Ms. Kennedy.
Ms. Bombin, you are now recognized for 5 minutes.
STATEMENT OF LISA BOMBIN
Ms. BOMBIN. Thank you, Chairwoman Velázquez and members
of the Committee, for affording me a moment of your time to share
my story as a Latina small business owner.
As the founder and owner of Unico Communications, a 16-year
event production company and a Latina-owned business
headquartered in San Antonio, Texas, I am proud to say the com-
pany has a solid reputation of producing large-scale events for the
Nation’s most reputable nonprofit organizations. And I am honored
to represent a larger event industry that includes master story-
tellers, writers, planners, producers, audio and video engineers, ca-
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terers, and so many more magicians that worked tirelessly behind
the scenes of our most memorable celebrations, concerts, con-
ferences, and events.
The pandemic left my business, along with thousands of other
event companies across the country, scrambling to develop a meth-
od to sustain my staff and execute payroll in the midst of so much
uncertainty. The merciless effects of the resulting shutdown were
evident in the swift volume of event cancellations that followed.
Our business came to an abrupt halt. The only alternative was to
suspend my own salary to retain as much cash flow, enabling us
to keep our staff secure and fully employed for the immediate fu-
ture.
After several emotional, exhaustive days of seeking a new busi-
ness strategy and plan, we had a glimmer of hope when Congress
established the Paycheck Protection Program in the CARES Act.
To say the initial rollout was problematic may be an understate-
ment. When the application window opened, I, like so many other
businesses, had been banking with a well-known national bank.
And along with many small minority-owned businesses, we were
left in the dark.
Our financial institution provided no method of submitting an
application, instead offering only a landing page to stay tuned for
more details. And I found myself seeing the hours slip away and
feeling the anxiety rise in what folks like a random selection of
some of my peers and fellow business owners who had confirmed
their applications had been successfully processed at other banks.
All the while, payroll deadlines loomed for my team.
After multiple attempts to submit our application, I contacted
the U.S. Hispanic Chamber of Commerce to seek advice and tech-
nical assistance, and they recommended that I submit a PPP appli-
cation through a small community bank, as they had been seeing
an increased track record of successful submissions from other
members across the country.
Furthermore, the USHBC was one of the few national organiza-
tions providing technical assistance in both English and Spanish to
minority-owned businesses and worked with the SBA to have them
translate their resources into multiple languages.
There wasn’t a list of lenders from which to start. I brought in
my husband to help research, and we began making calls and
scouring the internet through the night to research local banks
across our State to see if they would accept applications from new
customers.
We were incredibly fortunate to have had success in submitting
and securing a PPP loan in the amount of $26,900 through Pioneer
Bank, a small Texas regional institution.
Sadly, not all businesses like mine were able to secure a PPP
loan. There were more than 150,000 Latino small business owners
that lacked the access to technology and guidance to resources in
Spanish and, as a result, have succumbed to closure.
According to a study published by Small Business Majority,
which service small and minority-owned business owners, one in
three say the process of applying for the PPP was challenging due
to the calculations and paperwork involved, and nearly one in four
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said that finding a lender willing to accept their application was
challenging.
Now more than ever, small minority-owned businesses need the
U.S. Small Business Administration and its portfolio of loans and
technical assistance programs. Our business membership with the
U.S. Hispanic Chamber of Commerce helped me navigate this con-
voluted process through the communications.
Furthermore, I received technical guidance from the University
of Texas at San Antonio’s Small Business Development Center and
additional funding through the city of San Antonio’s Recovery
Grant Program facilitated by LiftFund, a community development
financial institution.
These three entities were critical in my business success during
one of the most unprecedented economic times in American history.
If it had not been for the forgivable loans built into the CARES
Act, our business would not have been able to survive, because we
could not sustain more debt.
As a small business owner, I call upon our Members of Congress
to expand PPP loans for our Nation’s small and minority-owned
businesses and to provide more support and financial resources to
the SBA and the Minority Business Development Agency to fund
critical, technical assistance in multiple languages through public-
private partnerships with chambers of commerce and other busi-
ness associations across the country.
Our road to recovery is still vast, and organizations like these
need to be funded and sustained to continue helping businesses
like mine navigate the ongoing economic crisis.
Thank you again, Chairwoman Velázquez and members of this
Committee, for your leadership and continued legislative collabora-
tion to ensure the economic survival of America’s more than 30 mil-
lion small businesses, of which 4.7 million are Hispanic-owned.
Chairwoman VELÁZQUEZ. Thank you, Ms. Bombin.
Now we recognize Ms. Simpson for 5 minutes.
Ms. Simpson, you are muted. You need to unmute yourself.
Ms. SIMPSON. Common for me. I apologize.
Chairwoman VELÁZQUEZ. Okay.
STATEMENT OF LISA SIMPSON
Ms. SIMPSON. Thank you again for the opportunity to talk
about the Paycheck Protection Program on behalf of the American
Institute for CPAs.
I am Lisa Simpson. I am the vice president of Firm Services. And
in my role, I have been helping support thousands of small CPA
firms and their business clients navigate PPP since the program
launched last April.
I want to thank Congress, the SBA, and Treasury for the pro-
gram and the lifeline that it has provided at a critical time. It
helped so many businesses and nonprofits keep their employees on
the payroll, keep the lights on, pay the rent, and position their
businesses to succeed when the economy is ready to reopen.
In my testimony, I want to talk about how the accounting profes-
sion is helping PPP borrowers, review some of the major challenges
within the system currently, and ask Congress to extend the PPP
application period for at least an additional 60 days.
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Many small business owners do not have accounting profes-
sionals in-house, so when PPP opened, they immediately turned to
their CPAs or their trusted business adviser to help with the pro-
gram. So to help the CPAs and their small business clients, we de-
veloped free resources, including loan amount calculators, loan for-
giveness calculators, and we provided townhalls to allow for ques-
tions and answers to be submitted, to provide the latest breaking
news on guidance and changes so that we could make these free
resources available to the small business owner who maybe doesn’t
love accounting as much as I do. So we try to approach it from
their perspective.
We also asked to engage with the SBA, Treasury, payroll pro-
viders, and lenders to create a holistic environment where we can
talk about the challenges and areas where additional guidance
might be needed.
There are current operational challenges, as you have heard
about. When PPP reopened in 2021, the SBA implemented front-
end compliance checks designed to limit and reduce the amount of
fraud in the program. We support those reasons established to
limit fraud and to protect taxpayer money. However, these chal-
lenges—these front-end compliance checks have created significant
challenges for small business borrowers to be able to access the
SBA system and to get their loans through the system and then to
the approval process.
As we discussed, in written testimony, there are over 50 error
codes and flags that can be difficult to decipher and resolve by both
the lender and the borrower. Borrowers can end up being caught
in limbo for weeks. We have heard of situations where borrowers
have suffered as long as 6 weeks waiting for their application to
either get into the system or make it through to the approval proc-
ess.
One of those borrowers is Shawnetta (ph), who I spoke with sev-
eral times. Her application was flagged. 2020 was a very difficult
year for her. She survived COVID and cancer, but her loan applica-
tion in 2021 was stopped. She ended up having to give up her
warehouse space before her loan ultimately came through.
These flags and the error codes impact the smallest businesses
and can trigger a loop where there is no way to get out. So we are
asking for transparency and additional resources to resolve these
error codes.
Recent changes to the program for self-employed borrowers are
well intended to provide additional relief to the smallest of self-em-
ployed borrowers. However, changing a program midstream has
caused anxiety, confusion, and delays in the process. The guidance
was released in—March 3. Lenders are still working to update
their system to enhance—to accept these changes, and now we are
hearing that many borrowers—many lenders are simply closing
their application windows because they need time to clear out the
applications that are in process.
For these reasons, we are asking for that 60—at least a 60-day
extension on the application window.
The changes for self-employed borrowers are not retroactive, and
this is resulting in a situation where hundreds of thousands, per-
haps as many as 2 million self-employed borrowers are not able to
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take advantage of this enhanced loan amount. So they are feeling
like they have been left behind, and they are not able to get loans
that our CPAs who support small and minority-owned businesses
are saying $7- to $10,000 in additional loan amounts could make
the difference in the survival of these small businesses and return
the corner.
In addition to the complexities within the system, CPAs who are
instrumental in helping their small business clients and not-for-
profits navigate PPP are also dealing with counting around issues
like the Employee Retention Credit, EIDL, the shuttered venue op-
erator agreement, which we are still looking for guidance on.
So providing additional time will allow the CPA to work with
small business borrowers to find the program that best suits their
needs.
In conclusion, I would like to thank Congress and the SBA and
Treasury for engaging in a conversation on how to improve this
program, how to keep it going, and I urgently urge you to extend
the deadline for at least another 60 days.
Thank you.
Chairwoman VELÁZQUEZ. Thank you, Ms. Simpson.
Now we recognize Ms. Frazier for 5 minutes.
STATEMENT OF ALICE FRAZIER
Ms. FRAZIER. Thank you, Chairwoman Velázquez, Ranking
Member Luetkemeyer, and members of this Committee.
I am Alice Frazier, president and CEO of Bank of Charles Town,
a $620 million asset community bank in the eastern panhandle of
West Virginia, and we serve Hagerstown, Maryland, and Loudoun
County, Virginia as well. Today, I am testifying on behalf of the
Independent Community Bankers of America, where I serve as
Chair of the Policy Development Committee and a member of the
board of directors. Thank you for this opportunity to testify at to-
day’s hearing.
The PPP has been a lifeline for small businesses, churches, and
other nonprofits in the communities we serve. My comments reflect
conversations with hundreds of community bankers across the
country.
Our firm was a natural fit in the business model of a community
bank, as we are a small business lending specialist with deep roots
in the communities we serve. My bank’s PPP lending is typical of
any community bank across this Nation.
In the first round, we made 557 loans. In the second round, we
have seen approximately half the demand and have made 272
loans to date. In each round, about 85 percent of the loans were
under $150,000, and more than half were microloans of less than
$50,000. Our PPP lending has saved nearly 7,000 jobs so far and
is really making a difference in the communities we serve.
Other community banks have had similar results. In fact, com-
munity banks made 60 percent of the first-round PPP loans, which
supported over 33.7 million jobs. What is more, community banks
made over 70 percent of the PPP loans to minority-owned and
women-owned businesses, and over 60 percent of the PPP loans to
veteran-owned businesses.
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To obtain most of the value of this program for the communities
we serve, BCT, Bank of Charles Town, like all community banks,
is committed to conducting outreach to potential applicants. During
the first round, we recorded podcasts and participated in local radio
shows. In the second round, after learning that some minority com-
munities lacked access to the program, we initiated targeted out-
reach to reach these communities.
In recent webinars, we sponsored with the local chapters of the
NAACP. We encountered numerous businesses, churches, and
other loan candidates that had not previously applied for a PPP
loan because they thought—they couldn’t find help with the paper-
work or because they were turned away by a larger bank as too
small.
To date, we have helped 38 businesses obtain first-draw loans
during the second round. Just last week, we had an African Amer-
ican church applicant for a first-draw loan. Though they qualified
for a $4,000 loan, they only requested $2,000 because they were
concerned that if it were not fully forgiven, they did not want to
be left with an outstanding loan. After additional education and
coaching, they decided to take the full loan.
This program cannot fulfill its potential without a one-on-one ad-
vice from a lender who is committed to making it work. And, as
you know, the PPP closes 3 weeks from today, on March 31, and
while demand for the program has slowed significantly, there are
still businesses and nonprofits that desperately need these funds.
At this moment, thousands of applications are in limbo because
they were put on hold by an automated screening program. With
the deadline approaching, we ask this Committee’s help in urging
the SBA to expedite the review of these holds.
Also, under current law, any application not approved by March
31, even if it was submitted prior to that date, cannot receive PPP
funds. No applicant should be left stranded because of bureaucratic
red tape. We believe an application submitted by March 31 should
be eligible for approval and funding.
Lastly, if the Congress extends the deadline beyond March 31 or
creates another round of PPP, the program should be targeted at
those industries that have suffered the most in the pandemic: hos-
pitality, travel, conventions, and others. These industries are major
employers in many of the regions of the country and will continue
to need assistance until the economy has fully reopened.
We have a set of recommendations for ensuring the funds are eq-
uitably distributed and retain the most value for job preservation,
and I refer you to my written testimony for more detail.
Thank you again for convening today’s meeting, your leadership,
and the opportunity to offer my perspective. I am happy to answer
any questions you may have.
Chairwoman VELÁZQUEZ. Thank you, Ms. Frazier.
Thank you to all the witnesses for the incredible, important in-
formation that you have shared with us.
I would like to address my first question to Ms. Kennedy. I was
pleased to see the Biden administration announce policy changes
allowing sole proprietors to secure considerably larger PPP loans.
Given that 70 percent of businesses without employees are owned
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by women and people of color, can you discuss the impact the rule
will have on them and their ability to recover from the pandemic?
Ms. KENNEDY. Thank you, Chairwoman Velázquez. And I can’t
overstate the significant impact to women and minorities for this
program. The examples that I gave to you—an African-American-
owned custodial maintenance company, and Leticia, a Latina-
owned, women-owned business in the party planning space, they
absolutely need those resources, and that Schedule C change was
absolutely critical.
Our involvement with the Women Business Owners Association
in our local area and statewide, our involvement with local Black
and Latino chambers of commerce, they need and want this pro-
gram for Schedule C borrowers, and that change will be the dif-
ference between them keeping their doors open or closing.
Chairwoman VELÁZQUEZ. Thank you.
Ms. KENNEDY. Thank you.
Chairwoman VELÁZQUEZ. Ms. Simpson, as a representative of
the CPA community, you deal with your small business clients reg-
ularly, and I am sure they bank at different places. We have heard
feedback that some larger lenders are not currently processing PPP
loan forgiveness applications for loans made in 2020.
What consequences could a serious delay in PPP loan forgiveness
have on small business?
Ms. SIMPSON. Thank you, Chairwoman Velázquez. PPP forgive-
ness is computated depending on the amount of the loan, and there
has been conversations leading up to the legislation that was
passed December 27 around whether or not the forgiveness process
can be simplified for loans of $150,000 and less, which was ap-
proved.
We do expect that there will be an increase in the capacity of
lenders to begin expecting the forgiveness applications again. They
have put all their efforts recently into launching these—this new
round of PPP, but we know that they are certainly—from the con-
versations we have had, they seem willing and anxious to turn to
for their next processing.
We believe that this gives borrowers ample time to navigate
other release options, such as the Employee Retention Credit,
which can be an amazing source of much-needed funds, but there
are complicated interplays between Employee Retention Credit and
PPP, so taking the time to navigate that is vital.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Bombin, I understand your initial PPP loan application was
denied, and you had to find a lender who was willing to make a
PPP loan to a four-employee micro business such as yours. Can you
elaborate on that process now that you have received your PPP
loan? How did your PPP experience change your views on banking
big versus banking small?
Ms. BOMBIN. Thank you so much for this time, Chairwoman. I
want to elaborate that it wasn’t that it was denied; it was not
available. We received notice from this national bank, and on their
landing page, they simply redirected, as all of the—as the grand
opening of the PPP had been—window had been opened on April
3, they had a statement on the website basically letting folks know
that because there was significant interest, they were not able yet
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to process, and there has been a high volume of interest received,
but they were not yet accepting.
So within that period of time, we—as we scoured and found Pio-
neer Bank, it became our lifeline for our business. We see this ex-
perience now as eye opening. I feel the value of ensuring that we
put our business—small business’ dollars and our worth to finan-
cial institutions that respect our investment, our time. And the
power that we bring as one body is critical.
So after applying through this smaller bank, it became clear that
the only way we could see change happen is by moving your funds
and your worth and your revenue to facilities and banks that do
value you.
As of this time, we have received funding. We have now moved
our business accounts over to a smaller local bank. It is a very dif-
ferent experience, but every time I call, they know my name. It is
refreshing.
Chairwoman VELÁZQUEZ. Thank you.
My time has expired, and now I recognize the Ranking Member,
Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Ms. Frazier, as we all know, the March 31 deadline is quickly ap-
proaching. In your testimony, you state that community banks
have seen a demand, or at least your bank has seen demand cut
in half for the second round of PPP here compared to the first
round.
Can you provide a little more detail on what you think is the rea-
son for that? Is it just not enough banks—or people qualifying, or
do you think there is no demand for it, or in your particular area,
your economy is coming back, or what would—can you elaborate on
it just a little bit further?
Ms. Frazier? Unmute, please.
Ms. FRAZIER. Thank you very much.
I would say necessarily there would be less folks applying for the
loans just within with the new rules of having to demonstrate 25
percent impact gross revenues over a quarter. And there are busi-
nesses that have recovered, but there are many small businesses
that still desperately need this program.
And as I mentioned in my testimony, there are still small busi-
nesses that didn’t apply the first time that are getting their first
draw this time. So I would liken it that the program with 500 and
less employees has diminished the numbers that qualify and that
the program is far more targeted and focused on those that need
it the most.
Mr. LUETKEMEYER. Well, in your testimony, you suggest that
if we do another round, that it be more targeted. And I am kind
of curious. What is the reason that the—that the applicants in your
business did not apply for the first round? Were they not in busi-
ness? They were, you know, struggling to do that, or they thought
they could do without it and just didn’t want to go through the has-
sle, or the bank didn’t contact them, or what was the reason for,
you know, not even being—not wanting to participate the first
time?
Ms. FRAZIER. I will give you, if I may, a few examples to that.
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First of all, just a week ago, I was speaking with a restaurant
owner who had tried to apply in the first round with their bank,
similar to Ms. Bombin. The bank itself was not helpful in getting
that to her, and she was busy working in the business rather than
having time to work on the business and make these applications.
So she now has applied with us for a first-round draw. Given the
timeframe of March 31 deadline, she will not be able to access the
second draw, which her restaurant will clearly need to continue to
survive.
But I also would state that I don’t know that it—it is about not
having access. I think it is about having information, and outreach
is critically important, as I cited in the testimony, and as—like all
banks—community banks have done, have really reached into the
community to——
Mr. LUETKEMEYER. Thank you. Well, it is disappointing to
hear that the banks are not doing their job, which is to try and
help their customers access the program, because I think that is
part of their job, is to be able to help their customer access this
program, be able to help them through the problem and help their
community. It is disappointing to hear that they are not doing it.
One more question for you before I move on to another witness
here. With regards to the code problem, there is about 50,000 loans
right now sitting in—at SBA that are—they are working through
manually trying to get these things done, and by end of the month,
anticipate somewhere around 10,000 are still not being able to be
processed because of that code problem.
What is your solution to that? Or have you been talking to the
SBA? What do they say? Where do you think we stand on that?
Ms. FRAZIER. That is definitely a difficult issue. We have, for
example, one borrower that has been in the code issue since Janu-
ary 29 that we have been trying to resolve, and we—you are forced
to use the systems to do that. However, not always can you resolve
an issue through a system, and you need to speak with somebody
that is—has expertise and ability to point you in the right direction
so that the borrower can benefit from this program.
And so if we can have an experienced help desk with a live per-
son that can answer the phone and be able to support us, I think
we would be able to find error resolutions moving along much fast-
er.
Thank you.
Mr. LUETKEMEYER. I appreciate that.
Ms. Simpson, you mentioned in your testimony that you think
there is as many as 2,000—or, excuse me—2 million loans that are
sitting out there waiting to get money that probably will not apply.
Where do you get that figure from, and what do you think is the
holdup on that?
Ms. SIMPSON. Let me clarify that comment. The 2 million rep-
resents the number of self-employed business owners who, based
on the data that we have available, may have already applied for
either—for a first-draw loan at the reduced loan amount. So they
can’t take advantage of the increase based on the new guidance.
Mr. LUETKEMEYER. Okay. All right. Thank you very much.
My time has expired. Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired.
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Now we recognize the Chairman oF the Subcommittee on Under-
served, Agricultural, and Rural Business, Mr. Golden from Maine.
Mr. GOLDEN. Thank you, Madam Chair.
I think I am going to try and follow up a little bit further with
that final question from the Ranking Member, and I will direct it
at Ms. Simpson.
So we already know that you mentioned this issue in your testi-
mony, where you found that a lot of your members probably could
have gotten a much higher PPP maximum, maybe around 50 per-
cent higher, if they are able to retroactively adjust the max amount
to account for SBA’s recent guidance for 1040 Schedule C filers.
Do you or your association have any kind of estimates about
what share of Schedule C filers could benefit from a retroactive ap-
plication?
Ms. SIMPSON. I don’t. I am sorry. We can certainly take that
back to the team and try to find that information.
There is a cap on the loan amounts for Schedule C borrowers just
like all owners of 20,833, so that does limit the cap of the loan, but
we can certainly take that back and look into it.
Mr. GOLDEN. Yeah. That would be very helpful. You know, and
if anyone else on the panel has—thinks they have any idea of what
the scale is like out there, that could obviously have an impact on
future discussions about additional appropriations for the program
if people were allowed to apply retroactively for a higher loan
amount. So I think that would be very helpful information for this
Committee and for Congress.
I guess I would also ask, Ms. Simpson, have you heard any ex-
amples from clients that your association represents who are in the
situation with the Shuttered Venue Operators Grant program
where we have a venue that is publicly owned but privately oper-
ated who are questioning whether or not they are going to be eligi-
ble for that program?
Ms. SIMPSON. There is certainly certain uncertainty around the
requirements for the—what we essentially call the SVOG, and so
they are anxiously waiting for that program to open up before the
process to begin to apply.
Mr. GOLDEN. So you don’t have any early information about
what eligibility is going to look like for those types of entities then?
Ms. SIMPSON. That is correct. I do not.
Mr. GOLDEN. All right. That is helpful.
I think basically everyone on the panel, or at least pretty close
to, has talked about some of the issues with 2021 applicants facing
delays related to error flags in the SBA system. And some of you
have suggested that perhaps we should ensure that people are eli-
gible beyond March 31 if they, you know, miss that deadline
through no fault of their own, essentially if the flag is dropped and
is resolved in their favor, but then they find that they are not eligi-
ble. So I think everyone is in agreement about that.
But I am also hearing from a lot of constituents who are looking
at the Shuttered Venue Operators Grant, but they are worried that
they are going to find out late in the game that they are not eligi-
ble, and then it will be too late to apply for a second-draw PPP or
even a first-draw PPP.
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So would you—any of you recommend maybe some kind of like
safe harbor to address a situation like that where people are wait-
ing for the shuttered venue program but could be excluded, you
know, late in the game, and then miss the ability to apply for the
PPP?
Ms. SIMPSON. I believe that there is a current proposal to allow
PPP almost as a bridge while waiting for the requirements around
the SVOG to be fully fleshed out, and then that PPP loan could be
reduced from the amount of any SVOG grant.
Mr. GOLDEN. And you are aware that that is——
Ms. SIMPSON. The challenge there——
Mr. GOLDEN. That is just a proposal, correct?
Ms. SIMPSON. That is correct. It is just a proposal, as far as I
understand. But the challenge there is the impending March 31
deadline on loan application. And I think SVOG-eligible entities
are just nervous about which way to go.
Mr. GOLDEN. Thank you.
If anyone else wants any other feedback, you have got about 30
seconds left of my time, and I would be happy to let you have it.
Ms. FRAZIER. I would just like to add that I would consider that
also in the targeted industries, that if you were to extend the dead-
line, that this too would be one of those industries that should be
eligible for that.
Mr. GOLDEN. Very good.
Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Texas, Mr. Williams, Vice
Ranking Member of the Committee, for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chairwoman.
PPP was designed to help small businesses during COVID-19
and keep employees on payroll. The program was only designed to
be 8 weeks long to sustain businesses during short-term lockdowns.
My colleagues on the other side are focused on expanding the
program for political gains with union members and Planned Par-
enthood overprioritizing hard-working businesses that use this pro-
gram as a lifeline. It is irresponsible for Congress to continue ex-
panding PPP unless it targets specific industries that have been hit
hardest by the COVID restrictions. We don’t want PPP to become
part of an economy. At the end of the day, we need to cut taxes.
So my question to you, Ms. Frazier: What metrics should we be
looking at as we disperse what is left in PPP, and how do we deter-
mine what industries should be targeted?
Ms. FRAZIER. Thank you. I believe the metrics that you began
with in this what is called second round, where you looked at the
number of employees and an actual impact to revenues to the busi-
nesses, actually targeted—began to target, as you noticed in the
number of applications this time, so I would continue along that
path.
As you decide how much more to support, maybe—I can tell you
from looking at the restaurants, what we have seen is anywhere
from 40 to 70 percent of revenues are reduced, depending upon
their business model as an example overall. But I do believe the
number of employees, the revenue impact of the organizations, and
the changes to the Schedule C, I believe, that were late in the
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game are critically important, as well allowing that route, folks
that may have already applied, to return and see an increase would
be very helpful for them.
Mr. WILLIAMS. All right. Thank you.
Many banks have announced that they will no longer accept ap-
plications, as we talked about this morning, 2 weeks prior to the
March 31 deadline, when Paycheck Protection Program is expected
to close. Many of these deadline concerns come from the Small
Business Administration delaying applications because of auto-
mated holds due to fraud and abuse. A suggested solution has been
to put a time stamp on applications to ensure who apply up until
March 31 are guaranteed to be processed.
So also to you, Ms. Frazier: Can you elaborate on the PPP infor-
mation gap between the Small Business Administration and lend-
ers and how your community bank plans to handle the March 31
deadline?
Ms. FRAZIER. Certainly. Thank you. We are asked internally
what we said was a March 29 deadline, not—mainly because what
I would speak to is it takes time for any bank, and us included,
to process the application, ensure we have all the documentations,
ensure the calculation is correct before we can submit to the SBA.
And then once submitted to the SBA, it can be 24 to 48 hours, as-
suming there are zero error messages.
And what we have said to our borrowers or potential applicants
is that get it in before that date because we can’t guarantee it will
be completely approved by the March 31 timeframe.
Mr. WILLIAMS. Okay. Ms. Simpson, you mentioned complexity
and confusion of tax deadlines stemming from Paycheck Protection
Program and COVID-19. PPP was intended to be a lifeline for
small businesses, not an avenue to force burdensome tax liabilities
and operational challenges on Main Street America.
So, Ms. Simpson, can you talk about some of the most widely
asked CPAs—questions CPAs have gotten related to PPP loans and
what guidance would be most helpful to get these issues resolved
before tax day?
Ms. SIMPSON. Well, it gets complex and gets into some of the
nuances of Tax Code. Before we get tax returns filed, borrowers are
looking for guidance as to how these are actually going to show up
on the tax returns.
So some IRS guidance is needed. And, additionally, some guid-
ance around, again, how to report ERC as an additional credit op-
portunity that has been made available to PPP borrowers who
couldn’t take it in 2020 but are now eligible. There are some com-
plex requirements around when that gets put back on the tax re-
turn.
Mr. WILLIAMS. Okay. I thank all of you for participating today,
and I yield my time back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Kansas, Ms. Davids, for
5 minutes, Chairwoman of the Subcommittee on Economic Growth,
Tax, and Capital Access.
Ms. DAVIDS. Thank you, Chairwoman Velázquez and Ranking
Member Luetkemeyer, for holding this important hearing today.
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I am really glad that we are talking about the next steps for the
Paycheck Protection Program. It has obviously been a very, very
important program. And with the vaccine rollout speeding up,
there is real hope for economic recovery and into the public health
emergency that we are in the middle of.
And, you know, I think that it is clear we have heard today and
we have heard over the last couple of months that small businesses
are still struggling to keep their doors open and trying to just fig-
ure out how to move forward. And I am really glad that so many
of us on this Committee are committed to providing the support
that our small businesses need. Clearly, small businesses are the
backbone of our economy.
And I know that the Paycheck Protection Program has, at least
from a number of people in the Kansas Third, has really saved a
lot of livelihoods and enterprises from some pretty extreme eco-
nomic difficulties. And I also know we heard about the roadblocks,
the hiccups, the difficulties that folks have faced.
And I am kind of interested to start off with whether or not, Ms.
Kennedy and Ms. Simpson, if you could, kind of talk a little bit
about the second-draw restrictions, whether it is too restrictive for
the folks that you all are seeing, and then also as a follow-up—and
this can be for anybody—the major challenges that we are seeing
that are slowing down the loan applications.
Maybe, Ms. Frazier, if you could answer that second question
after Ms. Kennedy and Ms. Simpson.
Ms. KENNEDY. Thank you so much. On the second-draw restric-
tions, I think that the guidelines were very reasonable and, cer-
tainly, this second rollout of PPP really made a difference in help-
ing the communities that needed the most service.
The change with the Schedule C has been really significant, and
I can’t emphasize enough time is not on our side. And so the time
to help these businesses that are Schedule C, to get the funds to
underserved communities, that, quite frankly, are the greatest im-
pacted in the pandemic if you look at the numbers for economically
disadvantaged communities and rural communities, to be able to
get access to these resources, and the Schedule C change will make
a significant difference.
And I will say to you in response to your last question, the errors
in the holds have been a real challenge. There was kind of a magic
wand after the February 24 changes were made that helped to re-
move some of the errors. But the resources, the competent staff to
help people address those errors is really what is slowing down the
process. And with this looming deadline, it could absolutely cripple
the program and small businesses from getting the help that they
need if we don’t get that addressed.
Ms. SIMPSON. If I may, I will address the second question and
then go back to the third.
Regarding the conversations around providing an opportunity for
SBA to approve applications that are in the pipeline on March 31,
that is great, but there are still so many applications that can’t
even get through the front door to get into the SBA system.
In our written testimony, we provided some graphics because it
is really complicated, and so a visual aid has been included in the
materials to help explain that front door that is entrapping so
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many applicants. So if that could be taken into consideration when
thinking about that March 31 deadline, that would be very helpful.
As to the first question around the 25 percent revenue decline for
second-draw loans, we are working with CPAs. We are trying to
help their clients understand whether or not they qualify at that
25 percent level. The SBA and Treasury have been very open and
flexible in how borrowers can calculate that. However, we still need
a key piece of guidance as to whether some of the other business
relief funds that came out of the CARES Act, such as Provider Re-
lief Funds and HHS funds, are included in gross receipts.
Ms. DAVIDS. Thank you. And then I will have to follow up. I
would like to follow up, Ms. Frazier and Ms. Bombin, about a cou-
ple of other things. So thank you all for your time.
I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
The gentleman from Minnesota, Mr. Hagedorn, is recognized for
5 minutes.
Mr. HAGEDORN. Thank you, Madam Chair. I appreciate you
and the ranking Republican member for holding this hearing. It is
very beneficial.
As we know, the Paycheck Protection Program was designed to
help businesses and others get from one side of the coronavirus to
the other and keep people employed and paid. And it has been very
successful in many ways. Many members of this Committee and
my Agriculture Committee where I serve worked early on to see
that farmers and ranchers would also be included in the Paycheck
Protection Program.
Unfortunately, there has been a little bit of an oversight, I be-
lieve, in the last legislation where farmers and ranchers are only
allowed to use net income instead of gross income for calculations
to apply for PPP loans. And I offered an amendment in the rec-
onciliation process with this Committee. It wasn’t accepted, but I
know there was a lot of folks on the other side of the aisle who felt
like it was an amendment that we should take another look at.
So I have introduced legislation, the PPP Flexibility for Farmers
and Ranchers Act. It is H.R. 1411. Has about 70 cosponsors al-
ready, and that would fix this loophole and allow our farmers and
ranchers to use gross income for their calculations.
And, Ms. Frazier, I noticed in your testimony that you discuss
this concept. Can you explain to folks why this is so important for
our farmers and how it will help our communities?
Ms. FRAZIER. Thank you. Well, as we know, the farmers really
are the ones that feed us every day, provide the food for our tables
and for our lunches, et cetera. And they work very hard on their
businesses, and oftentimes their net bottom line is very small in
comparison to what they provide at the gross revenue level.
So similar to the Schedule C, this change to the schedule act was
critically important and has actually given the farmers quite a bit
of hope. And we saw quite a number of farmers coming back, look-
ing for additional funds, and excited to see that benefit. So I thank
you for those changes and really support your initiatives to con-
tinue that.
Mr. HAGEDORN. I appreciate it. Thank you.
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And as somebody who represents southern Minnesota, a lot of
agricultural interest, I can tell you that, you know, when farm fam-
ilies sell out, they usually sell out to bigger operators, and bigger
operators are not bad folks but it means that we are going to have
fewer people holding the land, working the land, living in our rural
communities, shopping on Main Street, going to our schools. It puts
enormous pressure on our rural communities to be sustained. And,
of course, it undermines what we do in agriculture, which is incred-
ible, providing food and quality food at affordable prices for the
American people and many around the world.
So I am hopeful that we can gain support for this piece of legisla-
tion, and if the program is extended in any way, make sure that
that is included because it would help over 100,000, I believe, farm-
ers and ranchers across the country. And so I would ask for your
support on that.
Lastly, I think, it seems to me, based on what I have seen in the
State of Minnesota, best thing we can do to help everybody across
the board is to get rid of these lockdowns. Our State of Minnesota
has been locked down as much as almost any other State. It has
really hurt businesses, farmers. It has hurt people across the
board, and we are seeing a real labor shortage out there. And, un-
fortunately, with the schools closed for the most part for a long,
long period of time and not fully reopened, you know, parents
aren’t able to get back into the workforce full time. And we are see-
ing an enormous pressure put on for childcare services.
So I would encourage, you know, if he is watching, our governor,
to open back up, get the kids back in schools, because it is also
having a bad impact, not just on businesses and so forth, but addic-
tion issues, suicide, people having problems with depression, folks
like me. I am a stage IV cancer survivor. And, unfortunately, there
are people that didn’t go to the doctor and get their screenings, who
are probably going to have worse problems than they otherwise
would if they had had that in time. And then you see students in
record numbers in Minnesota falling behind, dropping out.
These are the types of unintended consequences of lockdowns
that really should be examined. I think we need to make strong
changes in that area.
So if there is anyone that would like to comment on the—well,
I only have 35 seconds. I apologize.
But, with that, Madam Chair, I will yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentleman from Maryland, Mr. Mfume, Vice Chair of the
Committee and Chairman of the Subcommittee on Contracting and
Infrastructure, is recognized for 5 minutes.
Mr. MFUME. Madam Chair, thank you. My thanks to both you
and the Ranking Member for pulling us together for this hearing
and for the leadership that you have demonstrated on this issue
going back over and over again.
A couple of quick things. First of all, I appreciate the previous
gentleman’s remarks, particularly about the human aspect of what
is going on, in addition to the very real needs of businesses out
here in the country.
For the record, Madam Chair, I was glad that you put in your
memorandum to us a reminder that we have appropriated $800 bil-
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lion in total for PPP. So Congress gets a big ‘‘E’’ for effort but a
much smaller one for effectiveness and efficiency, which is why this
meeting is so very important, trying to drive us to where we ought
to be with good testimony.
I have a question for Ms. Frazier and then one for Ms. Kennedy.
Ms. Frazier, you talked about extending the deadline beyond
March 31, which I am in support of. And then you said we should
refer to your written testimony for some of the ideas and thoughts
that you had along those lines. So I went to your written testimony
and was wondering if you could expand, Ms. Frazier, on a couple
of things: first-draw increase eligibility, second-draw eligibility, sec-
ond draw use of proceeds, and the requirement that goes with that,
as well as the Schedule C borrowers and Schedule C filers, the im-
plications of that coming out of the SBA change.
Ms. FRAZIER. Thank you. I will try to remember all the great
questions that you have.
So I will begin with first-draw borrowers. Right now, if someone
were to apply for a first draw, they would not be eligible for a sec-
ond draw, nor would they be eligible to spend the money in the 8-
week period of time before the March 31 date. So maybe they didn’t
have an opportunity to do a first draw for, you know, whether the
bank didn’t support them or they didn’t get the application in,
wasn’t aware. We really firmly believe that they should have an op-
portunity for that second draw to support their business. So ex-
panding that time and giving them the time to spend the money
as the rules predict.
But also, being able to go for an increase. Sometimes—for in-
stance, in my testimony, I remarked about a Schedule C borrower
who is a video production firm and sole proprietor who outsources
the help when he needs it. When he applied for his first draw, he
only was able to access $4,000. He needed much more money, and
the round one could do that because his business was shut down.
So we supported it with an SBA loan, express loan of $16,000.
If the rules that are now in place for Schedule C had been in
place at the beginning for him, he would have been eligible for that
full $20,800. And it would now also be forgiven as well. So he is
left today with a $16,000 SBA loan that we have turned out over
a period of time.
He did come back for a second draw, again, early in the process,
because his business was still impacted, but the rules charged. And
so our suggestion is, is that businesses like that are able to come
back and reapply using that new calculation. It is very important.
Mr. MFUME. And, Ms. Frazier, I am going to have to reclaim
my time because it is dwindling. I would appreciate, though, if you
could get back to me with expanded thoughts on those areas that
you listed in your testimony that I just referenced.
And, Ms. Kennedy, if you could just take a moment to talk about
section 1112 of the CARES Act which provided 6 months of debt
relief for existing 7(a) and 504 and microloan borrowers. The 6-
month period was extended under the Economic Aid Act, which
was passed in December.
Could you expand on the importance of section 1112 in terms of
current SBA borrowers, especially those with unforgiven loans?
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Ms. KENNEDY. Thank you so much, Congressman. The section
1112 payments were really a lifeline for these small business bor-
rowers. With the new economic relief aid act, the predicted amount
of funds were underfunded. We discovered that they were under-
funded, and some of those small businesses are not going to get the
SBA debt relief payments that they need most. These are commu-
nity advantage and microloan borrowers as well as SBA 504 and
7(a) borrowers. And the predicted amount that was supposed to be
6 months or 3 months has shrunk down to 3 months or 2 months
of debt relief payment.
And so we are asking Congress—we know your intention—to con-
sider how we can close that gap and make sure those small busi-
ness borrowers who plan, thinking about inventory, and adding ad-
ditional employees, and supporting their operations because of the
debt relief payments, to be able to get those resources so that they
can continue to support their communities.
Mr. MFUME. Thank you very much.
My time has expired. Thank you, Madam Chair.
Chairwoman VELÁZQUEZ. The gentleman from Minnesota, Mr.
Stauber, is recognized for 5 minutes.
Mr. STAUBER. Thank you. Thank you, Madam Chair. And I ap-
preciate the witnesses’ testimony. Greatly appreciate it.
I just have a few quick questions for Ms. Frazier. Can you elabo-
rate on what the unresolved errors look like in the SBA application
as you mentioned in your testimony?
Ms. FRAZIER. The item that I am referring to is actually a fraud
situation. This is a first-time draw applicant for their business.
When the application was submitted to the SBA, it was determined
that the business employer identification number had previously
been used in the first round as a—for an EIDL loan and a first-
round draw. And so we have been trying to work diligently through
this process to find a way to get that released off of her so that she
could have her first-draw loan.
Mr. STAUBER. And next question, Ms. Frazier. What changes
need to be made to ensure that PPP isn’t just a bridge to nowhere
and that business owners are able to take full advantage of what
the program has to offer?
Ms. FRAZIER. I think beyond the PPP, what was heard earlier
in other oral testimonies, I think continued support from the
SBDC, through the SBA, and also the SBIR programs to help those
businesses with their business plans, to help them look forward
and find a way, whether they need to change their business model,
adapt their business model, or just understand what I would refer
to as working on the business rather than in the business. So I
think funding those programs across the minority groups, across all
groups would be very helpful.
Mr. STAUBER. And then, in your opinion, are the traditional
SBA lending programs prepared to pick up where the PPP leaves
off?
Ms. FRAZIER. I believe so. And I also believe that, through this
process, many banks have become much more comfortable with the
SBA programs and will continue to make use of them going for-
ward, yes.
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Mr. STAUBER. The last comment I would like to make is, as you
supported the PPP program in the lending institutions, some of the
redundancy for expediency was, you know, left off the, you know,
the normal way in which you provide a loan. Would you agree or
not that some of the items of redundancy as we get through
COVID, we can erase some of the redundancy that you were asked
to do by the Federal Government as a lending institution? And if
so, name just a few of those.
Ms. FRAZIER. May I ask for a clarification on redundancy?
Mr. STAUBER. So the PPP loans were given out in an expedited
manner, and some of the redundant—and I would say some of the
normal things you would do like, for instance, the known customers
in your respective banks, you—many people—or many banks, rath-
er, expedited the loans and not required to do all the, quote, nor-
mal, end quote, you know, checks and paperwork.
Are you prepared in any way to state that the way you did the
prior loans should be the same way going forward? And what I am
getting at is reducing redundancy, which is a third of your time
preparing for that examiner to come into your business.
Ms. FRAZIER. I appreciate that. Thank you. I can speak for my
bank and a few others, more than a few others, that I have talked
to directly. But while the requirements of the PPP program did not
necessarily require us to submit what we normally would for a full
loan package, we did do a good bit of the work behind it just to
ensure. And the goal behind that was just to ensure that the bor-
rowers received 100 percent forgiveness. And that is what is most
important at the end of the day, that they didn’t have a tail of a
loan hanging around for them.
So going forward, I am not sure that I can answer off the top of
my head. I would like to give that question a little bit more
thought and get back to you, if that is okay.
Mr. STAUBER. That would be just fine. Thank you for your tes-
timony.
Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentleman from Minnesota, Mr. Phillips, the Chairman of
the Subcommittee on Oversight, Investigations, and Regulations, is
recognized for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair, and to our witnesses
today.
I am going to follow up on my friend and colleague, Mr. Mfume’s,
questioning about the 1112 program.
To Ms. Kennedy, you called the relief provided under section
1112 under the CARES Act, quote, a lifeline to your borrowers.
That is absolutely true certainly for the small business owners in
my district and I presume in all of our districts. That is why I am
concerned about the gap in funding to fulfill the December promise,
the so-called December promise that was made to businesses in the
Economic Aid Act of last year.
In fact, a smoothie bar in my district called DrinkFit was ap-
proved for a 7(a) loan exactly 1 month after eligibility for the first
round of debt relief, after that ended, despite starting the process
a full year earlier. Then the second round of additional months of
relief under the Economic Aid Act added eligibility on both sides
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of his approval date, leaving his business in a literally no-man’s
land due to how that bill was written.
So, Ms. Kennedy, can you speak to the challenges that the busi-
nesses that you serve have had with the section 1112 program run-
ning out and what steps you would like to see we in Congress take
to make good on the promise that we made to the employers?
Ms. KENNEDY. Thank you so much, Congressman. And I think
your last statement of make good on the promises. We as your non-
profit community partners, we reached out to those businesses and
we let them know what was in the Economic Relief Aid Act, and
to go back to them and let them know, I am sorry, there is not
enough funds, that was really tough. And one of our small busi-
nesses who is a catering company who has absolutely been
slammed because he cannot open his business, he cannot run his
business, he called and emphasized, If there is anything that can
be done to make sure that we can get those payments, we would
really, really appreciate it. We are trying to pivot. We are trying
to get our business back open, and we need this assistance, and we
thought we had it. So we were planning, based on having those
funds available or that debt relief available, and now we need to
figure out how we are going to make this payment.
The need is great for those businesses, especially in hardest hit
industries. And we hope that Congress can figure out how we can
keep the promise that Congress made and intended for these busi-
nesses through the section 1112 payments.
Mr. PHILLIPS. Thank you. You consider your message delivered.
We have open ears, and I wholeheartedly agree.
Ms. Simpson and Ms. Frazier, in your comments, you mention
the changes made by the Biden Administration to the loan amount
calculation for business owners relying on PPP including sole pro-
prietors, independent contractors, and the self-employed. And as
you mentioned, I am hearing from constituents myself who say
that the formula change has to be applied retroactively or hun-
dreds of thousands of business owners will be unable to access the
potential of an increased loan.
So a few questions. To what extent is money being left on the
table? How much more support would companies be able to tap into
if this issue were to be addressed? And is your recommendation
that Congress take steps to correct the issue, or can that be done
at the administrative level?
Perhaps, Ms. Simpson, you might begin.
Ms. SIMPSON. Thank you. We don’t know exactly how much
money will be left on the table. But we do know, based on some
conversations we have had with CPAs, who have looked at their
client base of Schedule C filers, that the loan amount could be as
much as 50 percent more or doubled. So many small business own-
ers operate on a shoestring, and their net income, the bottom line
of their tax filing could show a loss or barely any income at all. But
if they are able to use this gross receipts calculation that is now
available to new Schedule C borrowers, they would be able to ac-
cess a substantial amount more, again, up to the cap that the SBA
has approved.
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Mr. PHILLIPS. And just relative to the question about Congress
or at the administrative level to address it, do you have thoughts
on that subject?
Ms. SIMPSON. I am no constitutional expert, but it is my under-
standing that SBA believes that that would require congressional
action.
Mr. PHILLIPS. And Ms. Frazier?
Ms. FRAZIER. Thank you. What I would like to do is look back
through our applications and give you a more firm number and get
back to you. But I do know that we have seen an increase in the
number of applications over the past week since that calculation
changed. And I echo what Ms. Simpson said that I believe it could
be as much as 50 percent, 60 percent increase in loans for a good
number of those businesses overall.
So, again, I think that to have that—the feedback that we have
received thus far is that maybe the systems are not adequately pre-
pared to accommodate that increase and so maybe there needs to
be consideration to, I don’t want to call it a third draw, but a draw
increase type format.
Mr. PHILLIPS. All right. Thanks, Ms. Frazier.
And I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Meuser, for 5 minutes.
Mr. MEUSER. Thank you, Madam Chairwoman. Thank you very
much to all of our witnesses.
In the second round of PPP, one of the requirements was a 25
percent reduction in revenue in a quarter, a quarter of 2019 versus
a quarter in 2020. I offered an amendment which would allow to
compare any 90-day period in 2019 versus 2020, as opposed to a
set calendar quarter.
Ms. Frazier, from a community banker’s standpoint, would this
have been helpful to banks and in the interest of small businesses
if we could pass such a provision?
Ms. FRAZIER. Thank you. I think any time period that a bor-
rower could review and look at their business, it could be helpful
certainly for allowing more people access rather than just the tradi-
tional calendar quarter.
Mr. MEUSER. But as far as you know, that wasn’t a significant
problem for many?
Ms. FRAZIER. It would be difficult for me to answer that fully,
but we did not hear any commentary that it was a problem.
Mr. MEUSER. Okay. From a community bank standpoint, once
again, do you feel our community banks can handle the pipeline of
loan requests that exist? My understanding is it is as high as
50,000 nationwide that need to be facilitated between now and
March 31. Do community banks feel that is a problem?
Ms. FRAZIER. To my knowledge of all that I have talked to, we
do not feel that this is a problem. We really take pride in serving
the communities in this way.
Mr. MEUSER. Okay, great. Were there they sectors that you be-
lieve, industry sectors such as restaurants, for instance, that were
underserved or PPP was not well-enough designed to serve effec-
tively?
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Ms. FRAZIER. I cannot speak to that directly. I am not aware
of any that were not addressed or were not eligible. I do believe—
I will go back to the changes to the Schedule C where moving to
that gross receipts method, there were many businesses that were
operating at a net loss that were ineligible in matters particularly
about an industry but at that net loss, and that changed the pic-
ture for those folks.
Mr. MEUSER. I thank you. And, Ms. Frazier, again, do commu-
nity banks have any concerns or many concerns with the forgive-
ness procedures that are currently outlined for the loans?
Ms. FRAZIER. No. It seems to be working smoothly for us, and
the process continues to improve. And with the most recent appli-
cation, simplified application for loans, $150,000 or less, it is work-
ing smoothly.
Mr. MEUSER. That is great.
Will a loan that is outstanding that has not yet been forgiven be
used by the bank, for lack of a better way of putting it, against the
business’ line of credit?
Ms. FRAZIER. No. I will speak only for my bank, is that the
process we used in helping the buyer access the PPP loans we felt
assured that they would have forgiveness. And so we continued to,
even though borrowers that have PPP loans, offer them additional
loans and support their business needs.
Mr. MEUSER. Okay. Well, those are very positive answers. That
is good to hear.
Are there any aspects of the PPP program that you feel are too
burdensome to lenders or to your customers that you feel we should
work on?
Ms. FRAZIER. I would go back to the errors and being able to
provide resources such that the process, if there is an error identi-
fied or something is holding up the system, that we have access to
folks that can help us resolve it, because you have the benefit of
actually approving the loans or approving the dollars. We have the
very wonderful benefit of being able to say the loan is approved
and then forgiven. And so that is our ultimate goal is to get to
those answers for the borrowers as quick as possible.
Mr. MEUSER. Last question. Do you think some of those re-
sources need to be dedicated to the SBA?
Ms. FRAZIER. It will help with the errors, yes.
Mr. MEUSER. Thank you. I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentlelady from Illinois, Ms. Newman, is recognized for 5
minutes.
Ms. NEWMAN. Well, good morning, everyone. And thank you,
Madam Chair and Ranking Member. I appreciate the time this
morning. And thank to you all our guests today. Very informative
and very helpful.
So this morning, I am directing my questions to Ms. Kennedy
and Ms. Simpson. The former gentleman was talking about loan
forgiveness, and I was going to tag off that.
So in my district, loan forgiveness has been a significant prob-
lem. We have about 80 percent of our businesses in Illinois Three
are micro businesses, so under 20 employees and very small rev-
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enue. So with that, they are busy running their business, and get-
ting their loans forgiven has been quite an ordeal.
So I would love to ask Ms. Kennedy and Ms. Simpson, from both
of their perspectives, what can be done either by the SBA or by
Congress to make that easier for these loans to be forgiven?
And I will start with Ms. Kennedy.
Ms. KENNEDY. Thank you so much. You know, we are CFI, a
community financial institution, as a CDC and micro lender and
CDFI. And the forgiveness process we have found to be fairly
straightforward, as Ms. Frazier said, especially for loans under
$150,000. She also mentioned people—the small businesses are
working in their business versus on their business. So sometimes
that takes a little time to get the documentation, but the fact that
the applications have been streamlined has really made a critical
difference in helping the small businesses get that forgiveness. So
we have had fairly good experience with that and responsiveness
from SBA when there has been questions.
Ms. NEWMAN. Thank you.
And, Ms. Simpson, as a CPA, what guidance can you give busi-
nesses to get the—because it is an onerous document. I read
through the 20-page document. It is fairly onerous for people to get
through. And luckily, we have a lot of kind CPAs and now we have
the community navigation program that will be helpful in that re-
gard. But what do you recommend to those folks who are strug-
gling through that without spending more money?
Ms. SIMPSON. Thank you for the question. We have actually
worked with a technology provider to create an online platform
that helps small business borrowers work through the forgiveness
process using an online platform. So it avoids—again, I love Excel.
I think it is awesome. Not everyone agrees with me.
So this tool allows small business owners to use a more friendly
environment to let them input information around their payroll
costs, their rent, their utilities, and the new expanded costs that
are now eligible.
It is really important for small business owners to know that
there are safe harbors within the forgiveness process. If they were
shut down, which so many of them were, they can avoid some of
the implications of a potential head count reduction.
So understanding that there are opportunities to streamline this
forgiveness process and that there are online tools to help I think
would be a good place to start, and I have got a lot of resources
that I can connect you with to get that information out there.
Ms. NEWMAN. That would be much appreciated. It is a signifi-
cant problem in my district, so I would really appreciate that.
Thank you.
And let me just end by thanking the Committee for all their
great work on the SB program overall. It has helped my district
immensely, and I really appreciate it. I also would add that I very
much appreciate the fairness of the program, that it addressed
many industries. And I think that many industries is important
and that we emphasize those that were hurt the hardest, such as
stages and venues and restaurants. So I am very happy with the
broad breadth of the program. So thank you all.
I yield back.
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Chairwoman VELÁZQUEZ. The gentlelady yields back.
The gentlelady from New York, Ms. Tenney, is recognized for 5
minutes.
Ms. TENNEY. Thank you, Madam Chair.
And good morning to everyone. It is such an honor to work with
you again on this Committee.
I want to thank the witnesses for their insight. This has been
really, really a productive and helpful meeting.
It has been a long, hard year, and our Nation is finally turning
the corner to fight this COVID-19 crisis. Small businesses are the
heart of the economy in New York’s 22nd District and have been
hit extraordinarily hard during the pandemic. In fact, 94 percent
of the workers in the 22nd District are employed by a small busi-
ness, so they are really one of the bright spots in our community,
and the Paycheck Protection Program has been a phenomenal life-
saver for us. It has allowed many businesses in my district to con-
tinue to pay their employees and to survive the shutdowns that we
have experienced in New York, especially upstate.
In New York, just for some information, PPP has provided
140,000 loans, totaling $12 billion, and has saved literally hun-
dreds of thousands of jobs. This has been an effective COVID-19 re-
lief program. And we are, as we know, to begin to hopefully head
into prepandemic life and to a better way forward, opening our
economy is obviously critical to this. But there are many businesses
that still need to benefit from PPP.
And just some good things that have happened: 397 jobs were
added to the economy in February, well beyond the 166,000 ex-
pected. The unemployment rate dropped to 6.2 percent, which is a
huge decrease from the peak that was 15 percent that we experi-
enced early in the pandemic. The nonpartisan Congressional Budg-
et Office has estimated that unemployment will continue to fall as
vaccines are more widely distributed.
I am also concerned about where we are going to go, not just
with PPP, but to make sure that our small businesses continue to
benefit from the Tax Cuts and Jobs Act as they move forward into
prepandemic life. I have heard from numerous businesses that are
concerned about that, as well as maintaining and trying to deal
with their new taxes, should that happen during this crisis.
The Paycheck Protection Program will expire, as everyone has
talked about here today, on March 31. And the program has nearly
$128 billion of funding still available. While I do not support all of
the provisions of the American Rescue Plan, I continue to believe
that parts of that bill have merit, particularly provisions that
would continue to extend relief to small businesses and individuals
most in need. And i recognize that, obviously, while we are enter-
ing into recovery, there are many businesses who have done better
than others and some who have not. Some have done well. Some
have, unfortunately, been forced to close. But I am also a small
business owner and I understand the difficulties we face, and I am
committed to doing everything we can to make sure that everyone
can return to normal life and all businesses can thrive.
So one of my big questions is: As we head into this complex tax
situation—and, hopefully, the Tax Cuts and Jobs Act will remain
in place, because it has been cited as the single biggest benefit to
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my small business community in the last 30 years—I wanted to
ask and turn my attention to Ms. Simpson and just to get her ex-
pertise as a CPA. Obviously, many businesses are struggling with
the complexity and confusion around PPP that you have discussed.
But how is it going to specifically impact their taxes? Is there a
way that maybe we can put the online program you suggested for
forgiveness? Can we place that? Also, can we do something with
dealing with the paperwork for taxes as they are coming due right
now?
Ms. SIMPSON. As a colleague said, the Tax Code may never be
less complex or may never be easy, but we can certainly strive to
make it less complex. And I believe that you find many people who
are willing to go along with that statement.
We are working with the IRS to get guidance on how the PPP
programs will impact the tax returns of many borrowers. We
thought the problem was solved when Congress allowed PPP ex-
pense deductibility. However, there are complicating factors, such
as States that may not conform to that or they may conform in dif-
ferent income caps. So lots of moving parts and pieces to navigate
across the entire country and how systems are operating there.
We would be interested in talking about a resource that we have
provided that helps CPAs and small business owners navigate the
differences between Federal tax treatment and State tax treat-
ment. That is a document that we do have available.
Ms. TENNEY. Thank you. My time is expired. But would that
be something that would be on an online portal?
Ms. SIMPSON. I can go back and talk to the team about that.
Ms. TENNEY. Great. Thank you so much.
Thank you, Madam Chair. I yield back.
Chairwoman VELÁZQUEZ. The gentlelady from California, Ms.
Chu, is recognized for 5 minutes.
Ms. CHU. Thank you so much, Madam Chair.
First of all, thank you to Hilda Kennedy for being here. Hilda
Kennedy is my constituent, and she was one of the first persons to
contact my office about the need for a Paycheck Protection Program
set-aside for SBA micro lenders, certified development corporations,
and CDFIs.
And so thank you, Ms. Kennedy, for being here to provide the
perspective of a small community financial institution and espe-
cially for the work you have done in my district to connect under-
served businesses to COVID relief. It was thanks to the direct ad-
vocacy of constituents like you that made it so clear to me that PPP
needed a dedicated set-aside for underserved businesses. And with
the Chairwoman’s support, we succeeded in creating those set-
asides for small banks and community financial institutions like
your business, AmPac. Those CFIs have processed over 110,000
loans directly, but also provide crucial guidance and resources to
small businesses.
Can you talk about the kind of services that CDCs have provided
to small businesses and how they differ from what larger commer-
cial banks can offer?
Ms. KENNEDY. Thank you so much, Congresswoman, and great
to see you.
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The difference between a CDC and a bank is we are mission-
based lenders. So our bottom line is the small businesses that we
serve, and we are not beholden to shareholders. We also provide a
lot of hand-holding for small businesses. So from technical assist-
ance support to webinars and training, to just being available when
the business plops in your office and just needs to be reassured and
needs to know how do I complete this form, that is the role that
we play.
And we have been working with a number of communities to
manage emergency relief programs, COVID-19, from counties to
State to other local governments. So we are in the community and
part of the mission of serving small businesses.
Ms. CHU. Well, thank you for that. And also, thank you for men-
tioning the importance of a Community Advantage loan program in
delivering capital to underserved businesses over the long term.
My legislation to give statutory authorization to this program
would increase the targeting of underserved markets and explicitly
include business owners of color in the program. And it passed the
House last December. It is a top priority of mine to pass the bill
into law this Congress.
And what is important is the success of the PPP set-aside for
CFIs show that the Community Advantage model works at scale
and is particularly powerful for reaching underserved and under-
banked communities. Can you describe your interest in rejoining
the program and talk about the way that these Community Advan-
tage loans would benefit the small business communities that you
serve?
Ms. KENNEDY. Thank you. I cannot overstate that because
those small businesses, especially economically disadvantaged busi-
nesses, critically need this program. And as PPP stabilizes these
businesses, they are going to be ready to grow. Underserved com-
munities were hardest hit as a result of the pandemic, and Com-
munity Advantage targets those communities. So we really need to
make the program permanent and need to open up for new CA
lenders. And we would absolutely want to be part of that conversa-
tion. We have businesses who need the help, and they call us for
the help.
And as a Community Advantage lender, we will be able to help
this veteran who just called our office the other day. Got some new
government contracts but needs help from a program many that
Community Advantage could serve.
So thank you. We would love to support you in doing that.
Ms. CHU. Great. And you have also talked about the unique
challenges facing sole proprietors and PPP. They are more likely to
be women and people of color who lack access to traditional banks.
Can you say what issues they have and why they need programs
like yours?
Ms. KENNEDY. Well, those businesses by and large need more
hand-holding. They don’t have access to great CPAs or book-
keepers. They are putting their information on a spreadsheet or
maybe they have QuickBooks, but they need hand-holding. And it
is community-based lenders, mission-based lenders who do that
kind of hand-holding to make sure they can get the resources that
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they need and then to be able to have the resources to provide
them.
So 80 percent of America’s businesses are nonemployer busi-
nesses. Those are the small Schedule C filers. They need additional
hand-holding. And mission-based lenders or community banks real-
ly provide that kind of support that they will not get at larger, non-
traditional banks.
Chairwoman VELÁZQUEZ. The gentlelady’s time has expired.
The gentlelady from California, Mrs. Kim, is recognized for 5
minutes.
Ms. YOUNG KIM. Thank you, Chairwoman.
And I would also like to thank our Ranking Member Luetke-
meyer for holding this very, very important hearing today.
With the Biden administration announcing five changes to PPP
on February 22 of this year, the looming March 31 deadline does
not give our small businesses the time to adjust to the new guide-
lines issued by the SBA. I am also concerned that the SBA is not
forthcoming and transparent when it goes beyond the statutory 90-
day period to review the loan. The SBA should be communicating
with borrowers and lenders about the status of the loan if it goes
beyond the 90-day period.
And I would like to engage Ms. Frazier in the next round of
questioning here. To date, the SBA has cleared approximately 36
percent of all PPP loans through the forgiveness process. However,
certain loans that are not processed right away have tended to let
beyond the 90-day review window imposed by the SBA. So has your
institution dealt with any of these loan reviewers taking longer
than 90 days? And what steps can SBA take to make the loan for-
giveness process more efficient?
Ms. FRAZIER. Thank you for your question. We do have loans
that have been in the forgiveness portal for longer than 90 days.
They tend to be the larger loans. They are taking longer. And you
identified correctly, there is a lack of communication to the bank
and to the borrower, which is causing a bit of stress on the bor-
rower’s side because they are concerned about, you know, what if
it is not forgiven, what happens then. So we completely agree with
what your statements are.
I do think communication, where they are in the process, what
is happening, what they need, would be really helpful overall in at
least calming the fears of the borrowers and allowing us to keep
things moving forward and gathering the information that they
need. That would be the number one request of what would need
to be done.
Ms. YOUNG KIM. Well, following up, we have heard from nu-
merous sources and constituents about the delays in processing
loans due to SBA hold codes. Can you comment on your experience
with these hold codes and what the typical length of delay looks
like when addressing the code?
Ms. FRAZIER. The length of delay could be 2 days. It could be
2 weeks. It could be, as the example I shared earlier, since January
29. It really depends on our ability to access information and what
that hold code might be.
If it is something that we can resolve without the SBA, maybe
there is a piece of documentation missing or there is a number that
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isn’t quite right, we can get that done fairly quickly inside just a
day or two or few days. If it is something that we need to rely on
the SBA or really need to get information from them to clarify
what they are looking for, it will take considerably longer over
time.
Ms. YOUNG KIM. Well, do you believe extending the March 31
deadline could help alleviate the delays with the hold code?
Ms. FRAZIER. It could. It at least would be able to resolve them
and allow people to access the money that they have applied for
and be able to take care of those needs.
Ms. YOUNG KIM. Well, thank you.
With that, I will yield my time back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Illinois, Mr. Schneider—
welcome back to the committee—for 5 minutes.
Mr. SCHNEIDER. Thank you, Madam Chair. It is wonderful to
be back. I am excited to be working with you and my colleagues
on this important Committee. Thank you also for holding this im-
portant hearing. I want to thank the staff for helping us work
through the challenges in these difficult times and obviously thank
our witnesses for sharing with us your experiences and perspective
as we try to understand this issue.
Very soon we will vote in the House on the Senate amendment
to the American Rescue Plan and send it to the President for his
signature. I am very grateful that this legislation includes another
$7.25 billion for the Paycheck Protection Program and expands the
businesses eligible for critical funding.
Our goal with PPP has always been helping our businesses, in
particular our small businesses, get to the other side of this pan-
demic. The American Rescue Plan will help assure that when we
get to the other side of the crisis, our small businesses will benefit
from a growing economy and hopefully be able to chart a path for
recovery and renewal. Obviously, that seems to be putting us on
that path, on beating back this environment, but it is not certain
when we will finally get to full recovery mode. And that is why pro-
viding the support for small businesses is so important.
For many businesses in our district, PPP funds have literally
made the difference between being able to hang on and weather
the struggles of the past year or having to close their doors often-
times for good.
I appreciate everyone’s testimonies. I have heard and shared
with colleagues many of the same concerns that we brought up
here. I will come to the error codes, but I want to talk first and
maybe—Ms. Kennedy, you mentioned this. Others said it in their
testimony as well. As we look to the future, people are trying to
figure out how will they get through this and then think about
what is next after, because it is not easy to go to the next place.
You touched on the need for financial education, technology edu-
cation. What things, whether it is your own group, CDC, that is
doing this or the SBA, more broadly, what type of education and
training do you think is most important to help businesses get to
the recovery and chart their future beyond that?
Ms. KENNEDY. Thank you, Congressman. I think one of the
things that we have said in this process is the wheat and the tares
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have been separated. And we learned throughout this process that
business financial literacy, business acumen literacy is so very crit-
ical. A lot of the small businesses that we worked with really did
not understand their financial statements, didn’t understand cash
flow, didn’t have reserves. So the opportunity to pivot, the oppor-
tunity to adjust, they couldn’t do it because they didn’t have that
training.
So the SBA has incredible programs through the SBDC and
SCORE, as you have heard, and through partners like the CFIs,
CDCs, SBA micro lenders to provide that kind of technical assist-
ance to help people understand their technology and understand
their business financials. That literacy is really critical.
Mr. SCHNEIDER. Great. Thank you. I think it is important. We
have been having webinars, the support for these companies, entre-
preneurs. Sole practitioners were just trying to provide for their
families. I think it is crucial.
I could talk to everyone about this, but I want to get to these
error codes as well. Time is of the essence. These businesses are
literally holding on by the day. It is important and applications
have been checked for errors and inconsistencies that could show
fraud. But, oftentimes, as has been earlier noted, that there are
sometimes flags that go up that are not fraud but maybe a clerical
error or something like that.
Ms. Simpson, I will turn to you. You talked about how many ap-
plications have been flagged incorrectly, and a business losing a
week or even 2 weeks could be the difference between getting
through this pandemic or not. Any thoughts you have on how we
can accelerate the process, not of making it easier for people who
abuse the system, but making it easier for people who are incor-
rectly flagged to get through the system and get the support and
assistance they need?
Ms. SIMPSON. Thank you so much for the question. I think
transparency into what is causing a hold code and what resolution
steps concretely are needed to move beyond a hold code is where
so much time could be gained. Having a manual that says, if you
have got this error code, these are the exact steps that either the
borrower needs to take or the lender needs to take, these are the
absolute sources of information that, if you supply, the hold code
can be released and moved on into a loan application process.
Mr. SCHNEIDER. Thank you. I am out of time. I could ask ev-
erybody, but I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentlelady from Texas, Ms. Van Duyne, is recognized for 5
minutes.
Ms. VAN DUYNE. Thank you, Madam Chair and to the Ranking
Member, for holding this hearing today.
When I talk to small business owners in Texas, they tell me two
things: PPP was crucial for surviving the most challenging days in
the pandemic, and that they aren’t looking for any more handouts.
They don’t want to just hang on anymore. They want a chance to
earn a living. They want to be able to open their doors and they
want to be able to get their customer base back. It has been an en-
tire year that we have held businesses back in the name of public
health.
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The bottom line is the best relief we can give these businesses
is to remove government-mandated constraints and allow them to
get back to work.
The Paycheck Protection Program was designed to be temporary
and targeted and, unfortunately, as demand for the PPP has gone
down, my colleagues across the aisle are still eager to add more
money to the program, even as over $100 billion dollars remains
unused.
As a Committee, we need to be focused on fixing the remaining
issues of PPP, while also figuring out a way to bring this pandemic-
related program to an end.
And with that, Ms. Frazier, community bankers were on the
front lines of delivering PPP loans. In your testimony, you cited
that community banks made 60 percent of the first-round PPP
loans. Now almost a year later, how do you see this program com-
ing to an end and a transition to recovery being made?
Ms. FRAZIER. Thank you for your question. In round two, I sus-
pect that community bankers continue to be meeting in the efforts
of delivering the PPP loans. I believe the benefit of that is the com-
munity bankers are able to really work with the borrowers and be
partners in helping them look forward.
But beyond PPP, I go back to I think there needs to be more in-
vestment into the programs that can support these businesses in
helping them understand, as Ms. Kennedy said, their financials,
understand their business model, understand how they can move
forward as well and supporting them. Banks can continue to sup-
port and partner with the businesses, helping them grow, helping
them understand the opportunities for them. But there needs to be
another party that can support them in understanding their busi-
ness overall.
Ms. VAN DUYNE. So as the Ranking Member of the Oversight,
Investigations, and Regulations Subcommittee, it is important to
me that we give our small businesses the best opportunity to suc-
ceed coming out of the pandemic. And this means removing any
unnecessary red tape.
So, Ms. Frazier, again, are there any SBA regulations, whether
for PPP or other programs, that this Committee should be review-
ing to help our businesses recover?
Ms. FRAZIER. For the small businesses, the most recent changes
to the forgiveness application have been $50,000 or less on those
loans. I think that has been a huge benefit for them and for others.
The changes to the second draw has been a big benefit. SBA as a
whole, I think that continuing to work with the community banks,
to deploy the other programs and be able to, as was noted earlier
in the conversation, make those approvals more timely and con-
sistent would be very helpful.
Ms. VAN DUYNE. All right. Thank you very much.
I want to thank all of our witnesses for being with us today.
And I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from New Jersey, Mr. Kim, for
5 minutes.
Mr. KIM. Thank you, Chairwoman, for pulling us together here.
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I know many of us are looking forward to the warm weather
ahead, the summer ahead, and enjoy some outdoor activities. Many
of the businesses in my district are seasonal businesses along the
Jersey shore, and they had a really tough season last——
[Audio malfunction.]
Chairwoman VELÁZQUEZ. I am going to yield to the gentleman
from Florida, Mr. Donalds, because Mr. Kim is dealing with some
technical issues. We will get back to Mr. Kim.
Mr. Donalds.
Mr. DONALDS. All right. Thank you, Madam Chair.
Listen, this has actually been a great conversation. Madam
Chair, I thank you, and, you know, thanking the Ranking Member,
Mr. Luetkemeyer of Missouri, for really bringing us together as we
begin to unwind the PPP program. And I would stress, members,
we have to really look at beginning to unwind and sunsetting this
program.
It is clear that the program, obviously, we designed it to chal-
lenge and to help the challenges of the COVID-19 crisis. With the
rate of vaccinations that are occurring in the United States
amongst the vulnerable populations, people over the age of 65, also
combined with the facts that you have many States that have al-
ready begun reopening, we have to make a decision here. And one
of the clear decisions is, are we going to continue, for how long, this
loan guarantee program?
One of the things that actually really came out to me during this
testimony from all of the witnesses is that one of the issues isn’t
really, per se, PPP in and of itself, but it is an ongoing issue in
the United States, and that is the lack of community banks to ad-
dress all of the financing needs of small businesses and micro busi-
nesses in communities both rural and urban and suburban across
the United States.
And if this Congress is going to take this matter seriously, we
have to begin to take a look at the statutory and regulatory envi-
ronment upon which community banks have to operate under,
which is why, in part, we have seen an almost 50 percent decline
in the amount of community banks in the United States—in the
United States, excuse me—since the passage of Dodd-Frank more
than a decade ago.
So I think it is time that this body begin to take even more steps
to allow the community banking industry to flourish in the United
States so we actually can address systematically the issue of bank-
ing deserts, the issues of access to capital, the issues to actually
help all of our small businesses and micro businesses, whether they
happen to be led by women or minorities or anybody else who oper-
ates businesses here in the United States.
Really, I just have one question, and it is actually—is a piggy-
back off of the question from Mrs. Kim of California, and it is di-
rected to Ms. Kennedy.
Ms. Kennedy, real briefly, if Congress decided to extend the PPP
program, how long of an extension do you think will be needed to
clear the current backlog to help those business owners who have
applied but they are waiting to get through their hold codes and
the like?
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Ms. KENNEDY. Thank you so much for the question. You know,
my association, NADCO, we have not taken a firm position on the
amount of time, but from talking to our staff, we believe 60 to 90
days would give the time to address some of those error codes and
to try and make sure these Schedule C businesses get the help that
they need after getting the application just approved on March 3
There are so many businesses who need to make sure that they
can qualify with the new guidelines of Schedule C, and there are
a number of businesses that need that help.
So from our personal advantage, a 60- to 90-day could certainly
help us to get through some of our backlog.
Mr. DONALDS. Thank you so much, Ms. Kennedy.
And, Ms. Frazier, same question to you. I know the banking com-
munity obviously is looking very closely at this, and, you know, ob-
viously you guys have a continuing relationship with SBA. As a
former credit officer in a bank, I have always enjoyed my dealings
with the SBA—and, yes, I am being highly sarcastic—but, you
know, Ms. Frazier, with respect to your industry group, what
would you guys recommend to Congress if we decided to actually
make a temporary extension to unwind the backlog?
Ms. FRAZIER. First of all, I want to thank you for your support
of community banks. Really appreciate that.
And, secondarily, in response to your question, we don’t have a
specific timeline, but I think in agreement with Ms. Kennedy’s
timeline, 60 to 90 days should certainly allow for the errors to be
resolved overall and to accommodate the changes or allow the bor-
rowers that are now eligible under the new changes to get through
the program.
Mr. DONALDS. All right. Thank you, Ms. Frazier.
Thank you, witnesses, for your time.
Thank you, Madam Chair. I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from New Jersey, Mr. Kim, for
5 minutes.
Mr. KIM. Thank you. Thank you, Chairwoman. Hopefully, this
works better this time around.
But what I was just getting at was just, you know, the seasonal
businesses that we have in the Jersey shore. And in December,
Congress, we passed additional help for seasonal businesses, allow-
ing them to apply for an increase to their first-draw PPP loan
based on a 12-week period of their choosing that better represents
their normal revenue.
For a lot of seasonal businesses, this first-draw increase has been
a lifesaver. But I have heard from other seasonal businesses in
New Jersey that they have been turned away by their first-draw
lender, basically being told, quote, ‘‘We are not doing this,’’ or,
quote, ‘‘There is too much paperwork.’’ And, unfortunately, they
don’t have other options to go to a different lender.
My office called one lender, one of the big banks, asked why they
were turned away, customers for first-draw increases, and suddenly
they started processing them.
We contacted another one, and after hearing that their policy
made by someone up the management train was not to process
these topoffs, I gave them a chance to correct the record in advance
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of this hearing, but they still haven’t gotten back to me or proc-
essed that increase for a business on the shore for about $70,000
that they are eligible for.
Who knows how many other businesses or others are experi-
encing this or being turned away. I know we are asking a lot of
lenders right now, and that they worked hard to get all this PPP
money out over the past year, but Congress did authorize first-
draw increases to help seasonal businesses. And I find it unaccept-
able that some lenders, particularly the larger ones, are simply
choosing not to do it.
I wanted to start with Ms. Simpson. Have you heard of this hap-
pening, or are there other challenges that you are hearing from
seasonal businesses when it comes to receiving their first-draw
loan increases?
Ms. SIMPSON. Thank you for the question. We are—I am going
to pick up my phone. I apologize. My headphones died. I have been
on here for a while. So I apologize for the awkwardness.
But, yes, we have heard that borrowers are not having much
luck getting loan increases approved. So that is not an isolated in-
cident to the Jersey shore.
Mr. KIM. Yeah. This is something that I am just trying to get
a sense of, just that, you know, how—you know, how significant
this is and how widespread it is.
Maybe a followup with Ms. Kennedy or Ms. Frazier. As small
lenders, have you helped any customers with first-draw increases?
Just trying to get a sense of your perspective from your end.
Ms. KENNEDY. We have tried to help small businesses with
first-draw increases, and that is part of where we get some of the
error codes and it becomes an issue for us. And that is why this
time that we are asking for to be able to work through those and
get resources on addressing the error and hold codes would help us
to be able to help more small businesses get that increase and ad-
dress some of those concerns.
Thank you for the question.
Mr. KIM. Ms. Frazier, anything you wanted to added on your
end?
Ms. FRAZIER. We have not had any seasonal businesses—we
haven’t processed any PPP loans for seasonal businesses for that
increase. I can’t speak directly to that.
We have had requests only from two borrowers to increase their
original loan. As part of the process, once it has been reported on
the form 1502 to the SBA, there is reluctance or there is quite a
bit of pushback on actually processing that increase.
Mr. KIM. Okay. Well, thank you for that perspective, something
that I will be looking to follow up on.
I would also like to just highlight that SBA issued a new interim
final rule last week allowing sole proprietors or Schedule C filers
to use their gross revenue to calculate their PPP loans. This was
a welcomed change, finally making PPP worthwhile for more of the
smallest, most underserved businesses. But as Ms. Frazier noted in
her testimony, borrowers who had already applied for the PPP loan
before the rule are being left with a smaller amount and are not
being made whole.
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SBA is claiming they don’t have the authority to make this rule
retroactive. And, Madam Chairwoman, I know you share my view
that sole proprietors who already took a PPP loan should be able
to use their gross income, and I ask to be able to work with you
and others together on a solution to make sure they are treated
fairly.
And so, with that, thank you, and I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Okay. With that, let me take this opportunity to thank all our
witnesses for their illuminating testimony. Your experiences have
given us insight into the current state of PPP and the impact of
reforms that the Biden administration put into place. I am pleased
to hear that these changes have helped money reach underserved
businesses, but it is clear that there is more we must do.
On this committee, we will continue to work to make the pro-
gram more equitable and accessible for the smallest of small busi-
nesses. The public health situation surrounding the virus is im-
proving, but we cannot let up. Small businesses still need our help,
and we must work to ensure this program is serving their inter-
ests. That means continuing to evaluate the coverage of PPP and
making sure—or making the necessary tweaks to maximize the
program’s reach and impact.
I ask unanimous consent that Members have 5 legislative days
to submit statements and supporting materials for the record.
Without objection, so ordered.
If there is no further business before the committee, we are ad-
journed.
[Ms. Lisa Bombin did not submit her QFR’s in a timely manner.]
[Whereupon, at 12:16 p.m., the committee was adjourned.]
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APPENDIX
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Æ
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File and source
- File
- chrg-117hhrg43606.pdf
- Size
- 19,504,983 bytes
- SHA-256
- 5c4595d29a53471e704649cd4c1b5088bb4dd813ebd7752eab63c69cf8a58837
- Our copy
- chrg-117hhrg43606.pdf
- Original
- www.govinfo.gov