"Paycheck Protection Program: Loan Forgiveness and Other Challenges" — Testimony, House Committee on Small Business

Summary

Testimony of Eduardo Sosa, SBA Lending Senior Vice President at Amarillo National Bank, Austin, Texas, before the House Committee on Small Business, June 17, 2020, titled Paycheck Protection Program: Loan Forgiveness and Other Challenges. The testimony says the bank made roughly 3,450 PPP loans totaling over $477 million. It criticizes the speed of implementation and guidance issued in fragments that contradicted itself, including forgiveness guidance issued on May 22, after millions of loans had been made. It says $31 million of the bank's PPP loans were cancelled or repaid after contradictory guidance and threats, and that 83% of its loans were $150,000 or less. The positions are the witness's own.

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“Paycheck Protection Program: Loan Forgiveness and Other
                       Challenges”
      Testimony before the House Committee on Small Business




                          June 17, 2020




                         Submitted by
         Eduardo Sosa, SBA Lending Senior Vice President
                    Amarillo National Bank
                         Austin, Texas
Chairwoman Velázquez, Ranking Member Chabot, and Members of the Committee—my name is
Eduardo Sosa and I have been in SBA lending for the past 25 years. I currently serve as the Senior Vice
President of Commerce National Bank in Austin, Texas. Commerce National is part of Amarillo National
Bank, a 126 year-old family-owned small community bank headquartered in Amarillo, Texas, and we
focus on small business borrowers in our community through both conventional and SBA lending. The
majority of our footprint encompasses the Texas Panhandle and Central Texas. In my capacity, I have
helped to oversee my institution’s participation in the Paycheck Protection Program (PPP), making
roughly 3,450 PPP loans totaling over $477 million in critical capital to support over 57,500 employees
during these recent difficult few months.
Let me start by telling you a little about myself: I am the son of Mexican immigrants and, as a migrant
farmworker, if you had told me that someday I would be invited to testify before a Committee of the
United States Congress, I would not have believed you. When I say that I am honored to testify before
this Committee today, those words carry great personal significance and encapsulate my story – the story
of a boy that came from very little and who, in partnership with my wife of 50 years, worked very hard to
contribute to my family, my community, and my country. In my career as a lender who specializes in
SBA loans, I have had the great privilege of devoting decades to helping small business borrowers to
whom a SBA loan can mean the difference between thriving and failing, and I have found fulfilment in
helping those small businesses achieve the American Dream.
Now, we find ourselves in uncharted territory in response to the COVID-19 crisis. The unique
circumstances resulting from the global pandemic brought businesses on Main Streets around the country
to a crashing halt. As a lender watching the reaction of Congress in creating the PPP, I am grateful for the
attention that was paid to the grave issue of unemployed Americans. The country’s small businesses
could not wait for Washington, D.C. to take its time—they were hurting and the stability of the small
business economy was deteriorating quickly. These fearful small businesses were my clients, my
neighbors, and my friends, and with the passage of CARES Act, I was hopeful our team of lenders would
have an answer for them as to how they would be able to survive. It is because of this unusual landscape
that I understand the clear pressure Congress and the agencies have felt to produce statute and guidance as
quickly as possible, as well as the pressure on lenders to deliver PPP loans with an emphasis on speed to
market. In many ways, speed was the cornerstone of the instructions to lenders from the get-go,
underscored by Treasury’s directive to attack the long queue of borrowers with a “first come, first serve”
process. Lenders were called to duty with a fireman’s mentality—suit up and start fighting the fire
quickly.
But lenders and borrowers are now paying the price of this speed, and perhaps there was a middle ground
to be had. Instead of promising all small businesses that they would receive a loan the very Friday after
the CARES Act was signed into law, perhaps we could have issued a message to reassure them that the
program was set up to help everyone quickly but it would take just slightly more than 5 business days to
establish. Partial guidance was issued to lenders close to midnight the night before the program “went
live” and my bank, as well as my peers, felt caught between two bad options—either deliver on
something we didn’t yet understand or face public shame for not churning out loans immediately to our
clamoring customers. Perhaps we could have given this country’s lenders a few days with a
comprehensive rule book first. Rather than take an extra beat to lay out all the rules, terms, conditions,
and processes for originating, forgiving, and servicing a PPP loan, speed to market pressure has created
piecemeal guidance issued in small fragments, one after another, that often contradicts itself and is still
not complete even today. This has left the industry confused and unable to trust the requirements that

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have been issued for fear that they will change the next hour, day, or week, as they so often have and
continue to do so. Yes, I understand speed to market and I wanted that for my clients—but, it seems to
me, and many of my lending colleagues, that somewhere the implementation process lost sight of
common-sense in the midst of this frenzy.
My testimony will focus on the main challenges that have arisen during the program’s short, but
impactful life. The intent is not to highlight the wrongs, but to paint a picture for the Committee of the
hurdles that lenders and borrowers face, and to bring to life for you what kind of price we have paid due
to the way in which this program is being implemented. The group of lenders at my bank have pulled off
what feels like a miracle for thousands of borrowers, and I would not have a story of PPP participation to
tell if not for the entire team that I stand with every day. I share my concerns with the Committee so that
I may give voice to this team and the small businesses that feel like family in our community. Ultimately,
my hope is that I help to contribute to the Committee’s blueprint of how Congress can intervene and chart
a better course forward for PPP lending, ensuring that we all continue to do right by the small business
borrowers.


                                                Guidance
So far, PPP has been implemented by 17 Interim Final Rules (IFRs) and 48 individual Frequently Asked
Questions (FAQs), as well as additional guidance provided in several miscellaneous documents, all of
which continue to be issued one at a time as we speak. I could stop right there and that would tell you
how inappropriately guidance has been issued. Lenders and borrowers get a small glimpse one day as to
the parameters for the application and eligibility for a PPP loan and a few days later, some of those rules
change. Then the next week, we may learn a different eligibility requirement that contradicted the
requirements issued the week before. Following that, maybe we learn part of the answer to the questions
related to ownership, affiliation, or EIDL loans, but never the full story. We have received program
guidance in slivers, but even as of today, we have never seen the whole pie. As an experienced lender,
I’ve never once fully understood how to make a PPP loan from beginning to end—and still don’t. No one
does. I wonder sometimes whether even the agencies have it all figured out yet. Because, if they did, it
would only make sense that they would provide full start to finish program guidance.
Forgiveness guidance was issued on May 22, seven weeks after millions of loans had been made. As a
lender, I asked thousands of small business borrowers to sign on the dotted line on a contract outlining
PPP terms and conditions, and neither myself, nor the borrower, ever knew, or still knows, the exact
terms and conditions related to forgiveness or other critical aspects of a PPP loan. Let me stress this
point: none of us knew how to achieve forgiveness of a loan centered on the concept of forgiveness when
they were made. Are things better now that we have the forgiveness guidance? Absolutely not. Lenders
still do not know where or how to even submit a loan forgiveness application to SBA and, at last week’s
Senate Small Business Committee hearing on PPP implementation, the officials responsible for delivering
the PPP seemed to be hinting that even the requirements that have been issued may still be changed.
As a bank, this approach simply is not practical, comfortable, or even appropriate. Lenders are risk-
averse institutions that operate based on a full understanding of what our roles and responsibilities are.
We have an obligation to our borrowers to be transparent about the terms and conditions of any loan we
make and we take that obligation very seriously. Is blindly offering a program to small businesses
without knowing who is eligible, what any of the basic premises of the loan are at any given moment, or
how borrowers will obtain loan forgiveness really what we want for our borrowers? Without clear
guidance, we’re doing a disservice to the small businesses we all want to protect.

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From the very beginning, this contradictory and confusing guidance caused my bank to question whether
we should even get involved. And in case you are not hearing this from other institutions—my peers
have told me that they were having the exact same internal debates. There was significant caution,
anxiousness, and more questions than answers—there still is. My small, community bank had to weigh
the desire to help our borrowers with the very real possibility that making these loans could cause
irreparable risk and damage to our institution should some or all of these loans, without any collateral or
personal guaranty from the borrower, wind up not being forgiven and without the government guaranty
honored due to some misunderstanding of the rules that were only revealed half way through the process.
Ultimately, we answered the call to serve, but only because we felt it was our duty and not because we
felt comfortable. This lack of complete guidance continues to be the primary challenge of the program
and Congress could intervene by putting appropriate pressure on Treasury and SBA to deliver to their
lending partners and borrowers the most basic starting point of any working relationship—a complete
picture of what is expected and required that does not continue to change with the passing of every week.


                                       Credit Elsewhere Confusion
The CARES Act parameters surprised veteran SBA lenders. The loan size could go up to $10 million,
twice the size of a regular 7(a) loan, and per the formula established in the law to qualify for a loan of that
size, the business had to average $4 million in average monthly payroll. That means that applicants for
PPP loans were not just the small business borrowers that SBA lending typically reached; PPP applicants
would also include substantially larger businesses, including those that financed their operations
differently than most regular 7(a) borrowers. The traditional size standards were broadened and
affiliation rules relaxed. Most notably, there was a complete waiver of the traditional 7(a) credit
elsewhere test, meaning that even if a small business could obtain credit conventionally because of their
revenue, market valuation, or any other reason, the small business is still eligible for a PPP loan. And
finally, there was absolutely no prioritization ever outlined in law or guidance to focus on borrowers who
met certain parameters, were a certain size, had a certain revenue, or any other means of identifying one
borrower over another.
Sure, a borrower had to certify that “the uncertainty of the current economic conditions makes [the loan]
necessary…to support the ongoing operations.” But, in the midst of an unprecedented economic crisis
and with the credit elsewhere test waived, lenders and borrowers believed that very few, if any, small
businesses could not certify to the necessity of a loan to support payroll. The CARES Act and any
subsequent guidance never mentioned that the business had to first draw on other means available to them
before certifying to a “need.” And the law or guidance never once told lenders or borrowers what they
mean by “need”—in fact, no one knows what is meant by “need” to this day.
All these loosened requirements made complete sense in light of the demands of responding effectively to
this kind of national tidal wave. Our goal was to get this payroll support out to all small businesses that
qualified; typical restrictions need not apply during a global crisis. We got the message loud and clear.
But all of that has been walked back and in the most confusing way possible. The media began finding
stories about publicly traded companies, and it seemed like neither Congress, nor the agencies, liked the
negative attention. Lenders and borrowers alike began to experience the worst kind of whiplash as both
Congress and the agencies started using these spotlighted examples to issue wide-sweeping threats and to
distinctly change the tone used when talking about PPP, as well as the borrower eligibility requirements
in guidance.


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The agencies did this by first issuing FAQ #31, requiring borrowers to determine whether they had “other
sources of liquidity sufficient to support their ongoing operations,” but without defining what they meant
by “sufficient.” This was asking borrowers to determine credit elsewhere for themselves. I didn’t know
what to tell my borrowers.
Then came the news that there would be automatic reviews on all loans over $2 million. FAQ #39 stated
that there would be reviews on these larger loans with additional reviews of loans of any size if deemed
appropriate. Then FAQ #46 said that any borrower who received a loan less than $2 million would be
deemed to have made the certification of need in good faith. Shortly thereafter, IFR #15 stated that SBA
can review loans of any size at any time. Along the way, the FAQs also announced that borrowers should
repay loans by May 18 that were not in fact “needed” in order to be considered in good standing by the
federal government—or else. The zig-zagging was painful to convey to borrowers and worrisome for
lenders. Panic ensued. And as a lender on the frontlines, I watched my customers nervously and fearfully
repay loans that were very much needed – and which I believe should have been found eligible for a PPP
loan.
Out of the $477 million in PPP loans made by our bank, $31 million in PPP loans were cancelled or
repaid as a result of this bizarre sequence of contradictory guidance and threats. To my knowledge, my
bank did not make one loan to a publicly traded company or to any recognizable brand name. In fact,
83% of my bank’s total PPP loans are $150,000 or less, and 92% are $350,000 or less (which is the
threshold that we traditionally refer to as a “small” loan in SBA lending). Only 0.008% of all PPP loans
in my bank’s portfolio are $2 million and over. And this is indicative of the overall PPP portfolio, with
85.8% of PPP loans $150,000 and under and 93.9% of PPP loans $350,000 and under (as of June 12,
2020). Sadly, the majority of the $31 million in cancelled or repaid PPP loans at my bank were small
loans that fit every possible parameter of the program and that would have certainly been deemed
“necessary” for the borrower.
If Congress or the agencies think the rhetoric around criticizing PPP loan recipients applies just to the
nationally recognized companies or companies with a certain valuation—both of which are, in fact,
eligible for PPP loans per the law—stops there, that simply is not true. There is a very sad domino effect
that must be acknowledged. I’ve had to watch as borrowers have repaid very small PPP loans—one for
$1,400, several for $2,200 and one for $3,300 all repaid out of fear. The recipient of one of the repaid
loans for $2,200 was an immigrant from a country whose government was in the practice of threatening
its citizens regularly. Imagine that borrower’s fear when he saw the announcements and public rhetoric
from Congress and the agencies requiring a borrower to return its loan funds if it can’t prove a never once
defined need, or otherwise face serious consequences from the federal government. The United States of
America suddenly reminded him of a government he had left for a better life, and in panic, he ran away
from the help he needed. Imagine being the lender who feels helpless to convince him otherwise. This
wasn’t oversight and transparency—this seems to be buyers’ remorse on the part of Congress and the
agencies for a law that failed to say what they apparently meant, mixed with government threats of the
worst, ambiguous sort. I don’t like to think of the federal government saying to a small business, “We’re
here to help you weather these difficult times,” and then, mid-way through, seeming to change its mind as
to just who it intends to help, subsequently going after those whom it had invited to participate in the
beginning. Help me explain this to my borrowers because I’m at a loss.
I proudly support oversight and transparency. If there is fraud, we need to go after it. If there is abuse,
we need to deal with it. But instead of dealing with concerning applications on an individual basis, the
agencies seemed to take the tact of threatening small businesses and scaring off lenders. Congress can
help here, and it starts with the kinds of threats and warnings issued by Congress itself. I’d like to ask

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Congress to acknowledge that the very law it passed not only permitted, but invited some of the
companies now being criticized to receive PPP loans. I’d like to think we could rely on Congress to say
that if they had hoped for PPP loans to go to a certain portion of the small business population that the
law never mentioned or required, that it will resolve to do better next time to make sure to include that
kind of prioritization in law and not pretend that it is there when it is not. And, just as important, I’d like
to ask Congress to require that the agencies properly reflect the waiver of credit elsewhere, amend the
FAQs that brought back the credit elsewhere requirement in direct contradiction with the statute, and
cease blanket threats of small businesses. Doing right by the small business borrowers depends on this
change in tactic.


                                            Forgiveness Process
As I’ve noted above, no lender or borrower understood the forgiveness process when millions of loans
were being made. It was not until May 15 that lenders and borrowers had the forgiveness application
form and instructions, and May 22 when the Interim Final Rules that filled in a few more holes in the
forgiveness process were issued. However, as of today, we are still waiting for more guidance as
promised by those IFRs. Lenders still don’t know how to present their borrowers’ forgiveness
applications to SBA, and borrowers still don’t have any guidance about how they will be able to appeal
adverse decisions related to their loan eligibility or their forgiveness applications.
Even what we have regarding forgiveness guidance is not clear and places a tremendous burden on
borrowers, especially when it comes to the smaller loans. The Loan Forgiveness Application is 11 pages
long, and all but ensures that Main Street’s small business borrowers will have to hire accountants or
lawyers in order to properly complete it. While the form estimates that it will take only 3 hours to
complete, my borrowers have struggled tremendously with completing the form. What makes this even
more difficult is that as lenders, we face enormous liability concerns that make it very difficult, if not
impossible, for us to provide the kind of assistance borrowers will need to complete forms that are then
submitted for the lender’s review.
While it appears that the agencies have the ability to simplify the forms, I urge Congress to insist on it—
otherwise, the agencies may not chose a different path than the one they already have created. It is
especially egregious that borrowers that received relatively small loans should have the same onerous
requirements as borrower that received loans of multiple millions of dollars. There must be serious
consideration given to that glaring inequity. In addition, I would strongly recommend that Congress
provide statutory directives to the agencies that they provide automatic forgiveness for borrowers with
loans of $150,000 or below. If the goal is to provide the country’s small businesses with what are
essentially grants to support payroll to prevent unemployment from skyrocketing, then by all means, let’s
collectively agree to make that possible. We shouldn’t be okay with a process meant to help small
businesses in need that is not only onerous, but set up in a way that scares off borrowers and is rife with
“gotcha” moments that could lead to failure to achieve forgiveness. That isn’t the goal of the PPP that I
understand, and I don’t think it’s the goal that Congress or the agencies intend either.


                                    Lenders’ Roles and Responsibilities
The CARES Act included a hold harmless section that seemed to intend that lenders would be able to rely
upon documentation presented by the borrower that certified it to be true and correct. Initially, agency


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guidance appeared that it would follow suit. Both the lender and borrower applications frame the
required documentation and certifications from the borrower in a way that seems very clear—the
borrower must represent certain information to the lender, the borrower must provide documentation to
the lender that is presented in good faith, and the borrower must certify as to the veracity of the submitted
information.
But, as is true for most elements of the program, the implementation guidance has been anything but
clear. FAQ #1 asked lenders to perform a “good faith review,” but that remains vague, undefined, and not
a requirement. Almost three weeks later, FAQ #31 states that when it comes to a borrower’s attestation of
need, the lender “may rely on a borrower’s certification.” And then, a month later, IFR #15 requires that
lenders perform a review of the borrower’s calculations and any supporting documentation to obtain
forgiveness. And the consequences are significant—if forgiveness applications are not appropriately
documented, the agencies have now stated that forgiveness could be denied entirely, leaving borrowers
with a loan to repay in a very short amount of time and lenders with loans on their books that have no
collateral and no personal guaranties, thus making these difficult loans for lenders to stomach. What is
perhaps even worse is that lenders do not know for certain how these requirements apply to the millions
of loans already made prior to the requirements first announced in IFR #15.
The question of a lender’s role and responsibilities in a program are among the most basic components of
a program. Millions of PPP loans have been made by thousands of lenders, and only now are we
discovering what is expected of us. This is exactly what my bank was worried about when it came to
participating in the PPP from the start. Should anyone be surprised that thousands of lenders who just
learned that what will be required of them during the forgiveness process is very different from what they
had been led to believe are increasingly worried about having participated in a program that seems to
constantly pull the rug out from under the players? It also should not be a surprise that lenders are now
increasingly skeptical about participating in any extension or expansion of the PPP unless fair and
comprehensive guidance is provided first.
Congress can help by including a strengthened hold harmless provision than what currently exists in the
CARES Act in any future, upcoming legislation to ensure that lenders feel confident in participating in the
program going forward.


                          Processing Fee Delays & Threats of Fee Claw Backs
The CARES Act was very clear in the provisions concerning fees to reimburse lenders for processing PPP
loans. The law also states that these fees are required to be paid to lenders “not later than 5 days after the
disbursement” of the PPP loan. While it was uncertain how this timing could be satisfied given that SBA
only knows that a loan has been disbursed when a lender submits a monthly report to SBA which gives
the status of all of the loans in its portfolio, my bank and my lending peers waited to hear how SBA
would handle this. But no guidance came on this front as the floodgate of loans were approved and
disbursed. We were using our own capital to fund more loans in two and a half months than we had done
in 34 years, and with mandatory payment deferments, my bank began wondering how we would be
compensated by the government to ultimately support the payroll of our employees at our very own
family-run small business that is our bank.
Finally, on May 21, almost two months after the passage of the CARES Act, SBA released a notice (SBA
Procedural Notice 5000-20028) that provided guidance on how lenders would be required to report PPP
loans to SBA and how they would be paid the processing fees outlined in law. But even here there are

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shortcomings—the notice only began the process for lenders to receive reimbursement. Based on my
experience and that of my peers, payments are now being made on a piecemeal basis, but we believe that
there is a long way to go before all of the earned fees are fully paid.
What is most concerning for my community bank are the new concepts in this May 21 procedural notice
and in IFR #15 that had never been previously communicated to participating lenders and were not
included in statute. The agencies announced that they did not need to compensate lenders for work that
they had done to process and disburse loans that were cancelled prior to disbursement or voluntarily
repaid early, and that for a period of one year after loan disbursement, they would have the right to
require the return of fees paid to lenders on loans that were subsequently determined by SBA to have been
ineligible because the borrower’s self-assessment of “need” was found to have been flawed. I’m at a loss
as to how to explain to my bank why it will not be compensated after doing the work and incurring all of
the significant related costs of making PPP loans simply because the agencies may do a review and find
that they deem the loan ineligible based on guidance entirely unknown to us at the time the loan was
made or guidance that remains vague, confusing, or even impossible to understand. I have been doing
SBA lending for a quarter of a century, and I can honestly say that no lender, including me, is confident
about who is even eligible for a PPP loan given that eligibility requirements have been changing on a near
weekly basis. I can honestly say that no lender, including me, and no borrower understands what the
agencies mean when they asked loan applicants to self-assess their needs for PPP loans since that concept
continues to be undefined. And I can honestly say that no lender, including me, feels confident with any
aspect of the guidance on any component of the PPP loan process. Yet, the agencies will refuse to
compensate lenders based on reviews that will deem whether loans should have been made based on all
these elements of the program that no lender or borrower understands.
Put yourself in the shoes of the thousands of lenders that participated in PPP lending in good faith,
wanting only to help small businesses survive, and without any clear rules of engagement. And now we
have learned that, based on the agencies’ changing and future interpretation of loan eligibility, they can
refuse, at any time over the next year, to pay lenders for the work they undertook to process and disburse
PPP loans. Not many things in life can be couched in such plain and sure terms as this: this claw back of
fees is unfair and unprincipled. And now I hear that there are proposals to expand another round of PPP
loans, and the government wants the same lenders they are taking advantage of and treating in a way
unworthy of calling a working relationship to continue to participate. I have to say that my bank would
have to think long and hard about whether we would jump in.
I hesitate to make this point for fear of how it will be perceived, but the reality is this: banks are
businesses that also need support during this global crisis, and in the case of most community banks, they
are small businesses with anywhere from a few dozen to a few hundred employees. Banks like mine need
to make sure we can still make payroll for our employees. If banks, especially our small, community
banks, are not stable and able to pay their employees during this crisis in order to turn around and help
our small business borrowers, then what good are special loan programs like the PPP?
Please understand this—delivering this loan program was not a simple feat for the lenders. I often hear
congratulatory remarks paid to Treasury and SBA for standing up a new program in such a short period of
time—I rarely, if ever, hear anyone from Congress or the agencies say the same to the banks. Lenders
had to create new IT systems, new infrastructure, new processes and systems, new teams of lenders
working around the clock in a 24/7 environment to simply get set-up to start making the first loan. Yes,
SBA stood up a new program in an astoundingly short period of time and I think that is to be commended.
But in listening to the Senate Small Business Committee hearing on implementation last week, I never
heard any mention of the lenders who performed the same herculean feat. The government created a

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solution for this crisis, but they weren’t delivering it—they turned to lenders to do that. Sure, a pat on the
back would be nice. But what I am most concerned about is making sure that when we work in good faith
with the federal government based on an understanding at the time that the work is compensated fairly.
Otherwise, the federal government may find itself with less and less lending partners in any subsequent
efforts.
Congress can once again help here—the Committee could lead the way in requiring that the agencies
amend their guidance so that if lenders have made a loan in good faith that they are fairly compensated as
the law requires. Surely, this can be a basic principle of working together that we all can agree upon.


                                       Recent Legislative Changes
Less than two weeks ago, new legislative changes were enacted through the Paycheck Protection
Program Flexibility Act, which provided some much needed flexibilities for the small business borrower
by recognizing that our country’s small businesses are not a one-size-fits-all model. These flexibilities
include the relaxation of an agency-created guideline requiring 75% of PPP proceeds to go toward payroll
and 25% on non-payroll—statute now allows for a 60%-40% breakdown, which will help many more
small businesses survive and remain eligible for forgiveness. In addition, the 8 week period set out in the
law during which a borrower must use PPP proceeds and refer to as the period related to forgiveness was
extended to 24 weeks. Many small businesses desperately need this extension, especially those in certain
industries like food-service, entertainment, and tourism that are still far from operating at full capacity
and need the extra time to utilize the PPP funds. This is especially true because it was only after
enactment of the CARES Act that we became aware of the true extent that the pandemic would have on
America’s businesses.
However, questions have been swirling at my bank and among my peers about many aspects of these
recent changes. For example, are we, expected to amend over 4 million loan notes (that is, the contract
between the lender and the borrower outlining terms and conditions of the loan), to reflect a significant
change in deferment periods? In addition, I understand the new law includes a provision permitting
borrowers who received a PPP loan prior to the date of enactment of the Paycheck Protection Program
Flexibility Act to elect for themselves whether or not they will continue to utilize the 8 week period or use
the new 24 week period. However, are borrowers able to apply for forgiveness at any time after using
PPP proceeds at their discretion, or are existing borrowers given a binary choice between 8 weeks and 24
weeks with new borrowers only permitted to utilize and wait a full 24 weeks? The legislation would
suggest the latter to many of my peers, yet we heard the Secretary of the Treasury testify in front of the
Senate Small Business Committee the former was the case. Countless number of borrowers wanted the
24 week extension—but there are just as many small businesses that do not want to be required to wait
the full 24 weeks either, and my bank is at a loss as to how to proceed with our borrowers. We need
clarifications on these points and others as quickly as possible.
These questions are also an important reminder that whenever a program’s core premises are changed
half-way through the game, there is going to be messiness that ensues, no matter how well-intentioned or
needed the changes are. If this Committee is going to move forward to consider further changes, I urge
you to fully examine all of the angles of unintended consequences and the domino effect that always
results from these kinds of course corrections.
___


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In an average year, Commerce National Bank makes close to $20 million in regular 7(a) loans. Yet, in
two and a half months, my small, community bank will have done several times larger than that in PPP
loans alone. We answered what we saw as a call to duty.
We did this in order to help borrowers like my client in Austin, Texas that had just re-opened his Mexican
restaurant in late January after renovations. Following that re-opening, he experienced an immediate
surge in business, including standing-room-only availability in the restaurant through mid-March. And
then, like all restaurants across the country, he faced the devastation of COVID-19. While the business
was still able to do take-out and drive-through, this limited business barely covered food costs. The
owner, an immigrant who had come to the United States at 14 years old and worked his way up the
industry ladder, was forced to lay off his 40 employees. But, his $77,174 PPP loan enabled him to pay
his employees, and while not yet profitable, most of his employees are back to work—and his American
Dream kept intact. His story is why we made PPP loans.
I also think about the minority woman-owned day care that decided to remain open in a safe and healthy
way during shelter-in-place orders so that she could specifically help care for the children of essential
workers in the community that still had to go to work during an otherwise quarantined period. Unable to
access PPP during the first round of funding, she worked with us to be one of the first to apply in the
second round. Her $37,100 PPP loan enabled her to pay her 7 employees and remain open—but it also
enabled her to continue dedicating herself to act as a pillar of the community during local families’ most
difficult days. Her story is why we made PPP loans.
And then there is our small business borrower in Amarillo, a mom and pop bakery that has been serving
the community since 1965. When shelter-in-place orders were issued locally, revenues dropped 65%.
The husband and wife team that currently own the business received a $104,800 PPP loan to pay their 24
employees. But their story doesn’t end there. Not only were they able to keep their employees paid, but
the bakery started offering eggs, milk, and bread to the older residents of the community. Then, they
started providing sack lunches to feed the local homeless. Like so many small businesses that all SBA
lenders know and serve, this borrower didn’t just help keep Americans employed—they served their
neighbors in countless selfless acts of kindness. Without the PPP loan, I’m not sure that this business
would have been able to turn around and help their community in a time of need to the extent that they
did. This husband and wife story is why we made PPP loans.
But participating in the PPP came at a cost. Some of our clients have fled from the program out of fear.
Many are confused about how to follow the rules that keep changing. As an institution, we are just as
concerned that the guidelines today will not be the guidelines tomorrow because that is exactly what has
happened since the very start of this program—and that negatively affects the bank and our borrowers.
As a lender, I worry about whether the changing rules will make it difficult for some borrowers to obtain
the forgiveness they were relying upon. I worry about how we will explain to the borrower that things
keep changing mid-game because I know that if I were in their shoes, that explanation just wouldn’t cut it.
How this program is implemented affects the livelihoods of my clients, my neighbors, and my
community. I want to be proud of my participation in this recovery effort, and God willing, it will be the
last crisis I see in my long lending career. And while I am proud of the countless stories of hope that have
already come out of this program, my own hope is clouded with more anxiousness than optimism at the
moment. Your role in ensuring that borrowers receive the help they need and that we do not face years of
confusing, conflicting oversight is critical. Lenders and small business borrowers are relying on you.




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