Hearing: What Comes Next? PPP Forgiveness (House Committee on Small Business, September 1, 2021)
Summary
A hearing titled What Comes Next? PPP Forgiveness before the Committee on Small Business, United States House of Representatives, on September 1, 2021, with Hon. Nydia M. Velázquez presiding as chairwoman of the Committee. The listed witnesses are Tracy C. Ward of Self-Help Ventures Fund, Leslie Payne of Affinity Federal Credit Union, Marla Bilonick of the National Association for Latino Community Asset Builders, and Robert Fisher, President and Chief Executive Officer of Tioga State Bank. The contents also list additional material for the record from Accion Opportunity Fund, CAMEO, CBA, CDC Small Business Finance, a Chairtable nonprofit letter and JCN.
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- Chrg 117Hhrg45478
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“Hearing: What Comes Next? PPP Forgiveness (House Committee on Small Business, September 1, 2021).”
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WHAT COMES NEXT? PPP FORGIVENESS
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
HEARING HELD
SEPTEMBER 1, 2021
Small Business Committee Document Number 117–030
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
45–478 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
TROY CARTER, Louisiana
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
CLAUDIA TENNEY, New York
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 ....................................................................................... 2
WITNESSES
Ms. Tracy C. Ward, Director of the SBA 504 Loan Program, Self-Help Ven-
tures Fund, Durham, NC .................................................................................... 5
Ms. Leslie Payne, Assistant Vice President of Commercial Lending, Affinity
Federal Credit Union, Basking Ridge, NJ, testifying on behalf of the Na-
tional Association of Federally Insured Credit Unions ..................................... 7
Ms. Marla Bilonick, President and Chief Executive Officer, National Associa-
tion for Latino Community Asset Builders, Washington, DC .......................... 9
Mr. Robert Fisher, President and Chief Executive Officer, Tioga State Bank,
Chairman, Independent Community Bankers of America (ICBA), Spencer,
NY ......................................................................................................................... 10
APPENDIX
Prepared Statements:
Ms. Tracy C. Ward, Director of the SBA 504 Loan Program, Self-Help
Ventures Fund, Durham, NC ....................................................................... 43
Ms. Leslie Payne, Assistant Vice President of Commercial Lending, Affin-
ity Federal Credit Union, Basking Ridge, NJ, testifying on behalf of
the National Association of Federally Insured Credit Unions .................. 61
Ms. Marla Bilonick, President and Chief Executive Officer, National As-
sociation for Latino Community Asset Builders, Washington, DC ........... 73
Mr. Robert Fisher, President and Chief Executive Officer, Tioga State
Bank, Chairman, Independent Community Bankers of America (ICBA),
Spencer, NY ................................................................................................... 78
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Accion Opportunity Fund ................................................................................. 85
CAMEO - California Association for Micro Enterprise Opportunity ............ 88
CBA - Consumer Bankers Association ............................................................ 90
CDC Small Business Finance (CDCSBF) ....................................................... 92
Chairtable Nonprofit Letter ............................................................................. 94
JCN - Job Creators Network ........................................................................... 97
(III)
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WHAT COMES NEXT? PPP FORGIVENESS
WEDNESDAY, SEPTEMBER 1, 2021
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., via Zoom,
Hon. Nydia M. Velázquez [chairwoman of the Committee] pre-
siding.
Present: Representatives Velázquez, Mfume, Phillips, Newman,
Bourdeaux, Carter, Chu, Evans, Delgado, Houlahan, Kim of New
Jersey, Craig, Luetkemeyer, Williams, Hagedorn, Stauber, Meuser,
Tenney, Garbarino, Kim of California, Van Duyne, Donalds, Sala-
zar, and Fitzgerald.
Chairwoman VELÁZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a recess at
any time.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during remote pro-
ceedings. All Members are reminded that they are expected to ad-
here to the standing rules, including decorum, when they are par-
ticipating in any remote event.
With that said, the technology we are utilizing today requires us
to make some small modifications to ensure that the Members can
fully participate in these proceedings. House regulations require
Members to be visible through a video connection throughout the
proceeding, so please keep your cameras on. If you have to partici-
pate in another proceeding, please exit 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 and will recognize that
Member at the next appropriate time slot, provided they have re-
turned to the proceeding.
Should a Member’s time be interrupted by technical issues, I will
recognize that Member at the next appropriate spot for the remain-
der of their time once their issues have been resolved.
In the event a witness loses connectivity during testimony or
questioning, I will preserve their time as staff address the technical
issue. I may need to recess the proceedings to provide time for the
witness to reconnect.
Finally, remember to remain muted until you are recognized to
minimize background noise. In accordance with the rules, staff
have been advised to mute participants only in the event there is
inadvertent background noise. Should a Member wish to be recog-
(1)
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nized, they must unmute themselves and seek recognition at the
proper time.
Seventeen months ago, during the early days of the COVID cri-
sis, this committee and our counterparts in the Senate worked to-
gether to create emergency relief programs to assist small busi-
nesses. At that time hundreds of thousands of small firms across
the country were closing their doors to protect their customers and
their employees.
Recognizing the dire nature of this situation, Congress created
the Paycheck Protection Program. The PPP was an unprecedented
government effort that sought to distribute hundreds of billions of
dollars to entrepreneurs so they could keep their lights on and pay
their employees.
Over the course of the past year, Congress replenished the funds
multiple times and made critical improvements to make the pro-
gram more equitable for the smallest of small businesses and the
underserved. More than $800 billion in critical PPP support was
provided to small businesses during their time of need.
PPP was never perfect, but thanks to the hard work of SBA em-
ployees and necessary reforms made by Congress, the program has
helped saves millions of businesses from permanent closure. With
conditions improving from the loss of the pandemic, it is vital that
this committee turn to what may be the most important part of the
program, the federal government’s promise that this loan can be
forgiven and converted into grants.
PPP guidelines stipulated that SBA should forgive loans if small
businesses spent funds on meeting payroll costs and other related
expenses.
SBA has already received 5.6 million loans for business requests
and made over 5.2 million forgiveness payments. This means that
approximately 46 percent of all PPP loans have received payments.
This statistic represents progress, but also shows that there is a
long way to go.
Unexpected debt can hinder a small employer’s recovery and
cloud its path to future growth, so we must examine the obstacles
preventing recipients from loan forgiveness and work to obviate
them.
I look forward to discussing how the SBA is working to make
PPP forgiveness as simple as possible and examining solutions to
maximize total loan forgiveness, especially for small dollar bor-
rowers.
I would now like to yield to the Ranking Member, Mr. Luetke-
meyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair, and thank you
for calling this very important hearing on Paycheck Protection Pro-
gram, loan forgiveness, and the process.
With the program’s application window now closed, Members of
Congress must examine the back end process that focuses on for-
giveness to insure the program concludes appropriately, prudently,
and smoothly for small businesses.
Prior to the pandemic, small businesses were displaying opti-
mism, confidence about their economic future. Through a smart tax
environment driven by the 2017 Tax Cuts and Job Act and former
President Trump’s deregulatory actions. Such as cutting two regu-
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lations for every new one, these small businesses were investing in
their companies, their employees, and their communities. Unfortu-
nately, COVID-19 and overwhelming State and local shutdown
mandates devastated the nation’s smallest firms.
From being closed entirely to altered capacity restrictions, these
measures force small businesses into survival mode. Not surpris-
ingly, many small businesses adapted and performed to the best of
their ability under dire circumstances. That is what they do. Fed-
eral government assistance, like the PP, provided an avenue to-
ward recovery and focused efforts on the nation’s more than 60 mil-
lion small business workers and employees.
The PPP proved to be successful due to the efforts of private sec-
tor lenders who partnered with the Small Business Administration
and the Department of Treasury to deliver funds to small busi-
nesses with speed and efficiency. As the program continues to shift
towards forgiveness.
Today’s hearing will show a completely different perspective for
lenders who participated in the program. If a small business ad-
hered to the rules set out in legislation and the guidance produced
by SBA and the Treasury Department, forgiveness should be at-
tainable.
Congress examined this process in 2020 and created a stream-
lined forgiveness process for all loans below $150,000 in a Decem-
ber COVID package. The SBA has also taken steps to simplify the
process to that end. As I have been examining SBA’s new direct
forgiveness process, it has come to my attention that lenders have
received multiple messages which quite conceivable could be con-
sidered a threat from the SBA on potential for enhanced lender au-
dits based on their participation within the direct forgiveness proc-
ess or if they had not offered 2021 PPP borrows an opportunity to
move through loan forgiveness.
One thing is clear. There are multiple legitimate and prudent
reasons why lenders haven’t joined the SBA’s new direct forgive-
ness portal, including the fact that some lenders have had systems
and portals up and running for months. And I cannot stress
enough this next reason, which is many lenders would like to assist
their small business borrowers through the completion of this pro-
gram.
I will not stand by and let lenders who are punished for working
closely with their small business borrowers, the SBA, their dismal
performance and attempt at direct lending through the EIDL pro-
gram to provide a warning to everybody that the SBA is ill-suited
to perform many of these tasks. I will continue to watch these de-
velopments closely.
At today’s hearing I look forward to hearing more about the rela-
tionship between SBA and private sector lenders. Has there been
an open line of communication? And where should improvements
be made going forward?
Additionally, I am also concerned about further changes to the
forgiveness process that can open the program to increased levels
of waste, fraud, and abuse. Granting blanket forgiveness has the
potential to remove critical safeguards that are in place to ensure
that American taxpayer dollars are protected.
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PPP loan forgiveness oversight is even more important consid-
ering recent reports indicating that certain fintech lenders have
been connected to many of the program’s most problematic loans.
These are significant issues that I plan to continue to examine
closely. As Members of Congress assist the small business economic
recovery, we must not ignore the barriers being enacted that will
prevent small business growth in the future.
At a time when most small businesses are simply trying to stay
afloat, President Biden and congressional Democrats are pushing
tax increases on both the corporate and individual levels, the elimi-
nation of step-up basis on inheritance, and a slew of other harmful
changes. These tax changes have implications for all small busi-
nesses and farms, and main street USA should not be forced to pay
for the Democrats’ outrageous and unnecessary spending agenda.
Our nation’s small businesses are already facing worker short-
ages and skyrocketing inflation. We should be creating an environ-
ment that allows small businesses to create jobs, expand, and grow,
not perpetuating an environment that requires them to scale back.
I want to thank all of the witnesses for joining us today, and I
look forward to our discussion.
Madam Chair, with that, I yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Luetkemeyer. The
gentleman yields back.
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 is Ms. Tracy Ward, the director of the Self-Help
Ventures Fund 504 loan program, who has led the way for her
CDFI in helping very small borrowers access to the PPP program.
In 2020 and 2021, Self-Help made just under 2,800 PPP loans to-
taling $253 million in COVID-19 relief funding. 65 percent of their
PPP borrowers were small businesses and nonprofits led by people
of color. Self-Help is affiliated with the Center for Responsible
Lending, a national nonprofit for research on policy organization
dedicated to protecting home ownership and family wealth by
working to eliminate abusive financial practices.
Thank you for joining us today, Ms. Ward.
Our second witness is Ms. Leslie Payne of Affinity Federal Credit
Union in Basking Ridge, New Jersey. Ms. Payne is the credit
union’s Assistant Vice President for commercial lending and has
been personally involved in the credit union’s PPP lending. Her
credit union has updated to the SBA direct forgiveness platform, so
we look forward to hearing about her Members’ experience. Today
she is testifying on behalf of the National Association of Federally
Insured Credit Unions.
Thank you for joining us today, Ms. Payne.
Our third witness is Ms. Marla Bilonick, the President and CEO
of the National Association of Latino Community Asset Builders or
NALCAB. She also serves as CEO of NALCAB’s subsidiary asset
management company, Escalera Community Investment. NALCAB
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is a nationwide network of over 130 mission-driven organizations
that are encore institutions in predominantly Latino communities.
Ms. Bilonick brings over 20 years of expertise in small business
development and community-based financial services with an em-
phasis on the U.S. Latino population.
Ms. Bilonick testified before the committee last Congress on
issues related to underserved business development.
It is my pleasure to welcome her back to the committee.
The Ranking Member, Mr. Luetkemeyer, will now introduce our
final witness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Our next witness is Mr. Robert Fisher. Mr. Fisher is the presi-
dent and chief executive officer of Tioga State Bank located in
Spencer, New York.
In addition to his leadership role at the century-old Tioga State
Bank, Mr. Fisher is currently the Chairman of the Independent
Community Bankers Association of America, also known as ICBA.
Additionally, he is a Member of ICBA’s Federal Delegate Board
and its policy development and nominating committees, not to men-
tion Mr. Fisher is a fifth generation community banker. He is also
a graduate of the University of Notre Dame and a United States
Air Force veteran.
Mr. Fisher, I want to thank you for taking time away from run-
ning your bank to join us today, and I want to thank you for your
service to our nation.
I also want to thank the other witnesses for joining us and look
forward to your questions. Thank you for doing all you can while
we are in this pandemic era here, a unique time that we have been
involved in this. Your testimony today is going to be very impor-
tant to us to be able to understand some of the issues that you face
and that we need to be addressing.
Thank you very much.
And with that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. Thank you all for being here today.
Ms. Ward, you are recognized for 5 minutes.
STATEMENTS OF MS. TRACY C. WARD, DIRECTOR OF THE SBA
504 LOAN PROGRAM, SELF-HELP VENTURES FUND; LESLIE
PAYNE, ASSISTANT VICE PRESIDENT OF COMMERCIAL
LENDING, AFFINITY FEDERAL CREDIT UNION, ON BEHALF
OF THE NATIONAL ASSOCIATION OF FEDERALLY-INSURED
CREDIT UNIONS; MARLA BILONICK, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NATIONAL ASSOCIATION FOR LATINO
COMMUNITY ASSET BUILDERS-NALCAB; AND ROBERT FISH-
ER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, TIOGA
STATE BANK, CHAIRMAN, INDEPENDENT COMMUNITY BANK-
ERS OF AMERICA (ICBA)
STATEMENT OF TRACY C. WARD
Ms. WARD. Thank you, Chairwoman Velázquez, Ranking Mem-
ber Luetkemeyer, and Members of the committee. My name is
Tracy Ward, and I represent Self-Help, a Community Development
Financial Institution, and a PPP lender. Thank you for the oppor-
tunity to provide testimony today.
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At the start of the pandemic, Congress came together to create
the Paycheck Protection Program, delivering urgently needed funds
to small businesses to limit mass layoffs and business closures.
Congress designed PPP as a forgivable loan with the explicit prom-
ise that funds spent properly would not have to be repaid. Today
we are asking for several fixes to PPP forgiveness to ensure that
promise can be kept.
SBA implementation of this unprecedented program was remark-
ably fast, but it came with a complex and constantly changing set
of rules, and Congress placed the burden of understanding these
rules on small business borrowers, quite a challenge for small busi-
nesses in survival mode scrambling to access limited funds. As a
result, many of the smallest businesses are not getting that prom-
ised forgiveness—even when they have spent every penny properly.
For example, an independent contractor in Illinois received a
much-needed PPP loan of just under $20,000. Two days before he
applied, SBA issued a new rule effective immediately that limited
the way businesses like his could document the request, so now his
loan is not forgivable, even though he completed his application in
good faith and spent the funds properly. This Black-owned micro-
business instead of being able to recover is being held back by an
unexpected $20,000 debt trap.
Congress and SBA have recognized and addressed some of the
unintended challenges faced by the smallest businesses in access-
ing PPP loans. One significant change was an adjustment earlier
this year in the loan amount calculation for most microbusinesses,
sole proprietors, independent contractors, and self-employed indi-
viduals, the smallest of the small; but that change was not applied
retroactively, denying thousands of businesses adequate relief.
One such business is a Black-owned child care in North Carolina,
which received only $2,750 in PPP funding. Had this change been
retroactive, she would have been eligible for an additional $14,000
to support her operations. And despite Congress making this exact
same change retroactive for small farmers and ranchers, other
microbusinesses, like this child care, were left out.
It is important to remember that these challenges are exacer-
bated for small businesses of color, which are overwhelming micro-
businesses that entered the pandemic credit starved and with lim-
ited access to mainstream banking services due to structural limi-
tations that have been well documented by our affiliate, the Center
for Responsible Lending, and by others.
We propose several clear fixes to the forgiveness rules to ensure
fairness and to avoid inadvertently causing further harm to the
smallest businesses who are the least able to sustain it.
One, eliminate ‘‘gotcha’’ denials of loan forgiveness due to sudden
changes in rules that were imposed without notice.
Two, rescind SBA’s January 15, 2021 rule denying forgiveness to
borrowers who made good faith errors.
Three, require lenders to opt in to SBA’s direct forgiveness portal
if they are unduly slow processing forgiveness or if they are unre-
sponsive to their borrowers. The portal should expand the options
for forgiveness, not limit it.
Four, alleviate unnecessary paperwork burdens for the smallest
businesses by automatically forgiving loans of $25,000 or less.
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These microbusinesses overwhelmingly should qualify for full for-
giveness based on program rules.
Finally, improve and refocus SBA’s loan review process to ensure
that fraudulent activity is prosecuted and that businesses who ap-
plied in good faith are not harmed by uncertainty and delay.
In this ongoing crisis, small businesses deserve responsible fol-
low-through on PPP’s promise so they can get back to running their
businesses and employing their communities. Without changes, the
forgiveness stage of PPP will exacerbate preexisting inequities, and
for many of the smallest businesses, will turn Congress’ promise
into a bait and switch.
Thank you for addressing this important issue, and I look for-
ward to your questions.
Chairwoman VELÁZQUEZ. Thank you, Ms. Ward.
Ms. Payne, you are recognized for 5 minutes.
STATEMENT OF LESLIE PAYNE
Ms. PAYNE. Good afternoon, Chairwoman Velázquez, Ranking
Member Luetkemeyer, and Members of the committee. My name is
Leslie Payne, and I am testifying today on behalf NAFCU. I am the
AVP of commercial lending at Affinity Federal Credit Union.
Over the last 18 months, I have been tasked with the implemen-
tation and day-to-day management of the PPP initiative at Affinity.
I am proud of the work that we have done to help our Members
through these challenging times, and I thank you for the oppor-
tunity to appear before you today to discuss the PPP forgiveness
process.
Credit unions have gone above and beyond to ensure small busi-
nesses in their communities are taken care of during the pandemic.
Though Affinity was already an SBA lender, many credit unions
signed on as PPP lenders despite not having done SBA lending be-
fore.
An analysis of the SBA’s PPP data shows that credit unions
made loans in amounts much lower than the national average, and
credit union PPP loans went to the smallest of small businesses.
Affinity provided 1,058 PPP loans in the first round of the pro-
gram, totalling approximately $58 million in lending. We provided
an additional 603 loans in the second round for approximately $38
million. Our overall average PPP loan was approximately $56,000,
with over 90 percent of loans $150,000 or under. Our smallest PPP
loan was approximately $700, while our largest was approximately
$1.7 million. Borrowers have come to rely on their credit units to
assist them through every phase of the PPP process, including for-
giveness. The initial complexity of the PPP forgiveness process
posed challenges for many small businesses who may not have the
staff or the expertise for such a complex application.
We were pleased to see Congress enact a simplified forgiveness
process for loans under $150,000. However, credit unions continue
to grapple with simultaneously processing loan forgiveness applica-
tions while meeting the routine needs of their small business Mem-
bers. Many credit unions, such as Affinity, have invested money to
create a solution for Members to complete online applications and
upload supporting documentation or work with a third-party ven-
dor to streamline the overall process.
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A primary source of frustration for credit unions on forgiveness
has been the SBA’s ongoing requests for additional documentation
for applications under review even for small dollar loans. Still, al-
most 80 percent of our PPP loans at Affinity have been forgiven.
For Affinity’s forgiveness applications overall, it has taken on aver-
age 9 days from application submission to SBA approval. For for-
giveness applications that have been placed under review, it has
taken an average of 47 days.
SBA’s recent introduction of the revenue reduction score is a wel-
come change will help expedite the forgiveness process. The SBA
also recently launched the Direct Borrower Forgiveness Portal. At
Affinity, despite the time and money invested in implementing so-
lutions to process forgiveness applications in-house over the last
year, we are one of many credit unions that have opted into the
portal. Although the process streamlines the borrower’s experience,
it does not necessarily streamline the process for all lenders as
many will have to monitor the SBA system and update their com-
mercial lending platforms manually. However, the portal offers
smaller credit unions that have not had the ability to leverage a
third party vendor or lack the means to develop a streamlined in-
house process, a simple solution to process forgiveness applications.
Despite many opting into the portal, credit unions generally feel
it would have been more beneficial at the onset of the forgiveness
process. Some credit unions are choosing to not opt into the pro-
gram because they feel the systems they have created are more
consumer friendly. Moreover, integrating the new portal is oper-
ationally burdensome.
There are also concerns that the SBA will not answer borrowers’
questions in a timely or complete fashion. It was very difficult to
get answers in a timely manner last year, and some credit unions
fear that borrowers will use the portal and then come back to their
lender with questions, but the lender has no control over the sys-
tem and will not be able to assist the borrower.
At Affinity we have had some frustrations with the process, such
as the SBA communicating directly with borrowers without alert-
ing lenders, and the SBA not alerting Members that borrowers
apply directly for forgiveness.
Two ways that Congress can take to improve the forgiveness
process would be, one, increasing the loan size for the use of the
portal and revenue reduction score and, two, urging the SBA to fol-
low up on its commitment to focus its review on larger and higher
risk loans. Adopting this approach to forgiveness reviews will con-
serve the SBA’s resources and allow the agency to more efficiently
allocate their finite resources to those PPP loans that warrant ad-
ditional review.
In conclusion, we are proud of how we have been able to help our
small business Members stay afloat and retain employees through
the PPP. At Affinity, like at all credit unions, our priority is our
Members. Our team has been and remains committed to guide our
Members through the PPP experience successfully.
I again thank you for the opportunity to appear before you today,
and I welcome any questions that you may have.
Chairwoman VELÁZQUEZ. Thank you, Ms. Payne.
Ms. Bilonick, you are now recognized for 5 minutes.
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STATEMENT OF MARLA BILONICK
Ms. BILONICK. Thank you.
Good afternoon, Chairwoman Velázquez, Ranking Member
Luetkemeyer, and Members of the committee. My name is Marla
Bilonick, and I am the president and CEO of the National Associa-
tion of Latino Community Asset Builders, otherwise known as
NALCAB. It is my sincere honor to be addressing you today about
Paycheck Protection Program forgiveness and speaking on behalf of
NALCAB, our Member organizations, and the small businesses
that they represent.
NALCAB is the hub of a national network of over 140 mission-
driven organizations that are anchor institutions in geographically
and ethnically diverse Latino communities across the nation.
Our vision is to dramatically scale the flow of public and private
sector capital that responsibly meets the asset-building needs and
opportunities in the communities we serve. As a grant maker and
U.S. Treasury certified CDFI lender, NALCAB strengthens and co-
ordinates the capacity of the NALCAB network to deploy capital.
We know that the strength of the U.S. economy relies on the
fast-growing Latino communities’ hard work, entrepreneurial expe-
rience, spending power, and leadership. While the Latino commu-
nity in the United States is often heralded for starting small busi-
nesses at rates higher than other ethnic groups, the adverse eco-
nomic effects of the pandemic have disproportionately impacted
Latino business owners.
Stanford’s Latino Entrepreneurial Institute surveyed 7,000 small
business owners and cites that 86 percent of Latino-owned busi-
nesses suffered immediate negative financial impacts from the pan-
demic. At the same time, Latino business owners were successful
at securing PPP loans at only half the rate of their White counter-
parts and only 3 percent of Latino-owned businesses received their
full funding request.
NALCAB was called upon to provide capital to several Members
to facilitate their PPP lending. As a CDFI in our own right, we ulti-
mately loaned our Members close to $12 million for PPP loans
which resulted in them making 640 loans to small businesses in
their communities.
NALCAB Member CDFIs, including heavy hitters like Accion Op-
portunity Fund, Self-Help, LiftFunds, and CDC Small Business Fi-
nance, were able to provide business clients with PPP loans when
banks could not or would not.
In fact, NALCAB Member and CDFI, Prestamos CDFI was the
third highest PPP lender in the nation, including traditional com-
mercial banks. Prestamos made close to 500,000 PPP loans aver-
aging around $15,000 each, for a total of close to $8 billion in PPP
lending. JP Morgan Chase and Bank of America topped the rank-
ing with over $12 billion and over $9 billion respectively.
As of August 2021, roughly half of PPP borrowers had submitted
forgiveness applications with the other half outstanding. Advances
have been made to streamline PPP forgiveness, including the July
launch of the Direct Forgiveness Portal which is an immediate and
simplified clearinghouse for forgiveness applications attached to
loans of $150,000 and below.
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Discussions with CDFI Members of NALCAB point to the portal
now being the primary channel available in seeking loan forgive-
ness for their small business clients. Between April and August,
the forgiveness applications process practically doubled from the
national number reported in April. This may be partially attributed
to the Direct Forgiveness Portal.
Number three ranked PPP lender and NALCAB Member
Prestamos CDFI reports that they are directing clients almost ex-
clusively to the SBA PPP forgiveness portal and have found that
to be a straightforward avenue for achieving forgiveness. However,
they noted that they fear that some clients are missing out on loan
forgiveness due to lack of awareness of the process and/or lack of
access to technology to connect to the portal.
The additional CDFI Members we spoke with from coast to coast
all reported the portal was now their primary channel for client
forgiveness, even in the cases where they had developed their own
technology ahead of the portal.
While only a sliver of NALCAB PPP lenders made loans over five
figures, we are supportive of stretching simplified forgiveness proc-
ess for loans up to $350,000. This would further ease the burden
on even more small businesses that are doing their best to power
through recovery. In addition, it would lighten the administrative
load of lenders that have supported those businesses through their
PPP journey. We agree that PPP loans of $350 thousand and above
are in a different class and justify higher scrutiny.
Loans that were made in the initial stages of the Paycheck Pro-
tection Program in 2020, when there was some confusion regarding
calculations around loan sizing, have resulted in good faith error
that generated some PPP loans that exceeded borrowers’ correct
maximum amount. In January of 2021, the SBA’s procedural notice
informed PPP lenders of said excess loan amount errors. Particu-
larly in cases of smaller amounts, small loan amounts, this seems
like undue efforts to squeeze dollars out of the very borrowers that
the PPP program was designed for, borrowers that most certainly
used every cent of their PPP loan to ensure their businesses stayed
afloat and to keep their employees on payroll.
I don’t believe I have time to go into my recommendations, but
they were outlined in the content of the testimony.
Chairwoman VELÁZQUEZ. Thank you.
Ms. BILONICK. Thank you very much for your time.
Chairwoman VELÁZQUEZ. Thank you, Ms. Bilonick.
Mr. Fisher, you are now recognized for 5 minutes.
STATEMENT OF ROBERT FISHER
Mr. FISHER. Chairwoman Velázquez, Ranking Member Luetke-
meyer, and Members of the committee. I am Bob Fisher, president
and CEO of Tioga State Bank, a $550 million community bank in
Spencer, New York, and Chairman of the Independent Community
Bankers Association of America. So thank you for the opportunity
to testify at today’s hearing.
The PPP was a natural fit for the business model of community
banks. We are small business lending specialists with local knowl-
edge and deep roots of the communities that we serve.
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My bank’s PPP lending is typical of a community bank. We made
a total of 929 loans for $64.8 million, saving roughly 10,000 jobs.
Our average loan was just under $70,000, and Tioga State Bank’s
40-year history as an SBA 7(a) lender helped us to navigate some-
times challenging SBA channels on behalf of our borrowers.
Our largest PPP loan, $2.7 million, was to a southern tier inde-
pendent center. They are a large not-for-profit in Binghamton, New
York, dedicated to helping people with disabilities remain inde-
pendent. The loan helped prevent staff layoffs and allowed the cen-
ter to continue to provide critical services in our community.
Other community banks have similar stories and results. In ag-
gregate, community banks made nearly 60 percent of the PPP
loans which supported nearly 50 million jobs. What’s more, commu-
nity banks made over 80 percent of PPP loans to minority-owned
and women-owned small businesses and nearly 70 percent of the
PPP loans to veteran-owned small businesses. I am proud that my
industry stepped up to support the survival of these diverse busi-
nesses in a time of crisis.
We are well into the forgiveness phase of the program, and this
process must be as simple as possible for borrowers so that they
can focus on operating their businesses in a still uncertain environ-
ment. We are grateful to this committee and Congress at large for
its role in making statutory changes and advocating for a stream-
lined process.
As you know, the SBA has created the Direct Borrower Forgive-
ness Portal for PPP loans of 150,000 or less. My bank has a strong
record of processing forgiveness applications and has chosen not to
use the portal. Like many community banks, our true value propo-
sition is relationship lending. We believe we owe it to our bor-
rowers to ensure a smooth process from origination until full for-
giveness. If there are technical or communication problems with
the SBA—and this has, frankly, been a major concern—we want to
use our expertise and relationship with the agency to resolve them.
This is good business practice and best for our borrowers. We are
working expeditiously and are as eager as our borrowers to obtain
full forgiveness.
ICBA insists that SBA respect lenders’ choice to not use the por-
tal. Instead. The SBA has threatened to audit these lenders.
What’s more, the SBA suggests that lenders are deliberately delay-
ing forgiveness to spread out fee income. That practice would be
unacceptable and would cut against the grain of community bank
relationship lending. I can assure you that no community bank
that I know of is engaging in it.
Our strong record of PPP lending in a time of crisis must not be
diminished by these accusations. My bank and other community
banks choose to preserve our borrower relationships and not be cut
out of the process by a direct SBA program. More broadly, bank
underwriting and servicing is what makes SBA lending programs
so effective and must not be displaced by direct programs.
As we conclude the PPP, reports of fraud and abuse have sur-
faced in the media. These problems must be reduced to the greatest
extent possible not only in the PPP but in all SBA programs. My
bank has experienced no PPP fraud and 100 percent forgiveness.
Like other community banks, we own the consequences of our lend-
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ing decisions and underwrite with great care. However, certain
lenders with little experience in underwriting or with the SBA
crowded into PPP. Safeguards were lowered in response to the cri-
sis and, not surprisingly, these lenders may be subject to higher in-
cidents of fraud.
As normal state returns, the SBA should proceed with great cau-
tion as it considers changes to existing programs. Tioga State Bank
and many community banks highly value a robust and sustainable
7(a) program. Fraud puts all SBA programs at risk.
Thank you again for convening today’s hearing and for the oppor-
tunity to offer my perspective, and I am happy to answer any ques-
tions you may have.
Thank you.
Chairwoman VELÁZQUEZ. Thank you, Mr. Fisher. Thanks to all
of the witnesses for being here today and for your work and en-
gagement on the PPP.
I will begin by recognizing myself for 5 minutes.
Ms. Payne, less than one-quarter of all PPP lenders have up-
dated to the SBA direct forgiveness platform. Even though your
credit union invested in its own platform, you also updated to the
SBA platform.
Can you share with us any feedback your borrowers have had on
the SBA platform?
Ms. PAYNE. Yes. Thank you for the question.
We have opted in, and largely we opted in, we have a system in
place that has been working quite well. We jumped on the forgive-
ness quite early in the process and put things in place that we
needed to do. We made our investments and such. We opted in be-
cause we want to give our borrowers every opportunity for forgive-
ness, so we have offered that.
To date, since the portal has opened, the Direct Forgiveness Por-
tal has opened, we have seen approximately 12 percent of our bor-
rowers go to the direct portal. So the majority of our Members are
still coming to us to directly go to our portal for forgiveness.
But what we have heard from our Members is that, from their
perspective, that the portal has been user friendly. From the lend-
ers’ perspective, this creates more manual process for us. As we do
have our own process in place, we have to proactively go into the
SBA portal and check the website, and then manually we are
inputting data in the beginning of the process as well as at the end
of the process.
So another concern that we have is in the early stages—we are
still in the early stages, and there are still some unknowns with
regard to the confusion and communication that our borrowers will
get from the SBA and when they will get that communication.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Ward, we have heard from borrowers that they are respon-
sible for paying, with interest, excess loan amounts caused by PPP
miscalculation from a lack of rules and clarity early in the pro-
gram.
Should this excess loan amount be forgiven if loan proceeds were
spent on forgivable purposes?
Ms. WARD. We believe they should. We have seen many bor-
rowers that are facing issues where they applied, based on the cur-
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rent rules in place as they understood them; but because the rules
were complicated: some businesses were able to include owner
healthcare costs, some were not. Some could document payroll
showing 941s, others had different methods that could be more
complicated.
So we are seeing borrowers that are caught in this issue of hav-
ing applied in good faith for a loan that they then used to keep
their business operating, to keep their staff employed, and now at
forgiveness, because the rule may have changed within days of
when, they applied, they are not going to be able to get full forgive-
ness and they are caught in that.
Chairwoman VELÁZQUEZ. How is your institution handling
these good faith errors?
Ms. WARD. So we are working with our borrowers when we find
situations like this—I will say, luckily, we are not finding many sit-
uations like this within our own PPP borrowers. We had processes
in place and worked closely—as Mr. Fisher said, community banks
are very—have a relationship and work hard with our borrowers
to try and make sure that they understand the loan they are get-
ting and how to get this forgiveness.
Chairwoman VELÁZQUEZ. Okay.
Ms. WARD. We are hearing and seeing news reports about espe-
cially small lenders, small borrowers who are caught in this and
are not going to be able to get forgiveness. We have been able—
on a couple of cases where we have borrowers in this situation at
Self-Help, we are working with them to try and identify are there
other potential documents they have that might help us get them
to full forgiveness.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Payne, any comments on the PPP miscalculations?
Ms. PAYNE. Yes. I think we have experienced several loans.
With the initial PPP guidance, it was continuously evolving. Both
the Members and lenders were trying to get their arms around the
guidance and the rules, a very stressful and chaotic time.
I think that each loan should be looked at on its own merits. If
there was an error and it was made in good faith but the use of
the funds was permitted, then I believe that these loans should be
considered for full forgiveness.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Bilonick, would you support increasing the qualifying loan
amount to $350,000 to help SBA deliver forgiveness more effi-
ciently and enable more small businesses to focus on their recov-
ery?
Ms. BILONICK. Absolutely. I think anything that will reduce the
burden on both the borrowers and the lenders is a positive and
should be supported. This would bring the percent over 90 percent
of PPP loans, and I think it is a sound recommendation.
Chairwoman VELÁZQUEZ. Thank you.
My time has now expired. The Ranking Member, Mr. Luetke-
meyer, is now recognized for 5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
And just to comment first, you know, whenever you see that basi-
cally one in six loans are made by fintechs and 9 out of 10 of those
we are looking at as fraudulent and most of those loans are under
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$350,000, and the OG report—IG report said that half the loans
under $350,000 are probably where your theft, identity theft and
fraud are, for us to not look at those is, like, the administration
leaving $85 billion worth of military equipment behind in Afghani-
stan for no reason whatsoever.
This is nuts for us not to go after people who have intentionally
gamed the system and are making away with dollars that the tax-
payers have paid in and half the program would not be looked at.
This is—I think it is a very, very wrong way to approach this.
Mr. Fisher, you talked about in your testimony something that
is very, very concerning to me with regards to the SBA and their
threat to audit entities, banks, credit unions, other entities that
may do PPP loans if they don’t participate in the portal.
What is your experience with this? What have you heard about
this? Can you elaborate on it? I know you said in your testimony—
I’m reading it as well. Would you like to elaborate just a little bit
on that, please?
Mr. FISHER. Sure. We received communication from SBA on
Monday that there was potential for audit if you did not participate
in the portal, the forgiveness portal. And from day one, we decided
we wanted to be that interface between our customer and the SBA
because it is, it is a very confusing, complicated process. And we
feel that we have got the expertise. The customer doesn’t.
So we want to, you know, control that relationship and help our
customer navigate through this whole forgiveness process, and we
don’t feel we should be—we have worked forgiveness very hard. In
fact, we only have five loans from the first round that are still
waiting for forgiveness, and it is not for a lack of effort on our part.
We have been reaching out to those borrowers to get them to seek
to apply for the forgiveness.
Mr. LUETKEMEYER. So it is a choice on your part how you
want to approach forgiveness, and the SBA is trying to threaten
you into making the choice, their choice, basically. Is that right?
Mr. FISHER. That is how it feels, yes.
Mr. LUETKEMEYER. Well, I would urge you if you find banks
that have received this threat and then receive an audit as a result
of that, please contact me and my office. We want to follow up on
this. We want to hold SBA accountable for outrageous statements
like this. This cannot go unchallenged. This cannot be allowed to
happen. So, please, work with us if you see this happening within
the banking community that you work and your association works
with.
Thank you so much for that.
You know, you made some great statements here, Mr. Fisher, as
you were going through discussing the banks making the loans.
You know, the banks have something called know your customer,
and in doing that, I think we have found that——
And as I mentioned earlier, the fintechs don’t have that sort of
firewall and, as a result, they are the ones that are causing a lot
of problems here, although there is not a lot of problems with PPP
compared to, like, the EIDL program which has got almost a third
of it which is the most fraudulent stuff.
But the underwriting that you are able to provide and the know
your customer seems to be a real key in being able to minimize the
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fraud, minimize the abuse, and also set you up for being able to
get forgiveness for your customers because you have done it right.
Would you agree?
Mr. FISHER. I totally agree. I mean, that is—we know our com-
munity. We know our customers. And I think that is what made
the process work for community banks and why we were able to
do 60 percent of the PPP lending.
Mr. LUETKEMEYER. It is concerning to me that, you know, as
we continue to go through this process here and we are looking
at—and I don’t believe to bring the EIDL program into the PPP
discussion here unnecessarily, but I think it lends—the PPP pro-
gram here, by having had the banks do the underwriting, be able
to do the hard work of know your customer and prepare the loans
to be able to be approved by SBA, showed that that is a template
I think for being able to do things the right way and minimize
fraud and abuse.
When you look at SBA’s direct lending program, which is the
EIDL program, and how fraught it is with fraud, it really sets up
the contrast of does SBA really need to be in the direct lending
business.
So would you like to address that question?
Mr. FISHER. We have always felt that, you know, with the 7(a)
program and 504 programs that community banks—you know, we
have that relationship with our borrowers, and I think it really has
reduced fraud. As I said, we experienced zero fraud in our PPP
lending, and I think that just shows how relationship banking
works and how utilizing community banks to be the interface with
small business is so effective.
Mr. LUETKEMEYER. Thank you very much for your testimony,
Mr. Fisher. We certainly appreciate your thoughts and observa-
tions today.
Thank you.
With that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
I now recognize the gentleman from Maryland, Mr. Kweisi
Mfume.
Mr. MFUME. Thank you, Madam Chair. Thank you for calling
this hearing.
Ms. Payne, I would like to just start with you, if I might. From
your own perspective, what were some of the considerations that
went into you offering your own PPP forgiveness platform as op-
posed to the SBA’s?
Ms. PAYNE. Well, the first consideration was that there was no
platform that the SBA was offering or putting out there. The for-
giveness process was technically to start almost immediately. We
took our first forgiveness application in September of 2020. So we
needed to put something in place, and we did. We bought a soft-
ware program, we trained our staff, and we pulled other resources.
We wanted to be responsive. This was a temporary loan to help
these businesses get through a very chaotic and traumatic time,
and they needed to know that this was going to be forgiven, not
that they had additional debt.
So so many wanted to get forgiven as soon as they could, so we
responded to our Members’ needs, and that is what we did. We ini-
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tiated our own platform, and we invested the time and resources
and money to do that to be responsive.
Mr. MFUME. So most of your credit union Members have used
your platform rather than the SBA’s platform. I would ask you,
how would you evaluate the borrower outcomes? Are they com-
parable? Are there things that jump out at you that are cause for
alarm?
Ms. PAYNE. No. We have not had too much cause for alarm. The
process, I will admit, early on was slow as we were learning it, and
we did not necessarily anticipate the number of loans going under
review. When we started, they were taking 10 percent of our loans
and putting them under review, and that creates very much the
back-and-forth problem, and it is time-consuming for our Members
and it is stressful.
They don’t know why they are under review, and we can’t—you
know, we don’t know if it is random or otherwise. But in that
sense, that process started slowly; but once we got up and running
and really hit stride, we haven’t seen any major issues. It is just
when we go under loan review, it can be very time-consuming; but
we have per my testimony, we have submitted 80 percent of our
portfolio has gone through the review process.
Not all are 100 percent forgiven, but there are some that have
some partial forgiveness; but overall we have had very good success
rate on behalf of our Members.
Mr. MFUME. Mr. Fisher, if I could turn to you for just a mo-
ment. You occupy a rather unique perch both as president of Tioga
and as Chairman of the Independent Community Bankers of Amer-
ica. So far only about a quarter of all PPP lenders have opted in
to SBA’s direct forgiveness platform.
Do you think, sir—or what do you think could have been done
differently to have made that platform more appealing to persons?
And if you had your druthers—let’s hope we never go through this
again; but if we were to go through something like this again, what
would you recommend?
Mr. FISHER. I think—you know, I think the issue is most banks
had their forgiveness plan in place. We have already developed sys-
tems. We have a methodology of how we put customers through
forgiveness, so SBA rolling this out late in the game has made it
problematic.
So I think had they wanted this portal to be used, I think I
would have rolled it out when forgiveness started. It is kind of late
in the game to throw in another ancillary system when we already
have it pretty down for our customers.
Mr. MFUME. Okay.
Thank you, Madam Chair. I have no other questions. I yield
back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
The gentleman from Texas, Mr. Williams, is recognized for 5
minutes.
Mr. WILLIAMS. Thank you, Madam Chair.
And before I get started, I want us, all of us across this country,
to remember those 13 families that are—we are all praying for the
loss of those young men and women and also remember those peo-
ple who are still stranded in Afghanistan this morning.
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I am a small business owner, have been for 51 years. My whole
life has been done dealing with credit unions and community
banks, and I can tell you that the main street America does it a
heck of a lot better than the federal government. And I want to say
thanks to all of the lenders for getting this program out, and it is
interesting that all of a sudden the SBA wants to get involved in
the program here of late with portals, and so forth, and now we
have to have a hearing. So just, again, the government does it bet-
ter—or the private sector does it much better than government.
When I talk to borrowers and lenders back in Texas, I constantly
hear about communication issues with the SBA. Last week a lender
told me there are some loans that have been submitted for forgive-
ness as far back as January, and we are hearing that this morning,
that have yet to receive an update after 8 months.
When the bank calls the PPP hotline for updates, it no longer is
even in service, and the SBA can’t continue to leave small business
owners and community banks in the dark when they are taking all
necessary steps to recover from the pandemic, these small business
owners.
So, Mr. Fisher, thank you for your service and what you are
doing. I want to say, can you discuss your interactions with the
SBA and describe how responsive they have been to your inquiries?
Mr. FISHER. Communication throughout the process has been
difficult, especially early on in the process. We have got some great
connections with our local SBA office, and those folks are greatly
helpful, but they are also limited in some of the knowledge that
they have and, obviously, this was a new program, constant guid-
ance changes, and things like that. So it was—communication was
very problematic throughout the process and continues to be some-
what problematic in certain areas.
I know of a local bank that I just heard a story yesterday that
they had opted out of the forgiveness portal, yet their customers all
received notices from SBA saying that they could apply through the
portal, which was not active for the bank because they hadn’t opted
into the program, which caused chaos with their customer service
center, so——
Mr. WILLIAMS. Well, we are hearing stories like this all over,
and I can tell you firsthand, it is tough to communicate with them.
Lenders were given two options for PPP loan forgiveness: Either
opt into direct forgiveness with the SBA or opt out and continue
to process loans themselves. We are hearing about that that today.
Most commonly bankers did not opt into direct PPP forgiveness for
two main reasons. Lenders had already created an internal process,
which we know that, or contracted this work out to a third party
when they saw how important the forgiveness aspect of PPP would
be in the future.
In addition, as we have heard today, many banks were reluctant
to opt in because the SBA had not been the most reliable partner
in the past, and that is an understatement. And, unfortunately, on
Monday morning, as we have heard, the SBA sent a notice to all
lenders that they would be under more intense scrutiny for their
loans if they did not participate in the Direct Forgiveness Portal,
and here they are coming in late and messing everything up.
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So making this change so late in the process has caused confu-
sion and even more headaches for the banks who make PPP so suc-
cessful.
So, Mr. Fisher, you have touched on this, but I think we need
to talk about it even more. Can you discuss the risks you may face
due to the recent announcement from the SBA and why you choose
and chose to opt out of the direct PPP forgiveness in the first place?
Mr. FISHER. Obviously, as I said before, they threatened poten-
tial audits, although they sent a follow-up email that maybe said
that we wouldn’t be audited, but I am not sure, you know, which
letter to believe. But I think the reason we opted out is because we
are relationship lenders. I mean, we want to be that interface be-
tween the lender and SBA because of—it is a complicated process,
and we want to make sure that our customers are getting the cor-
rect information, that they don’t have to learn the entire process.
We know it.
We have been through it. We have worked with SBA for 40
years, so we want to be that interface, that relationship that we
have with both the SBA and our customer. We want to enhance
that.
Mr. WILLIAMS. Well, a heavy-handed government is never good,
and we are seeing that here firsthand.
Just quickly, Mr. Fisher, can you elaborate on the importance of
relationship banking for PPP forgiveness and how more govern-
ment involvement may draw out this process?
Mr. FISHER. I just think relationship banking, that is the role—
that is the key for community bank, how we interact with our cus-
tomers, and I think it really cuts down on fraud. As I said pre-
viously, you know, we have had zero fraud. Most of the banks that
I know have had zero fraud. So I think fraud and just having those
relationships is critical.
Mr. WILLIAMS. Well, thank you for that, and the government
cannot say that. So thank you for what you are doing.
And I take my time and I yield it back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
I now recognize the congress lady from Georgia, Ms. Bourdeaux.
I would just like to also say to Mr. Fisher, when we had the first
tranche of money that went out and in the first 2 weeks it was all
gone, the data that we didn’t get from the administration then
showed that many small businesses in underserved communities
and real small businesses were not able to access any PPP money
because they didn’t have preexisting relationships with banks.
The big banks didn’t lend to those small businesses. It wasn’t
until we intervened and we demanded from the Secretary of the
Treasury to set aside money for mission-based lenders, that those
data, those numbers didn’t change.
The same is true now with the great work that the SBA is doing
in informing small businesses what they need to do in order to fill
out the forms and take every step to be able to—for their loans to
be forgiven.
Ms. Bourdeaux, you are recognized for 5 minutes. Thank you.
Ms. BOURDEAUX. Thank you, Chairwoman Velázquez, and I
have a similar line of questioning to some of the points that you
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raised. And thank you, Ranking Member Luetkemeyer, for holding
this hearing.
This access to PPP loan forgiveness is something I have been
very concerned about since the moment I was sworn into Congress.
In particular, we have heard a lot about discrepancies in loan for-
giveness among underserved small businesses, particularly minor-
ity-owned businesses, in my community. And we did some informal
surveys of who had gotten loan forgiveness and who hadn’t and
found that minority-owned businesses didn’t know to ask, you
know, didn’t know how to follow up.
And I think the testimony of Ms. Bilonick raises some of these
kind of unanticipated problems that often occur with some of these
very entrepreneurial, very vibrant businesses that just don’t have
that traditional relationship with a lender.
This is one of the reasons I worked with the committee to submit
additional views to the American Rescue Plan, encouraging the
Small Business Administration to work to ensure equitable admin-
istration of emergency assistance, including PPP loan forgiveness.
The SBA I think took a very important step towards ensuring
greater access to loan forgiveness by opening their portal to provide
forgiveness to loans less than $150,000. Unfortunately, as has been
discussed in this hearing, you know, there is a lot of—you know,
this is also creating some tradeoffs.
But just to start off, Ms. Bilonick, can you just talk a little bit
more—you raised some of the, kind of I wouldn’t know, that I
didn’t know kind of issues that come up with some of the busi-
nesses in the Hispanic community. I have a very large Hispanic
community. You know, when they are trying to approach working
towards PPP loan forgiveness, what are some of the barriers that
they face that we may not anticipate.
Ms. BILONICK. Absolutely. So I think one issue is just—and I
don’t think it is exclusive to the Latino community. I think for most
individuals who applied, the process of forgiveness was kind of just
a big question mark, so I don’t think that anyone is opposed to re-
lationship banking. In fact, I would say all CDFIs are heavily in-
volved in relationship banking. That is the bread and butter of the
CDFI industry. So I did take some exception to those comments.
I think also I wanted to just raise that I think the community-
based lenders and the mission-based lenders have opted into the
portal because, unlike higher resource financial institutions, the
portal that the SBA is providing is actually an improvement over
whatever sort of internal either portal or other system, maybe even
the less sophisticated systems, that was being used internally.
So they are directing their clients almost exclusively to the portal
because it is more straightforward, clearer, you know, just better
overall versus what they could put together in-house.
But, yes, these challenges are real. I think—you know, just to
add one more thing, just the access to technology, I mean, in order
to access the portal, you have to have a means of accessing it.
One other thing that our CDFI Members reported was that it is
very challenging to follow up with multiple clients. You know, I
mentioned one of our Members made 500,000 PPP loans, so to indi-
vidually follow up with each one of those borrowers would be im-
possible, and so if people change their phone numbers, close their
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business, or anything, you know, that is sort of really challenging
to try and reach them and then connect them, you know, into the
forgiveness process, period, let alone the portal.
Ms. BOURDEAUX. I thought that was an interesting point about
I think of the housekeepers, and the landscapers, and just a ton of
this kind of very vibrant entrepreneurial economy that we have,
but often are not in, sort of, the traditional path in these relation-
ships.
What can we do better in order to make sure that a lot of these
small businesses know about the forgiveness program and, you
know, are able to access this?
Ms. BILONICK. Well, one thing I want to say prior to being in
this role, I actually was the head of a CDFI that is based in Wash-
ington, D.C. So during the pandemic, I was in that role. And I
think what was critical to the success of either rolling out pro-
grams or following through with them, as is happening right now
in the forgiveness process, was the direct line of communication be-
tween the SBA and the lender.
And, so, I think you see that most in the district offices where
there is kind of a more direct relationship to the community. But
I would just actually suggest that that continue, or, perhaps, that
more resources be put behind that so that there is someone to call
up when you have a question, and you are in a community-based
organization it is just kind of a lot of red tape and paperwork that
you may not be accustomed to working with.
So, I think having that direct tie to the SBA, and from my expe-
rience in New York and D.C., the SBA district offices are really
knowledgeable and approachable. And I just think that is sort of
a great way to connect into the overall mission of the SBA.
Ms. BOURDEAUX. Thank you so much.
Ms. BILONICK. Thank you.
Ms. BOURDEAUX. We work very closely with our SBA and
SBDCs and groups like that to reach out to the broader commu-
nity.
Thanks so much. And I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Minnesota, Mr. Hagedorn,
for 5 minutes.
Mr. HAGEDORN. Thank you, Madam Chair.
I would like to follow up on the presentation made by our Rank-
ing Member Luetkemeyer, and also Congressman Williams of
Texas. First of all, I think we are very fortunate to have someone
like Congressman Luetkemeyer who understands the community
banking business and that sector so well. And he has made some
good points, that there isn’t a lot of fraud, if any, with most of the
community banks. And the banks that have made these loans, they
know their customers, they are attentive to their customers, they
are concerned about their communities and small businesses. This
is a pretty good model of maybe something we stumbled into, but
looking at, perhaps, utilizing this for other SBA loans could mini-
mize the fraud that we have seen and help the taxpayers and help
businesses.
Second of all, Congressman Williams comes in and says, look, he
has been in business for 50 years. He has interacted with both
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bankers in the private sector and then the SBA and others in gov-
ernment. There is a clear difference. I mean, one is attentive, one
is trying to keep customers, one is trying to get business, and the
other one is, well, if they get to it, they get to it. I mean, that is
the way bureaucracies operate. The record of the SBA throughout
this whole process was all good in some areas, but not so good in
others. And I will tell you that the businesses and the banks that
we talk to in this district, who have problems with SBA, they end
up in our office. They end up with us calling SBA trying to get
some resolution, trying to get people moving. And that really
shouldn’t be happening. The SBA should be handling these issues.
Now I will give you my perspective, I was a congressional rela-
tions officer at Treasury for 18 years. I have seen the bureaucracy
a little bit. And I think this move by the SBA to try to gain some
control back of the PPP program when it was actually run very
well through the banks might be some, you know, and effort to re-
tain their turf. They see the writing on the wall that if we turn
over the EIDL loans and others to the banks where we can mini-
mize fraud and do better for our customers, they are going to lose
some of their power. So I think that this may be not so much to
help everybody, but just as a bureaucracy, looking out for itself.
Now I would add, Madam Chair, I just want to do a couple of
housekeeping items with you. When do you expect that we are
going to get Secretary of Treasury Yellen to fulfill her duties and
testify before our committee in person?
Chairwoman VELÁZQUEZ. We are working to get her to come
as well as the Administrator to discuss the PPP forgiveness, but we
are working on the reconciliation package right now. So, my guess
is right after that, we are going to have the administration come
in.
Mr. HAGEDORN. Well, to your credit, I know you have said in
the past and you joined with our Ranking Member that you had
wished she had testified a little earlier. And, so, I appreciate you
are going to continue to try to encourage her to come before us, so
we can have a hearing.
And secondly, and I know how important it is to forgive these
loans and make sure small businesses can move on. Most of them
have received these moneys and have utilized them, and have
helped. But there are some small businesses still out there that
this committee has an obligation to help. And they would, for in-
stance, would be in the restaurant arena with the Restaurant Revi-
talization Fund. When the moneys were expended for that, almost
$28.5 billion, they went to the people on a priority list that many
of us viewed as discriminatory. And the people who are not on the
priority list are sitting out there, well over 100,000 restaurant own-
ers and they haven’t received any money. And Congress hasn’t
done anything to follow that up to this point.
Chairwoman VELÁZQUEZ. I——
Mr. HAGEDORN. Well, if I could just say, I don’t think that is
fair, because people who are in the business are being helped, and
other people who may be in trouble and needing help and going out
of business are waiting. And I know the Ranking Member has a
bill, I have cosponsored it, use reconstituted money, $60 billion. I
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think let’s work together, please, and get the money to our res-
taurant owners. They really need it at this time.
Chairwoman VELÁZQUEZ. I wish—I hear you and many others
express concerns about the fact that many underserved businesses
and the very, very small businesses didn’t get any access to PPP,
even though they tried the hardest. I wish that you were out there
compelling the big banks to provide access to those PPP. And,
so——
Mr. HAGEDORN. I agree with you, Madam Chair. No, I agree
with you. I am not a big fan of the big banks. And I think the one
thing that has come out of the PPP program with underserved
folks is they do now have a banking relationship with community
banks and others. And they are in better position long-term in
order to help their small businesses and to be successful. So for
that, I think we should be——
Chairwoman VELÁZQUEZ.—that the numbers were there for
the world to see.
Mr. HAGEDORN. Okay. All right.
Thank you, Madam Chair. I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California, Ms. Chu, for 5
minutes.
Ms. CHU. Yes. Ms. Ward, you state in your testimony that three
quarters of the PPP loans issued in 2020 included no demographic
information. This is something I pushed hard to correct, and even
most recently, sent a letter to the Biden administration asking
them to look into racial disparities in PPP. And the lack of infor-
mation caused the L.A. Times to publish a report where they
looked at Census tracts in LA. And they found out that businesses
in majority White neighborhoods received loans at twice the rate
that majority Latino Census tracts received 1.5 times the rate of
businesses in majority Black areas, and 1.2 times the rate in Asian
areas.
So, now we are in the forgiveness phase. So can you elaborate
on why this kind of data transparency is necessary? And do you
have recommendations on how to correct the data gap in the for-
giveness process? If we don’t have this kind of data, what do you
feel businesses would stand to suffer?
Ms. WARD. Thank you. I think SBA has taken steps to do a bet-
ter job having lenders collect demographic data. And I think that
is really critical and important, because then we can see what com-
munities are being served by these programs, and where we as
lenders, SBA, Congress, need to do more to make sure that these
dollars are distributed fairly and forgiven fairly.
I will say because of the crisis and the short time period to get
a limited amount of funds, SBA was building this plane while it
was already in the air. And there were constant changes, constant
improvements made, constant clarifications, and that made it real-
ly hard for borrowers to keep up. But by and large, what we saw
was an organization, an agency trying to get this product out as
quickly as possible. I think they had this entirely new loan pro-
gram available to small businesses within about 2 weeks of Con-
gress passing this. That’s unprecedented. So I really want to ap-
plaud SBA. With their resources, this became an overwhelming
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challenge. I am very happy to see that they have now been able
to develop their own direct forgiveness portal, because there were
lots of, especially the community lenders, and smaller lenders,
CDFIs that did not have the resources to develop their own. And
for those, SBA’s direct portal is a significant improvement allowing
a lot more borrowers quicker access to forgiveness.
For lenders that had already created their portals like Self Help,
like some of the other lenders here today, limiting borrowers op-
tions to get forgiven is not the right way to go. So while I applaud
SBA for creating direct forgiveness, I think that will help get more
of these loans through the forgiveness process, lenders that are
doing a good job should be able to keep working with their bor-
rowers.
Ms. CHU. So Ms. Ward, but I was asking about demographic in-
formation. And so, you know, how can we correct this? And with
the forgiveness portal, can we actually get that demographic infor-
mation?
Ms. WARD. Yes, I apologize. I didn’t mean to get off track with
your question.
SBA has made changes to collect demographic information with
the forgiveness process. So that is part of the information that SBA
is trying to collect now on the forgiveness side that, in the early
days and the loan application initially, those questions weren’t
asked and that makes it very hard to see where these funds were
going.
Ms. CHU. Let me ask about sole proprietors, and micro busi-
nesses and the unique challenges that they face. I want to make
sure that they get the full benefit of the programs, since so many
were devastated. Can you speak how the SBA direct forgiveness
portal would benefit the sole proprietors specifically? Is the portal
more accessible for them than the ones operated by their lenders
or not? And which of your recommendations in your written testi-
mony would be most helpful for those sole proprietors or these
micro businesses to access forgiveness and relief?
Ms. WARD. Well, I think in cases where sole proprietors have a
lender that already has a portal or is already doing is good job
processing forgiveness, that is probably their best place to keep
going with the process. As you noted for sole proprietors, inde-
pendent contractors, self-employed, the rules were pretty complex.
And if you are a micro business, you are your accounting depart-
ment, you are your legal team, you are your marketing team, and
you are trying to run your business. So having your lender—if your
lender is working with you, helping you understand these complex
rules, as you are entering your forgiveness information—we think
that is better.
Now SBA’s direct portal SBA does have people manning and
FAQs. But the nitty-gritty and details, especially for the smallest
borrowers, we still think that is pretty complicated. And I still
think the lender should be helping their borrower as they enter it,
so there is not a lot of back and forth afterwards. We just think
that is a smoother process, and hopefully, we will speed forgiveness
for these smallest borrowers, too.
Ms. CHU. Thank you.
I yield back.
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Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Minnesota, Mr. Stauber.
Mr. STAUBER. Thank you, Madam Chair. And thank you, Rank-
ing Member Luetkemeyer, for holding this hearing. It is very im-
portant. And I will just say that one of the—I have really, really
strong concerns about the leadership at the SBA under Adminis-
trator Guzman. I can tell you that when our small businesses get
information stating that they should or better opt in, otherwise
they are going to be subject to audits, et cetera, that is the heavy
hand of the government that I will fight against tooth and nail. I
know many of us on both sides of the aisle, that is not how we
treat our small businesses that just coming out of COVID, just
struggling to make it. And, so, I will just say that first, we can’t
rule, or have SBA and this administrator rule with a heavy hand.
And I wanted to say, earlier we talked about the PPP and some
banking, my comment is our local lending institutions did a tre-
mendous job with very little information upon the distribution of
the PPP loans. With very little information, they did it in a quick
way. But I just want to publicly thank our lending institutions that
helped so many businesses stay afloat and helped people keep their
doors open during the COVID crisis.
I will also say that Administrator Guzman who was in our great
State of Minnesota at an event, and her partisanship showed very
well. Myself and Congressman Hagedorn, we are both Members of
this committee, weren’t invited by her or any of her staff. And I
will say that my staff, both in the district and in Washington, D.C.
have been very, very concerned with the lack of effort and the lack
of response that Administrator Guzman and her staff have given
to us when we have requested information. Either they are late,
slow or no response. And that is just simply unacceptable and the
partisanship on her end must stop. Her actions speak loud and
clear. I should say her partisan actions speak loud and clear.
So my question, Mr. Fisher, what has communication from the
SBA been like for the lenders? Has guidance been clear, especially
as it relates to forgiveness? And have you had difficulty getting an-
swers to any of your questions? Mr. Fisher.
Mr. FISHER. It has been problematic throughout the whole proc-
ess. And I don’t want to—I mean, SBA did a good job building the
system, as Ms. Ward said on the fly. We were basically flying from
New York to L.A. building the plane as we were going. So I con-
gratulate SBA on their efforts to put this all together.
But it has been problematic getting answers from SBA. And that
is why we have always felt it is important to be that buffer be-
tween the customer and SBA, because we can—we have relation-
ships with people at SBA. And even having those relationships, it
has been difficult to get clarity and answers on complicated ques-
tions.
Mr. STAUBER. Thank you very much for that answer.
And are you concerned with new SBA direct forgiveness portal?
And if you are, when would you instead like to see moving for-
ward? And how might Congress help?
Mr. FISHER. I am not concerned with the portal. I think as far
as having that portal, I think it is a great option for maybe some
banks or other institutions that don’t have a forgiveness method.
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But I think, don’t force people’s hand into utilizing the portal. I
think having those relationships with the borrowers is really, I
think—you know, we create that buffer and we can help with those
complicated questions. And I think even Ms. Ward alluded to the
fact that some of our smaller borrowers—I mean, our smallest loan
was $430, but some of those are some of the more complicated
questions that arise. And so, if we can help answer those questions
based on relationships we have had for 40 years, that is what we
try and do.
Mr. STAUBER. Mr. Fisher, I appreciate those answers. And you
are one of the institutions that helped keep our small businesses
afloat. You know, as well as I do, 16, 17 months ago you didn’t
have the answers, and we didn’t either, and so we were working
through it. And our lending institutions across this nation deserve
so much credit for helping us out, and helping get that capital
where it was needed in a short period of time.
So with that, as we move forward here, I think that we ought
to make sure that—we always talk about the economic drivers in
our communities are our small businesses. And we need to take
care of our small businesses. As Mr. Fisher said, that—know the
customer, that relationship building is extremely important to—
having been in small business for 31 years, I understand that rela-
tionship with the banking and the bankers and the institutions are
incredibly important.
So with that, Madam Chair, I will yield back. Thank you.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr. Evans,
for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
I understand—Ms. Ward, I understand your CDC works with
many borrowers who may require extra assistance when applying
for PPP loans. What kind of challenges are these borrowers facing
during the forgiveness stage?
Ms. WARD. Thank you. The biggest challenges we are seeing for
our borrowers during forgiveness are borrowers who misunderstood
the rules because they were changing rapidly at the time, and
made good faith errors in calculating their loan amount. Borrowers
were responsible for calculating their own loan amount and deter-
mining their own eligibility. And, so, we are seeing businesses that
are—you know, they have spent these funds on their business with
the understanding that this would be a grant. They made choices
as to how they would keep employees staffed and paid based on the
understanding that this was going to be a grant. You know, some
tell us they wouldn’t have taken it if they had known they would
have to pay it back, because the last thing they need in an eco-
nomic crisis is additional debt.
So, we really strongly feel that these smallest businesses espe-
cially that are suffering from good faith errors, that they be al-
lowed the forgiveness that was intended, that they relied on. We
also think for businesses in this size range, these micro-businesses,
loans up to about $25,000, by and large, especially for one-person
businesses—they would qualify for full forgiveness. And having
them go through the paperwork burden of applying for a separate
application for a business that small is a significant burden, and
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we think automatic forgiveness for those loans would be appro-
priate. We absolutely do not think that SBA should stop inves-
tigating fraud, and doing automatic forgiveness would not remove
SBA’s ability to investigate red flags, and fraud, and go after any-
one who has lied about having a business or created false docu-
ments to try and bump up their loan amount, those should be pros-
ecuted. But giving automatic forgiveness and taking this extra bur-
den off the smallest businesses would not prevent SBA from inves-
tigating those cases.
Mr. EVANS. Let me follow up. What options exist for borrowers
who PPP lending is not being responsive to forgiveness requests?
What options would you say?
Ms. WARD. So I think SBA should absolutely be monitoring
lenders to make sure that they are processing forgiveness applica-
tions within a reasonable timeframe. Borrowers should not be
left—the worst thing in the world for a small business is uncer-
tainty. And if they are stuck not being able to apply for months on
end, or they are under review for months on end at SBA, that un-
certainty is keeping those borrowers from knowing whether they
will be forgiven, whether they have funds that they can spend to
invest in new employees, to expand in their communities. If they
don’t know yet if they are going to be forgiven, they cannot make
those investments.
It is critical that SBA focus its review on the larger and higher-
risk issues when they are doing their manual reviews. Work on
those so that those, too, can be processed more quickly, so that bor-
rowers that applied in good faith are not penalized.
For the smaller loans, the SBA has a series now of red flags,
things that flag fraud for them that can help them go back and
look at those small loans that need SBA review.
Mr. EVANS. I thank you.
I yield back, Madam Chair. Thank you very much for this hear-
ing and this opportunity, Madam Chair.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Meuser.
Mr. MEUSER. Thank you, Madam Chair Velázquez, and thank
you, Ranking Member Luetkemeyer, that you to our testifiers.
So, certainly, the PPP, I think we virtually all agree, saved liveli-
hoods. It worked out well, certainly from my district throughout
Pennsylvania, and the SBA staff in Pennsylvania was very helpful
along the way. As a matter of fact, taking calls at 7:00 a.m. and
sometimes 11:00 p.m. for a number of months there. And the SBA
should be an advocate, I think, almost by definition, for small busi-
ness. So the PPP was successful because it was created by the
Trump administration Treasury Department, but was driven and
administrated by the private sector, with the support of the SBA.
So, you know, public-private partnership, if you will. And it cer-
tainly worked out well.
Now, the EIDL loans, and I know that is a challenging subject
to bring up was a very different story, and was, in fact, run exclu-
sively by the SBA. So the SBA is serving as an advocate for small
business. Wouldn’t, then, the SBA have checked with the commu-
nity banks beforehand before sending out such a letter? And basi-
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cally mandating and strongly encouraging the use of this direct for-
giveness portal?
Mr. Fisher, were you or any of the community bank associations
advised or asked for their input on the requirement to use a direct
forgiveness portal?
Mr. FISHER. No, we were not advised that this was going to be
mandatory or pushed down on the banks. I mean, forgiveness has
been going on since September of last year.
Mr. MEUSER. Right, yeah. And this email was just received just
this Monday morning, correct?
Mr. FISHER. Correct.
Mr. MEUSER. And did they explain at all why it was so impor-
tant, that even though as we discussed, minimal fraud and prob-
lems, why this portal would be would be so necessary? Did they go
over that with you?
Mr. FISHER. They have not, no.
Mr. MEUSER. And the letter, the email that came out for the
direct forgiveness stating that many banks—it seemed that it was
many, were managing their accounting and financials through
2022 as part of a better accounting plan for themselves. Is that
something that has been discussed, or you think is a widespread
issue?
Mr. FISHER. Not with the community banks that I know. We all
want to get those loans off of our books and get the loans forgiven
for our customers. That has been our plan since day 1. This was
always deemed a short-term solution to help or small businesses
customers and help our communities survive.
Mr. MEUSER. Right. And all of my community banks through-
out my district, same thing. I mean, the needs of their customers
certainly outweigh some, perhaps, improvement of accounting for
2022.
So, back to this email. You know, just looking at it here, the au-
dits, as you quoted, SBA warned avoid, that wasn’t in the letter,
but avoid lender audits—to avoid lender audits, we encourage the
direct forgiveness portal being utilized. Maybe I am paraphrasing.
It wasn’t really written like a small business advocate. What was
your thought? What were you and your colleague’s thoughts when
you received that language?
Mr. FISHER. We hoped to have all of our loans forgiven from
both rounds before the end of the year. So personally, I am not
overly concerned about being audited. They are not going to find
anything if they come in. But, I mean, nobody wants to get audited
by the SBA. So I mean, it didn’t sit well with me, especially be-
cause we had been working so hard on forgiveness for our cus-
tomers.
Mr. MEUSER. Yeah. Okay. No, I would agree if I think if I was
sitting in your seat.
I just think it is clear that the portal for direct forgiveness must
remain an option with no perceived or implied penalties whatso-
ever, and certainly, we need to maintain a high level of integrity
with the program.
With that, Madam Chair, I yield back. Thank you.
Chairwoman VELÁZQUEZ. The gentlemen yields back.
I don’t think there are any other Members. Yes.
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Ms. HOULAHAN. Madam Chair, I am here, Rep Houlahan.
Voice. Represent Tenney as well.
Chairwoman VELÁZQUEZ. Yes. I can see you.
I recognize the gentlelady from Pennsylvania, Ms. Houlahan for
5 minutes for questions.
Ms. HOULAHAN. Thank you, Madam Chair. And thank you
very much to all of you for joining us today.
I have just a couple of really quick questions, and my first one
is to Ms. Ward. I understand that in your written testimony, you
shared that there is a need to alleviate unnecessary paperwork
burdens for the smallest of businesses. And you shared that the
need should be expanded to simplify forgiveness applications for
loans all the way up to and including 350K. Would you be able to
speak a little bit more in this forum in depth about that, and why
we might need to expand the simplified forgiveness applications for
PPP from what exists now at 150K to 350K?
Ms. WARD. Thank you. I think anything we can do to simplify
the process for more small businesses is useful and helpful. I think
expanding that up to 350 poses minimal additional risk to program
funds, those loans are still reviewable, but it lessens the burden of
submitting documentation, makes it more efficient because then all
of that documentation does not have to be reviewed, and gone
through, and back and forth with the lender and the borrower be-
fore it is even submitted to SBA. SBA maintains still the right on
all loans to ask for underlying documentation if they choose. But
bumping that up, we think, would just make this process easier for
more businesses. We think that is appropriate. Automatic—sorry,
go ahead.
Ms. HOULAHAN. Do you have an appreciation, or an estimate,
for how many of the total number of loans would then represent
with 350K and below?
Ms. WARD. I think—I shouldn’t speak to one, because I probably
don’t have the right number in my head—I think if you go up to
the 350,000 level, you are getting over 90 percent of our PPP loans
that have been made through that more streamlined process. And
that allows SBA’s resources and lenders’ resources to focus on the
larger and higher-risk loans and make sure that those documenta-
tion, supporting invoices, supporting payroll documentation, is re-
viewed to protect these loans.
Ms. HOULAHAN. Thank you so much, Ms. Ward.
My final question was for Ms. Bilonick. I was also hoping that
you would be able to elaborate and articulate on how the SBA can
continue to improve the forgiveness process for those underserved
borrowers, those specifically who may not have attorneys or ac-
countants on staff to help them through that process. What else
can the SBA be doing to be able to improve that process for them?
Ms. BILONICK. Well, if I could give my wish, I would say that
if there could be support for those organizations that are working
with the small businesses and funneling them through the portal,
I think most CDFIs and other small businesses using nonprofits in
the communities that my organization represents, they are not just
giving folks sort of, Here is the website for the portal. They are
really walking through and providing hand-in-hand support to the
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borrowers to, you know, understand what is being asked, under-
stand—you know, upload documents, all of that.
So it is really not a hands-free kind of situation. So I think wher-
ever resources could be put to support that extra labor, I think ev-
eryone has rolled up their sleeves during the pandemic to just do
whatever it is that is necessary, but a lot of this work is not ac-
counted for. And, you know, it is just kind of being provided with-
out resources to back it up. So if there were anything like that.
And then just to repeat my prior point, you know, the district of-
fices being a lifeline for community-based organizations to ask
questions, to funnel any doubts, it is just very, very helpful to have
that direct person that is answering a phone, rather than looking
at FAQs, because each loan is so particular. I think all of our lend-
ers on the call would agree. And, so, it is really challenging to have
straightforward rules that apply to every deal.
And then, just really quickly, I just wanted to respond to the
thing about the 350—raising it up to 350 would bring it up to 94.2
percent of all the PPP loans. So it is just an increase an increase,
a bump-up of 7.7 percent.
Ms. HOULAHAN. Thank you. I really approach that that.
And with that, I yield back. Madam Chair.
Chairwoman VELÁZQUEZ. Thank you.
The gentlelady yields back.
Now we recognize the gentlelady from New York, Ms. Tenney, for
5 minutes for questions.
Ms. TENNEY. Thank you, Madam Chair. And also thank you to
Ranking Member Luetkemeyer. I just really appreciate your hold-
ing this important hearing on PPP. It has been a lifesaver for my
community. A small business community is what drives the econ-
omy in my region. And we are so grateful that we were able to
have that program, and how effectively it was done through our
small community banks and credit unions. And I know that work-
ing with our credit unions and banks, as a former bank attorney,
and also as a small business owner, how critically important it was
for us to have access to these unfortunately dwindling number of
community banks and credit unions that we can build our relation-
ships with. And that is why I am very concerned about the letter
that was received, somewhat threatening letter from SBA, to—the
email, I should say, from SBA to lenders to avoid lender audits, en-
couraging them to move into the direct forgiveness program, in-
stead of working through their own institution, where they have
originated the loan, where they have actually had the community
bank. They have had the community relationship with these par-
ticular lenders in a business community where they know what the
risks are, they know what the community needs. And they also un-
derstand the businesses in the community.
And my first question I would like to direct to Mr. Fisher. And
I am so grateful that he is on, you know, a frequent guest and
great expert on this issue. Also, our president of the Independent
Community Bankers Association, so congratulations for that dis-
tinction as well. But, I know you have been asked this, but I want
you to give us a little bit more of the real implications of this coer-
cive letter, or email, that you received from SBA about encouraging
your business customers and your businesses to move over to the
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SBA portal, as opposed to using your bank and your system as the
forgiveness site, because I am concerned about some of the privacy
concerns and the liability of the bank in giving up that information.
Could you maybe address that, Mr. Fisher?
Mr. FISHER. Yeah, I am not sure about the liability issue, but
as far as just, you know, we have systems in place. We are actively
working with all of our PPP customers pursuing forgiveness. We
work with them. And back to one of the previous questions, you
know, I think the easiest way to have customers, if they are having
difficulty with PPP forgiveness, go to a community bank. We will
gladly help you walk through the process. Even if it is not our loan,
we will help figure it out for you so——
But being coerced to have to work it through a direct forgiveness
portal with the SBA, I think that is problematic. I mean, they are
not going to get the same level of service that they will get coming
to my bank. I know that we know the customer. We live here. We
work here. We work with them. And so, it is concerning that we
are kind of being coerced to go down that path of sending our cus-
tomers directly to SBA without having that interface that they can
work through us and a get the solution through us.
Ms. TENNEY. Yeah. And as fellow New Yorkers, I am always
concerned about when the government is interfering in these rela-
tionships that banks have. And you describe so eloquently the im-
portance of character lending and community banking relation-
ships. And those have been vital to many in our community who
rely on those dwindling number of community banks. But you pro-
vide such a great resource to so many, whether it is a farmer, or
another kind of small business owner, restaurant, some of the not
for-profit that you described that you were doing PPP loans with.
Those businesses are vital. And you, as a Member of the commu-
nity, understand that. It is not like they call an 1-800 line. And for
a bureaucracy in Washington to interfere in that process, that con-
cerns me. And I think the efficiency that you pointed out earlier
in the PPP program of using our community lenders is really—is
worthy of commendation. That is a good move. And also, less reli-
ance on the bureaucrats in Washington, and more reliance on peo-
ple that are closer to our community. I really appreciate those com-
ments that you made. And I would also like to echo the comments
of my colleague, Mr. Stauber, on—my staff and many of our con-
stituents have come to us concerned about the problems they have
had with SBA. So to me the fact that we have wonderful institu-
tions, like community banks, community credit unions, that serve
customers so directly, I think that is a huge win. And I just think
it is a mistake that they are using any kind of coercive tactic.
So I want to thank you for that. And thank you for also indi-
cating that in your testimony, that you have zero fraud and 100
percent forgiveness rate and you are working through every one of
these. So that is really important to know about the accountability
aspect of this as well.
I don’t know how much time I have left, but I wanted to just get
a quick question to Ms. Payne about the credit union aspect of this,
and some of the direct consequences, or some of the experiences
you have had on the credit union side. If you can quickly tell me
that, because I think I am running out of time.
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Ms. PAYNE. Well, I would like to, then, quickly maybe, share a
direct quote from one of our Members who was recently forgiven.
And this is from an email. ‘‘Hopefully, you are able to hear our
screams of delight. Thank you so much. This is an enormous relief.
Please let everyone there know how important this is to us.
Affinity’s communication systems responsiveness and empathy dur-
ing really trying times was second to none. You guys rock.’’
That is a relationship. And that is the critical piece here.
Ms. TENNEY. Yeah. Thank you so much. That is fantastic.
And I don’t mean to disrespect there are many great people that
work for SBA, but who are on the ground with customers and you
are relationship building, you depend on these people and they de-
pend on you. And I think that the last thing we need is Wash-
ington bureaucrats to interfere with that. And I do think that this
is a lit bit of mission creep for the SBA to move away from their
job of helping small businesses to get into a banking relationship,
and interfering in that important relationship with our small busi-
nesses community. And I have heard the same. I think this is a
great program. And to end it, interfering in that ability to forgive
these loans, which was intended as a grant program, as Mr. Fisher
referred to in his testimony, it would be a mistake. And I think
that going down the path of accountability, particularly with people
like the small business—small community banks, small community
credit unions, you have something at stake, you have skin in the
game. And I think that is why you are so good at doing this. And
that is why I think the program was so successful.
I want to thank all of the witnesses and everyone. This is really
important. I hope you will continue it work hard on these issues
and help our small business community. We are really grateful to
you.
And thank you very much, Madam Chair, and Ranking Member
Luetkemeyer. I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we now recognizes the gentleman from Minnesota, Mr. Phil-
lips, for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair. And greetings to my
colleagues and to our witnesses. Gratitude for you all being with
us.
My question is about the bank fees relative to the PPP program.
And the Washington Center for Equitable Growth indicated that
banks reaped about $18 billion in fees that were associated with
processing PPP loan applications. And I would like to hear from
you, whichever of our witnesses want to begin, to help describe the
bank fee structure that was implemented through PPP to provide
the incentives to issue the loans, and whether you think that in
part, at least, it explains why some of the largest lenders were re-
luctant to push forgiveness through using the SBA’s direct forgive-
ness portal? Any thoughts from any of our witnesses on that sub-
ject?
Ms. WARD. I am happy to take the first slab to try and answer
that. So first, I would say, I am not aware, and would be surprised
to see that there are lenders trying to delay the process for pur-
poses of when their fees are booked. I have not heard that and that
would surprise me. If that is happening, SBA should be applying
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significant pressure on those lenders. That would just be unaccept-
able.
The fee structure that was put in place, really, initially, I think
Congress made an effort to ensure that even the smallest busi-
nesses had access to PPP, but because Congress structured it with
a larger percentage fee on the smallest loans. Unfortunately, even
a larger percentage fee on a $5,000 loan does not give the lender
the reimbursement for the resources they used to do that loan. So
lenders that were able to do large PPP loans were able to generate
large enough fees to offset their costs.
Lenders like community lenders, CDFIs, a lot of the lenders that
worked primarily with the smallest businesses and micro busi-
nesses, probably did not receive enough fee income to cover their
costs, depending on the volume that they did. Self-Help among
CDFIs is a little unique in that we were able to work with over 70
percent of our loans were to those smallest borrowers, under
$50,000. Our median loan size was just with over $20,000. But we
also, because we were helping some of the nonprofits serving the
community, we were helping some larger employers keep their em-
ployees on staff. We were able to do some of those larger loans to
help offset costs.
But we had real concerns about the fee structure for community
lenders and CDFIs that were working almost exclusively on those
tiny loans, and Congress did address that when it brought out the
2021 PPP——
Mr. PHILLIPS. Right.
Ms. WARD.—by putting in a minimum fee amount for those
lenders so they could cover costs.
Mr. PHILLIPS. I appreciate that.
Ms. Payne, Ms. Bilonick, any perspectives on the same question
you want to share?
Ms. PAYNE. I would like to add that going into this in the envi-
ronment that we were in with the pandemic, I don’t know that, for
us, it was really member-based. We needed to help our Members.
The fee structure was basically secondary. We needed to get
through this, and we needed to get through it together, and this
is what we needed to do for our member base.
Mr. PHILLIPS. I appreciate that.
Before my time expires, I know that a number of borrowers were
contacted by their bank saying that they received more than their
allowable funding, and are responsible to pay it back, of course, de-
spite having, in many cases, used the money for forgivable ex-
penses. So at what stage do you think it would have been appro-
priate for that to be communicated to borrowers and by whom? Do
you think it is the lender’s job or the SBA? Any thoughts on that
subject?
Ms. PAYNE. I can jump in to try to answer that. I don’t know
with the ever-evolving guidance and such what might have been a
good time. It is hard to say.
Mr. PHILLIPS. Yeah.
Ms. PAYNE. But I do think from the beginning, the message to
these borrowers was, if you use it the right way, you will be for-
given. And I think that is the message that, you know, that so
many of us heard as the borrowers did.
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Mr. PHILLIPS. Right.
Ms. PAYNE. This was temporary.
I think it depends for us, we are happy to give that message
when it does happen, if there was partial forgiveness or something
otherwise. We are happy to give that because we have the relation-
ship and can fully explain it to our borrowers so that they under-
stand, and then hopefully help them with any other needs that
they may have going forward with that.
Mr. PHILLIPS. Hear, hear.
With that, I yield back. And I thank you all again for being with
us today.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from New York, Mr. Garbarino,
for 5 minutes.
Mr. GARBARINO. Thank you, Chairwoman. And thank you to
the Ranking Member for having this hearing as well. Thank you
to the witnesses that are here today. I have appreciated your testi-
mony so far.
I want to start with Mr. Fisher, because it is sort of a follow up
to what him and Ms. Tenney were talking about and how you have
been dealing with customers looking for forgiveness and your Mem-
bers have dealt with them all the way up through the processing
application and whatnot. Have you come across any small business
customers that have not opted to seek forgiveness?
Mr. FISHER. We have had some customers that are slow to seek
forgiveness. But, you know, no, they all want to get forgiven. It is
just, some are quicker to try and apply for it than others.
Mr. GARBARINO. Is that the same instance for you, too, as well,
Ms. Payne, with your Members?
Ms. PAYNE. We have seen some, not many at all. Several of our
borrowers have opted not to apply for forgiveness. The only input
that we have heard from them is that they felt that they did not
spend the money fully in line with the PPP guidance, and that is
all I can really say on that.
Mr. GARBARINO. They don’t think they qualify for forgiveness?
Okay. All right. Thank you.
Mr. Fisher, back to you. How much staff have you dedicated to
PPP, as well as how much staff do you have dedicated working on
PPP forgiveness?
Mr. FISHER. Initially it was kind of all hands on deck. We prob-
ably—I mean, I have 100 FTEs at the bank, a little less than that.
But we probably had 20 people that were working around the clock,
weekends, trying to get PPP applications into the SBA. The forgive-
ness phase we have automated some of that. So we are really using
about three people, two to three people to handle the forgiveness
phase. And it has been very efficient and pretty effective for us.
Mr. GARBARINO. And Ms. Payne, your organization?
Ms. PAYNE. It is going to sound very similar. It was all hands
on deck as well. And we actually brought on three temporary em-
ployees to help us through the PPP forgiveness process. And it has
been working very well for us. And we have automated our plat-
form as well.
Mr. GARBARINO. Okay. And finally, I guess what—PPP was big
in getting funding out the door when it was first going. That was
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a big question to employers, how they are going to keep open and
PPP was a big help. For many of the witnesses, Ms. Payne, Mr.
Fisher, anyone, what are you hearing specifically now? Now that
the PPP programs—what concerns are you hearing from small
businesses now?
Mr. FISHER. I think the big concern right now is what is going
to happen with this next wave, if it is going to lead to shutdowns.
We are seeing mask mandates for schools and things like that. So
I still think there is a lot of uncertainty with business, which is al-
ways problematic, so.
Mr. GARBARINO. Uncertainty over the regulations on how to
handle it if there is another—I don’t think there will be, but if
there is another shutdown?
Mr. FISHER. Correct. Yeah.
Ms. BILONICK. I was just going to add that from our perspec-
tive there is lot concern around workforce. So there is just not
available workforce for a lot of industries that were hardest hit,
and that are now trying to reopen and reboot. And that is just
something that is coming up very frequently.
Mr. GARBARINO. I have heard that a lot from every industry
I think, from construction, to restaurants, manufacturing, to retail.
Everybody is having trouble right now finding workforce. But as for
programs, like PPP, is there something we could do better next
time, you know, if there is another shutdown? Like, what should
we address on how this program ran out, or how we ran this pro-
gram compared to what we should have done? Like, what can we
do better? For anybody?
Ms. WARD. I would say we at least have a template now, even
if this exact same program was put in place, there is lot more clar-
ity. That is a huge improvement. One of the biggest challenges was
that almost daily, changes came through during the duration of
this program, and it really made it impossible for borrowers to
know whether they were eligible or how much they were eligible
for. So that would be an improvement.
The funds could be—there could be other ways to deliver these
funds to borrowers. I think, by and large, banks, big banks, com-
munity banks, CDFIs, even fintechs getting in got these funds out
to a lot more borrowers, and allowed these funds to be funneled
through a lot of sources so that more money could get out the door
as quickly as possible to these businesses that needed it to survive.
Having clarity in the rules from the beginning, and having clear
steps for forgiveness, delivering on that promise, taking away that
uncertainty as to whether you are going to get these funds for-
given, or whether you suddenly have unexpected debt after you
kept your staff on, those are the things that I think could be ad-
dressed to help more businesses if we, you know, hopefully don’t,
but if we ever had to go through something like this again.
Mr. GARBARINO. Thank you. My time is up. So I yield back.
Thank you, Chairwoman.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California, Mrs. Kim for
5 minutes.
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Ms. YOUNG KIM. Thank you. Thank you, Chairwoman and
Ranking Member. I also want to thank the witnesses for being with
us today.
You have heard a lot from my colleagues about the PPP has been
tremendous assistance in allowing small business owners. And in
my district also, it has been a lifeline for them to weather the eco-
nomic downturn caused by the COVID-19 pandemic and unprece-
dented lockdowns.
We are talking about now the next phase of PPP forgiveness, you
know. The massive effort of distributing close to 12 million PPP
loans and sustaining close to 50 million jobs could not have been
possible without our partners, like the banks and credit unions. So
I want to thank them and the partnership they have had with you
guys.
But I was troubled to hear SBA was threatening—excuse me. I
was really troubled to hear that SBA was threatening lenders to
opt into the direct forgiveness program to avoid audits by the Office
of Credit Risk Management. SBA later clarified that audits would
focus on lenders that have yet to accept forgiveness for 2021 PPP
borrowers, or those that are not actively reaching out, the damage
has been done. And SBA must be careful not to vilify lenders mov-
ing forward.
And I also must stress that whether a bank or any other lending
institution, obscene or not with the SBA’s forgiveness quota has no
bearing a borrower’s opportunity to get their PPP loan forgiven.
You know, many banks and lenders have already set up their own
forgiveness platforms that are complementary to SBA and having
really highly efficient.
So let me ask you, Mr. Fisher, I agree with your testimony that
the SBA should not force lenders to opt into the direct forgiveness
portal. And with the high number of review requests from the SBA
which requires lenders to put resources aside to provide docu-
mentation, what should we expect if SBA decides to proceed with
audit on lenders on top of all these review requests? And how is
that going to divert your attention in serving your customers prop-
erly?
Mr. FISHER. It just diverts resources away from my mission of
serving our local community and our customers in helping small
business. If I am trying to provide documents and trying to deal
with auditors from SBA, it just becomes problematic for us.
Ms. YOUNG KIM. Sure.
You know, Mr. Fisher, you also said in your testimony, you men-
tion SBA’s lending programs like the 7(a) and 504, they rely on
bank underwriting and the expertise that lenders bring to the
table. So can you explain to our committee what would change if
SBA moved in the direction of direct-to-borrower programs at the
SBA?
Mr. FISHER. I just—obviously, if you leave the bank out of it,
you are subject to potentially more fraud. I think that has been
brought up that the EIDL advances saw substantially more fraud
in direct loans to SBA than the bank loans. So, I think looking at
it from the standpoint of trying to reduce fraud, I think utilize your
existing framework of community banks and banks to continue that
lending through the S-7(a) program and 504 programs, and even
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PPP was very successful, and I think limited fraud by utilizing the
banking framework that we have.
Ms. YOUNG KIM. Well, thank you very much. I mean, I think
the biggest concern that we have is the impact. And we want to
make sure there was a prevention of waste, fraud, and abuse with
those programs.
One more question. And I would like to direct this to Ms. Payne.
Why do you believe that forgiveness review process by the SBA is
challenging and time consuming? Are there certain steps that add
extra days to the review?
Ms. PAYNE. When a loan goes on to—into loan review, it is a
time-consuming process because it is not typically that we have
that the lender has a direct communication with the SBA rep-
resentative. It is basically an email is sent out, sometimes can be
fairly vague, and then we are asking for additional documentation.
Sometimes it is already been uploaded and they are repeating our-
selves, sometimes we have to then reach out to the borrowers to
get additional information, not always understanding what that is
going to go do for the loan itself, in terms of the forgiveness review.
So it does add days. It also add frustration, and confusion, and
stress for the borrower in terms for the fear about why am I under
review.
So there are a lot of factors. It does add time. And it can add
other things, stress that a small-business owner does not need at
this time.
Ms. YOUNG KIM. I have one other question to ask, but I think
my time is up so I will yield my time back. Thank you.
Chairwoman VELÁZQUEZ. The gentlelady yields back. Now we
recognize the gentlelady from Texas, Ms. Van Duyne.
Ms. VAN DUYNE. Thank you very much, Chairwoman
Velázquez and Ranking Member Luetkemeyer for holding this
hearing today.
As the driving force behind our economy, you know, an employer
of nearly half of all American workers, the success of small busi-
nesses is critical to each of our communities. And this is no more
apparent than during the pandemic. While government shutdowns
forced many businesses closed, the Paycheck Protection Program
delivered the emergency capital that small businesses needed to be
able to keep their doors open. After providing almost $1 trillion to
small businesses, we are finally nearing completion of the program.
As this massive relief program shuts down, we must continue to
push for more rigorous oversight to protect American taxpayers.
I want to echo Congressman Hagedorn’s request and express my
disappointment that we are discussing complex policies yet again
without an SBA representative present. There are questions that
Members of this committee have that can only be answered by
those actually running the program. So I hope we can have some-
one from SBA in front of the committee very, very soon.
That being said, I want to thank the witnesses that we do have
here today.
Mr. Fisher, I appreciate all the work that you do in upstate New
York. I think I actually used to have an account with your bank
when I was up in college in Ithaca. So I know it is raining there
today, but now is when I want to be there, because I am in Dallas,
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Texas, and it has been 100 degrees here today. So enjoy your sum-
mers and your falls because winter is coming soon.
But I do have a question for you. Despite many circumstantial
setbacks and concerning amounts of fraud, the PPP program suc-
cessfully kept small businesses afloat during the pandemic. So as
we look ahead to preparing for the next major disaster, these prob-
lems are not unique to just PPP. And I know Congressman
Garbarino had also asked a similar question. I am going to change
it a little bit. How can we improve the PPP model to disperse the
quickest aid, but also minimize fraud?
Mr. FISHER. I guess I would suggest not trying to go direct to
the borrower. I think utilizing the network of banks that partici-
pated, utilizing banks that have a long history of 7(a) lending is
definitely probably the way to go, because we have relationships
with those businesses. We know the businesses, because it is down
the street. I drive by it every day, versus somebody who is just, you
know, seeing it in application, either on paper or virtually, trying
to make that decision. I think we can be a great mutual aid to help
get those dollars out and also curb fraud.
Ms. VAN DUYNE. That is good to know.
Ms. Bilonick, in your testimony, you state that in 2019, before
the pandemic hit, that Latino-owned businesses had hit a record-
breaking strive with their average annual revenue increasing 10
percent to over $525,000 per year. This is impressive, and it is the
exact type of growth strategy I think that we are looking for in the
business environment and we need to get back to that.
What would you attribute that success to back in 2019?
Ms. BILONICK. I think the success was reflecting the scaling of
Latino-owned small businesses, so businesses that may have start-
ed 5 to 10 years ago that were going to the next level, expanding,
adding additional locations, adding additional personnel. And, un-
fortunately, the pandemic is a setback, but I do think that we can
harness that, you know, sort of growth mentality and perseverance
moving forward, and it hopefully will just be a hiccup in the story
of our entrepreneurship story.
Ms. VAN DUYNE. Were there any particular policies that you
think that helped back in 2019 that we should either try to
strengthen or, you know, bring back?
Ms. BILONICK. I don’t know that I would point to a particular
policy. I am not sure. I think—I really do think it was sort of was
just maturity of the businesses that had taken off at that point.
But I am open to suggestions of what policies you may be referring
to.
Ms. VAN DUYNE. Well, I don’t know. I mean, maybe tax cuts.
I mean, were you looking at any other tax cuts in the Tax Cuts and
Jobs Act, for example? Did that strengthen? Did that help? I mean,
I know that right now we have got from the Biden administration
a number of financial policies that are coming down that are talk-
ing about increasing taxes, you know, gut inflation, so in backing
away on some of the policies that I think really helped grow the
economy and were very positive, beneficial to small businesses, and
I am just wondering if you are seeing the same thing.
Ms. BILONICK. I don’t know that I would attribute it to that.
I would say that I am not opposed to taxing those larger busi-
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nesses. I think a business that is making under a million dollars
is certainly not, you know, going to be targeted in that segment.
Ms. VAN DUYNE. No. But I am talking about specifically small
businesses. Right?
Ms. BILONICK. Well, these are, I guess—would be probably a
threat closer as a microbusiness in the $250 to $500 thousand
range.
Ms. VAN DUYNE. Well, I thank you.
I yield back my time. Thank you.
Chairwoman VELÁZQUEZ. The gentlelady yields.
Now we recognize the gentleman from Florida Mr. Donalds for
5 minutes.
Mr. DONALDS. Thank you, Madam Chair, and thank you to the
Ranking Member for holding this hearing.
I have got to tell you, I think SBA getting involved, as involved
as they are trying to be with this forgiveness process and, frankly,
you know, threatening community banks from doing what they
kind of already been said to do I think is outrageous. It is out-
rageously wrong.
You know, in a prior life, I was a credit underwriter at a commu-
nity bank. I had to deal with SBA when we were doing joint credit
with them. And, to be frank, SBA would be late to the table often
with respect to their lending decisions. We already knew it was
good credit. It just took forever to deal with SBA. So for them to
try and come in now and, in some respects, completely take over
the forgiveness process, to me it just doesn’t make much sense at
all.
So, I guess, my question, my first question is to Mr. Fisher. Mr.
Fisher, you are going through the process of forgiveness. What kind
of data are you actually looking at in order to clear [cut out] for-
giveness?
Mr. FISHER. We just make sure that it is a valid, you know,
loan. We validated all the customers at the front end, so the for-
giveness, we just have to ensure that they have all of the docu-
mentation required by SBA, and it goes through—we have an auto-
mated system that it goes through and submits directly to SBA,
and we typically—right now we are getting forgiveness back very
quickly from SBA, so it is a pretty smooth process for us right now.
Mr. DONALDS. Okay. And, Ms. Ward, my question for you is,
what different or what value added is SBA bringing to the forgive-
ness process as to why they should be involved in it?
Ms. WARD. Well, I think the value SBA is adding is, in creating
this Direct Forgiveness Portal, they are giving an easier, more effi-
cient online access for some PPP borrowers that may not be getting
that from their lenders, and in that case that is incredibly valu-
able. I am really happy to see that they have created the portal to
fill that gap.
I agree, though, for lenders that have already created their por-
tal or lenders that are efficiently processing PPP forgiveness, they
should be allowed to keep using their own systems. I think SBA’s
direct portal should expand access to forgiveness and not limit dif-
ferent ways that borrowers can get forgiven.
I have worked as an SBA lender for over 15 years. I have worked
with SBA on micro loans, 7(a) loans, 504 loans, and now PPP loans,
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and SBA works best, in my opinion, when it works in partnership
with the lenders. Each has a role, and SBA can have drastically
more impact working through the lending community. That needs
to be expanded, more community lenders, credit unions, CDFIs,
mission-oriented lenders that are making sure to hit underserved
borrowers, but that is where I think SBA provides an incredible
and unique service and much needed loans. These SBA loans of all
types are part of why the U.S. has such a vibrant small business
economy.
Mr. DONALDS. Ms. Ward, as a follow-up to that, I mean, like
I say, somebody who has been in the community, actually done
credit underwriting, with the amount of loans in the system, how
would SBA actually go about dealing with loans that there might
be early indications are fraudulent or that dollars were spent and
maybe not in line with the PPP program and, as such, those dol-
lars—a portion of those dollars or those dollars overall would not
be forgivable, how would SBA deal with that?
Ms. WARD. So what we’ve seen that process include since the
program got rolled out, I think initially in the speed to get these
dollars out, a lot of the normal safeguards——
Mr. DONALDS. No. Ms. Ward, I have to reclaim my time real
quick. I understand what you are saying about what happened on
loans from now going forward.
What, frankly, special mechanism is SBA going to do if they see
early warnings that there was, not so much even just fraudulent,
but a misapplication of funds where those funds are now no longer
subject to forgiveness under the various—and I know there have
been a couple iterations of PPP. But what if those dollars were
spent and none of those iterations that were allowable for forgive-
ness, what is SBA going to do? What would it ordinarily do to en-
sure those dollars are repaid to the taxpayer? [Audio cut out on his
question]
Ms. WARD. So all of these go through SBA for the final deter-
mination. The bank, the community bank, or the lender submits
our recommendation per SBA based on does this loan qualify for
forgiveness or partial forgiveness, and then SBA bases its forgive-
ness on that. SBA also has the right to review those and ask for
additional documentation.
And so they will keep doing that same thing. They will continue
to review and make sure that forgiveness is appropriate. If the
funds were not spent for the intended purposes, the business
should be paying them back. The use was to keep your business op-
erating and keep your staff employed. Businesses that didn’t do
that knew going in and should be held accountable for paying that
back.
Mr. DONALDS. Well, Ms. Ward, thank you for that.
I know I am over my time. Madam Chairwoman, thank you so
much more the indulgence, and I yield back.
Chairwoman VELÁZQUEZ. Thank you. The gentleman yields
back.
Let me thank all of the witnesses for being here today. Your tes-
timony has shown the progress we have made in forgiving PPP
loans and also the challenges that small businesses still have——
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Mr. LUETKEMEYER. Madam Chair, we have got one more wit-
ness—one more Member. Mr. Fitzgerald from Wisconsin is still on.
Chairwoman VELÁZQUEZ. Well, he has his camera off and——
Mr. LUETKEMEYER. No. He is on.
Chairwoman VELÁZQUEZ.—he has had his camera off through-
out the hearing.
Mr. FITZGERALD. Madam Chair, I am not sure if I—I just have
a quick one if I could sneak in.
Chairwoman VELÁZQUEZ. Sure. But we have always said that
while you are in a hearing to please to keep the video on. So, sir,
you are recognized now for 5 minutes.
Mr. FITZGERALD. All right. And thank you, thank you.
Just real quick, and I don’t want to be redundant. I know that
the hearing has gone on.
So to Mr. Fisher and probably to Ms. Payne, there is kind of
this—these stories that have been swirling for some time now that
there was kind of this cottage industry that was created basically
because PPP loans were available. There were accounting firms, as
well as law firms, that were starting to market, if you will—and
I am trying to keep this at a 30,000-foot level—market the idea
that, hey, if you want to apply for a PPP loan, don’t worry about
it, we will take care of the paperwork. This is what you are eligible
for. And then once the PPP loan was granted, then on the back
end, you know, there would be legal fees that were charged for
some of these or, certainly with some of the CPA firms, you know,
there was billings that were done on the back end.
And I bring this up—and like I said, I am trying to keep this—
I am not necessarily making the accusation, but it is out there. It
is very much out there. And I would just say, this is one of the
problems I think with just loan forgiveness is you, once again, take
down one of the hurdles that, you know, otherwise legitimate busi-
nesses would look at and say, well, wait a minute, if I have got to
pay this back in the end, no, I am not going to take that $25,000
loan. I am not going to take it because it is going to be a burden
on me later. But if I know that it is going to be forgiven anyways,
sure, what the heck, you know, let’s make this arrangement now
with a law firm or CPA firm. And, you know, suddenly you find
yourself in a bad spot.
And I am just worried that this cottage industry was created and
that, you know, if we don’t try and keep this in check, it could go
wild. And I wonder if you have any comments on that, if you saw
any of this type of practice going on. You know, in my mind, you
know, it sounds like criminal activity but very hard to define and
very hard to delve out.
Mr. Fisher and Ms. Payne, I would ask either one of you who had
direct involvement with these loans to just—have you seen any-
thing like this?
Mr. FISHER. You know, we did have, you know, accounting
firms and lawyers that were working with customers, but they
were all customers that were known to us. We actually brought in
I think 40 percent of the first round of SBA—or PPP loans were
new customers to our bank; but most of those were not necessarily
referrals from attorneys or accounting firms. They were, you know,
the borrowers coming to us directly. I think there was—we had a
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couple of accounting firms that maybe referred a deal over, and I
think they thought they were entitled to some of the fee that was
being generated from the PPP loan, but we didn’t have any type
of an agreement signed with them for, you know, sharing those
fees.
So we didn’t really see anything that you are talking about as
far as fraudulent or, you know, the type of activity that I think you
are talking about, I haven’t seen it, so, I don’t know——
Ms. PAYNE. And I would add, we really didn’t see any of that,
and we didn’t have anything from accountants or anything of that
nature. We talked more to accountants more on the forgiveness end
of things than the early stages because of the complexity some-
times of the documentation that they had to provide for forgive-
ness. But we didn’t really see anything of what you are speaking
to. We didn’t have any familiarity with that.
Mr. FITZGERALD. Ms. Ward, are you aware of anything along
those lines?
Ms. WARD. We really didn’t see that in our PPP lending either.
We saw a lot of technical assistance being provided by accounting
firms and small business technical assistance providers. Third-
party payroll processing companies we saw step up and provide re-
ports for their customers to help them calculate the loan amount.
We saw a lot of different industries really doing what I think all
of you and all of we and, you know, all of these businesses did, it
was all hands on deck.
I am—I suspect you are right that there are organizations that
took advantage of that fear and that desperation, and to the extent
they can be found out and held accountable for that, I would ap-
plaud that; but most of what we saw, fortunately, was organiza-
tions trying very hard to help the businesses and the nonprofits in
their communities keep their doors open.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired.
Mr. FITZGERALD. Madam Chair, I am just worried—yes,
Madam Chair, I think this is something we have got to be aware
of, and I appreciate the time.
Chairwoman VELÁZQUEZ. Thank you.
Again, thank you to all of our witnesses for being here today. As
I mentioned before, your testimony has shown the progress we
have made in forgiving PPP loans and also the challenges that
small businesses still face.
While the small business economy has made tremendous
progress toward recovery over the past 17 months, we are entering
another precarious state with the spread of the Delta variant. For
small businesses that struggled for over a year, even minor set-
backs can instill monumental trouble. That is why our committee
must work to ensure that small businesses can achieve maximum
loan forgiveness.
This hearing has provided significant insight into the obstacles
that PPP borrowers still face. I look forward to working as a com-
mittee to achieve policy solutions that ensure entrepreneurs obtain
the forgiveness they are entitled to.
I would ask unanimous consent that Members have 5 legislative
days to submit statements and supporting materials for the record.
Without objection, so ordered.
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If there is no further business to come before the committee, we
are adjourned.
Thank you.
[Whereupon, at 3:15 p.m., the committee adjourned.]
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APPENDIX
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SBD026 with DISTILLER Insert offset folio 94 here 45478.052
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95
SBD026 with DISTILLER Insert offset folio 95 here 45478.053
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96
SBD026 with DISTILLER Insert offset folio 96 here 45478.054
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97
SBD026 with DISTILLER Insert offset folio 97 here 45478.055
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98
Æ
SBD026 with DISTILLER Insert offset folio 98 here 45478.056
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File and source
- File
- chrg-117hhrg45478.pdf
- Size
- 25,659,108 bytes
- SHA-256
- 2d2abddaabbb94e55fa92fd1a4d39cad7da922a5978597cf8d0b5a783293b4f9
- Our copy
- chrg-117hhrg45478.pdf
- Original
- www.govinfo.gov