Paycheck Protection Program: Loan Forgiveness and Other Challenges — Committee on Small Business (June 17, 2020)
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The printed record of a hearing titled Paycheck Protection Program: Loan Forgiveness and Other Challenges, before the Committee on Small Business of the United States House of Representatives, One Hundred Sixteenth Congress, Second Session, hearing dated June 17, 2020, Small Business Committee Document Number 116–082. The contents list opening statements by Hon. Nydia Velázquez and Hon. Steve Chabot and witnesses Ms. Melissa Kelly, Mr. Eduardo Sosa, Ms. Ashley Harrington and Dr. Rich Coleman, followed by their prepared statements. It also lists additional material for the record submitted by organizations including the American Farm Bureau Federation, the Independent Community Bankers of America and the National Association of Federally-Insured Credit Unions.
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“Paycheck Protection Program: Loan Forgiveness and Other Challenges — Committee on Small Business (June 17, 2020).”
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PAYCHECK PROTECTION PROGRAM: LOAN
FORGIVENESS AND OTHER CHALLENGES
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
HEARING HELD
JUNE 17, 2020
Small Business Committee Document Number 116–082
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
41–293 WASHINGTON : 2021
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
MELISSA JUNG, Majority Staff Director
JUSTIN PELLETIER, Majority Deputy Staff Director and Chief Counsel
KEVIN FITZPATRICK, Staff Director
(II)
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CONTENTS
OPENING STATEMENTS
Page
Hon. Nydia Velázquez ............................................................................................. 1
Hon. Steve Chabot ................................................................................................... 3
WITNESSES
Ms. Melissa Kelly, Executive Chef and Proprietor, Primo, Rockland, ME ......... 7
Mr. Eduardo Sosa, Senior Vice President, SBA Lending, Commerce National
Bank, West Lake Hills, TX .................................................................................. 8
Ms. Ashley Harrington, Director of Federal Advocacy and Senior Counsel,
Center for Responsible Lending, Washington, DC ............................................ 10
Dr. Rich Coleman, DVM, Owner, Four Paws Animal Hospital, Lebanon, OH ... 12
APPENDIX
Prepared Statements:
Ms. Melissa Kelly, Executive Chef and Proprietor, Primo, Rockland, ME .. 34
Mr. Eduardo Sosa, Senior Vice President, SBA Lending, Commerce Na-
tional Bank, West Lake Hills, TX ............................................................... 43
Ms. Ashley Harrington, Director of Federal Advocacy and Senior Counsel,
Center for Responsible Lending, Washington, DC ..................................... 53
Dr. Rich Coleman, DVM, Owner, Four Paws Animal Hospital, Lebanon.
OH .................................................................................................................. 77
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
American Farm Bureau Federation ................................................................ 79
Independent Community Bankers of America (ICBA) .................................. 81
National Association of Federally-Insured Credit Unions (NAFCU) ........... 84
National Association of Realtors (NAR) ......................................................... 86
NFIB .................................................................................................................. 89
Statement of Hon. Steve Chabot ..................................................................... 92
Team85 Fitness & Wellness, LLC ................................................................... 94
Engine Advocacy ............................................................................................... 96
(III)
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PAYCHECK PROTECTION PROGRAM: LOAN
FORGIVENESS AND OTHER CHALLENGES
WEDNESDAY, JUNE 17, 2020
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., via Webex,
Hon. Nydia M. Velázquez [chairwoman of the Committee] pre-
siding.
Present: Representatives Velázquez, Finkenauer, Golden, Kim,
Crow, Davids, Chu, Evans, Schneider, Delgado, Houlahan, Craig,
Chabot, Radewagen, Balderson, Hern, Burchett, Spano, Joyce, and
Bishop.
Chairwoman VELÁZQUEZ. Good afternoon. I call this hearing to
order.
Without objection, the Chair is authorized to declare a recess at
any time.
I want to thank everyone for joining us this afternoon for our
Committee’s second official remote hearing. I want to note some
important requirements.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during remote hearings.
Members will be expected to continue to adhere to the rules of the
Committee and the House.
All Members are reminded that they are expected to observe
standing rules of Committee decorum when they are participating
in any remote event. The technology we are utilizing today requires
us to make some small modifications to ensure that the Members
can fully participate in these proceedings.
During the covered period as designated by the Speaker, the
Committee will operate in accordance with House Resolution 965,
and the subsequent guidance from the Rules Committee in a man-
ner that respects the rights of all Members to participate.
House regulations require Members to be visible through a video
connection throughout the proceeding, so please keep your cameras
on.
Also, if you have to participate in another proceeding, please exit
this one and log back in later.
In the event a Member encounters technical issues that prevent
them from being recognized for their questioning, I will move to the
next available Member of the same party, and will recognize that
Member at the next appropriate time slot, provided they have re-
turned to the proceeding.
(1)
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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 established under House Resolution
965, staff have been advised to mute participants only in the event
there is inadvertent background noise. Should a Member wish to
be recognized, they must unmute themselves and seek recognition
at the appropriate time.
Before we get started, I wanted to offer a warm welcome to our
newest Member, Representative Kweisi Mfume from Maryland. Mr.
Mfume represented Maryland’s 7th Congressional District for five
terms, beginning in 1987 before leaving office in 1996, to take on
the critical role of heading the Baltimore-based NAACP.
Being a Member of the Small Business Committee is nothing
new, as he previously sat on the Committee and served as the
Chair of the then-Subcommittee on Minority Enterprise, Finance,
and Urban Development.
I look forward to continuing our work to elevate the needs of
small businesses across the country. Welcome, Mr. Mfume, and we
are all pleased to have you join us.
Over the last few months, the outbreak of COVID-19 has led to
an unprecedented public health crisis. Congress took swift steps to
address both, but, today, we will be focusing on the Paycheck Pro-
tection Program, created by the CARES Act.
The Paycheck Protection Program is a subprogram of the 7(a)
loan guarantee program, and began with almost $350 billion for
fully guaranteed forgivable loans designed to meet payroll costs
and other business expenses. The goal of the program is to save as
many small business jobs as possible, as quickly as possible.
To do so, SBA stood up the program within a week and has guar-
anteed over 50 times as many loans than it did in the entire 2019
fiscal year, all this in just a few short weeks. We appreciate all of
the hard work by everyone at the SBA, and are equally grateful to
the lending partners who participated in PPP for helping small
businesses stay afloat during these uncertain times.
However, given the size and scope of PPP and the speed with
which it was stood up, implementation was bound to be less than
perfect. As Members of the Small Business Committee, we are
tasked with assessing areas for improvements in all of SBA’s pro-
grams, and the first run of Paycheck Protection Program funding
exposed some of those areas.
For example, too many main street mom-and-pop shops were
forced to sit on the sidelines as the program was first rolled out
with larger, better-capitalized businesses receiving those loans. All
they were left with was the hope that Congress will add more
money to the program.
Eventually Congress did, and on April 24th, the Paycheck Protec-
tion Program and Healthcare Enhancement Act was signed into
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law, providing an additional $310 billion in Paycheck Protection
Program funding. Importantly, the additional funding included a
set-aside of $60 million for small banks and credit unions, as well
as CDFIs, MDIs, CDCs, and SBA micro loan intermediaries with
the intent of furthering a greater portion of PPP funds to under-
served business communities who struggle to access affordable cap-
ital.
This second round of funding has not drawn down as fast as the
first, in part, I suspect, because of the lack of clear guidance with
the forgiveness rule in the first several weeks of the program.
Agency rules like this rule forced us to act yet again, and, on June
5th, the Paycheck Protection Program Flexibility Act was signed
into law.
The Flexibility Act extended the covered period to use the loan
from 8 weeks to 24 weeks, and up until December 31st. It also per-
mitted borrowers to spend a greater portion of their loans on loan
payroll costs and remain eligible for forgiveness.
That makes today’s forum a timely one, as we will be able to
hear from stakeholders about what has worked with the program,
what hasn’t worked, and how Congress can keep optimizing the
program as our local economies slowly begin to reopen.
There were also a number of regulatory decisions made by SBA
and Treasury in the early weeks of the program that may have lim-
ited the appeal of the loans to some prospective borrowers. For ex-
ample, the agencies added a resource test to the program, and es-
tablished a rule that required borrowers to spend 75 percent of pro-
ceeds on payroll costs in order to be eligible for full forgiveness.
This rule greatly restricted the ability of many different kinds of
small businesses who spend their loan funds as needed and made
the PPP product much less appealing for borrowers.
As the program enters the forgiveness phase, we must analyze
the issues borrowers and lenders are currently facing. The primary
concern we have heard about is the needlessly long and complex
forgiveness application, which, according to experts, reads more
like a tax form than a loan application. If loan forgiveness is the
key feature of the program, applying for it should be as easy as
possible.
We have also heard that minority-owned small businesses, micro
businesses, and sole proprietors continue to struggle with accessing
PPP loans, despite about $130 billion remaining in the program
amount. Just last week, Secretary Mnuchin testified before our
Senate counterparts that Treasury will not be publishing detailed
loan information for PPP, robbing Congress and the public of the
data we need to evaluate the program.
I look forward to hearing from our distinguished panelists today
about how Congress can keep improving the Paycheck Protection
Program, and whether Congress should consider further fixes be-
fore the second round of PPP funding expires, or the program
closes on June 30th.
Again, I want to thank the panelists for joining us here today.
I now yield to the Ranking Member, Mr. Chabot, for his opening
statement.
Mr. CHABOT. Thank you, Madam Chair. Thank you for holding
this hearing today, and I also want to extend our welcome to Mr.
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Mfume. I was elected in 1994, and he left in 1996, so I had the
honor and pleasure of serving one term with him, and, as you indi-
cated, he is former Chair, and I believe his portrait is on our wall
in the Committee room. So we want to welcome him back to the
Committee. I am sure he will make a great contribution to small
businesses, again, all over the country.
On a different note, I must, once again, register my concern on
behalf of our side of the aisle about the continuing conducting of
Committee meetings by virtual format. The House has important
work that needs to be completed, yet we are forced to have these
hearings virtually. With States and localities opening up, it is a
concern that the House of Representatives remains a virtual entity.
And I certainly don’t hold the chair responsible for this. It is obvi-
ously above her pay grade, as I have said in the past. I do believe
the Speaker and the Democratic leadership should make sure that
Congress is in session, because we have a lot of work to do.
I am actually in Washington right now in the Capitol, the Visi-
tors Center, because we are holding a hearing relative to the
George Floyd killing and, you know, Congress’ response to that,
and there is obviously a number of legislation. The Senate has leg-
islation. The administration offered their suggestions as to how we
move forward in an executive order yesterday; so, we are all dis-
cussing this. So I am here in Washington. But unfortunately, other
than that, the other committees are not in session, and we ought
to be.
Now, relative to today’s hearing, the Paycheck Protection Pro-
gram application portal opened up on April 3rd, so it hasn’t been
that long. In just 2 months, the SBA approved and disbursed more
than 4.5 million loans, totaling over half a trillion dollars. It has
been a truly Herculean effort by the SBA, which is a relatively
small government agency, which is really, you know, working ex-
tremely hard, and really it is incredible how much they have done,
and, of course, they have more to do.
According to the May employment report released by the Bureau
of Labor Statistics, nonfarm payroll employment rose by 2.5 mil-
lion, so that is good news, and the unemployment rate declined to
13.3 percent.
Now, it is good news that it went down. It is unfortunate that
it is still that high. So, we obviously have a lot of work to do to
get that unemployment rate down and get the American economy
moving again. There is clearly a long way to go in this recovery,
but it appears that the PPP is having a major impact in saving
many American jobs.
I have seen the enormous impact to these loans in my district
back in southwestern Ohio, where I visited nearly two dozen busi-
nesses now that have utilized the PPP loan, so including res-
taurants and learning centers and manufacturers and medical
practices and many others.
For example, on May 8th, I had the honor and pleasure of vis-
iting Four Paws Animal Hospital in Lebanon, Ohio, and I asked
the owner and head veterinarian, Rich Coleman, if he would share
his experience with the PPP program with us, and he is going to
be one of our witnesses here today, and we certainly welcome him.
We will be introducing him shortly.
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We know the program hasn’t been perfect, especially early on.
Congress made adjustments, including the Paycheck Protection
Program Enhancement Act, and then the Flexibility Act, and these
adjustments included—expanded the loan forgiveness from 8 weeks
to 24 weeks at the option of the small business and what they de-
termine is in their best interests. They now have that option of
picking one or the other. That is going to help a lot of people.
Also, modifying the loan amount that must be spent on nonpay-
roll or payroll costs. We went from the 75/25 to 60/40. I have heard
from a lot of folks that is going to help a lot, and other things that
we did.
The PPP program is the result of tireless work between Congress
and the administration. We hope to achieve a delicate balance be-
tween flexibility for lenders and loan recipients, protecting the in-
tegrity of the program’s mission, and conducting needed oversight.
Transparency continues to be a hallmark of all government pro-
grams. We must ensure that transparency, without compromising
confidential information and personal information. I think that is
very important.
Additionally, as small businesses move closer to the end of their
forgiveness covered period, it will be instrumental for Members of
Congress to examine how forgiveness is treated. Today’s discussion
will add value to this element of PPP.
We are all committed to making sure this program has a max-
imum impact for small businesses all across the country, and I
want to thank all the witnesses today and the countless businesses
that have provided feedback to me and to other Members of Con-
gress, especially those on this Committee, about how the PPP pro-
gram has worked with them. Their impact will have an immediate
impact on the program and the Nation’s economic recovery.
And, again, Madam Chair, I want to thank you for holding the
hearing, and I yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Chabot.
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 speak-
ing, and that you return to mute when finished. With that, I would
like to thank our witnesses for taking time out of their busy sched-
ule to join us.
Our first witness is Melissa Kelly, Executive Chef and Proprietor
of Primo, a seasonal farm-to-table restaurant in Rockland, Maine.
After an esteemed career in teaching across the world, she opened
this restaurant in 2000 with the help of an SBA loan. Since then,
she has partnered with JW Marriott, who opened two additional lo-
cations and has been recognized for excellence by numerous indus-
try publications.
However, the outbreak of COVID-19 has put her restaurant in
jeopardy, and she took out a PPP loan with the hopes that it will
save her business.
Chef Kelly, thank you for joining us today.
Our second witness is Mr. Eduardo Sosa. He is the Senior Vice
President of SBA Lending at Commerce National Bank, an inde-
pendent community bank in the Austin, Texas area with about $5
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billion in assets. The bank is the 7(a) preferred lender, owing to the
years of experience with the program. His insight will, therefore,
be helpful for the Committee as we evaluate implementation of the
PPP.
Mr. Sosa, thank you for joining us today.
Our third witness is Ms. Ashley Harrington, the director of Fed-
eral Advocacy and Senior Counsel at the Center for Responsible
Lending, a leading research and advocacy organization dedicated to
a fair financial services market that provides meaningful opportu-
nities for community asset building and economic security.
Ms. Harrington, thank you for joining us today.
Finally, I would like to turn it over to the Ranking Member, Mr.
Chabot, to introduce our last witness.
Mr. CHABOT. Thank you, Madam Chair.
Our final witness today is Dr. Rich Coleman, owner of Four Paws
Animal Hospital in Lebanon, Ohio. Dr. Rich completed his under-
graduate studies at the University of Cincinnati before graduating
from the Ohio State University, College in Veterinary Medicine, in
2002.
He took over Plum Veterinary Clinic, changed the name to Four
Paws Animal Hospital in 2007, built a new facility in 2012, and
began a remodel in March of 2019—so just last year—to allow for
more growth and opportunities for his clientele, and obviously,
none of us anticipated at that time of what was coming down the
pike. So I am sure it would be interesting to hear how that has af-
fected it.
Dr. Rich is a dedicated community servant, and sponsor of many
local programs in Warren County. His wife, Jen, is a teacher at
Lebanon City Schools, and when I visited, I had an opportunity to
speak with her about what was going on in the school system up
there at that time.
Also, it was delightful to meet his two delightful daughters and
their two cats and two black labs, although I don’t think I met all
of those that day.
My staff and I visited Four Paws Animal Hospital last month to
see how they have benefited from the PPP as they have, as I men-
tioned, many other businesses in our community.
So I want to thank you, Doctor, for having us, and your great
animal care facility and for joining us here today. I look forward
to your testimony, as I do all the other witnesses as well, and I
yield back.
Chairwoman VELÁZQUEZ. Thank you, Mr. Chabot, and thank
you all for being here.
I would now like to begin by recognizing Ms. Kelly for 5 minutes.
Thank you.
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STATEMENTS OF MELISSA KELLY, EXECUTIVE CHEF AND PRO-
PRIETOR, PRIMO; EDUARDO SOSA, SENIOR VICE PRESIDENT,
SBA LENDING, COMMERCE NATIONAL BANK; ASHLEY HAR-
RINGTON, DIRECTOR OF FEDERAL ADVOCACY AND SENIOR
COUNSEL, CENTER FOR RESPONSIBLE LENDING; AND DR.
RICH COLEMAN, DVM, OWNER, FOUR PAWS ANIMAL HOS-
PITAL
STATEMENT OF MELISSA KELLY
Ms. KELLY. Good afternoon. I would like to thank Chairwoman
Velázquez, Ranking Member Chabot, as well as the members of the
Committee for this opportunity to represent and address the con-
cerns of the hospitality industry.
I am Chef Melissa Kelly, owner of Primo Restaurant in Rock-
land, Maine. I am here in my kitchen, alone. In normal times, this
kitchen would be filled with my staff, as we would be preparing for
dinner service. Unfortunately the corona pandemic has changed all
of that.
Today, I would like to share my thoughts and concerns in three
areas: the people I work with, the industry at large, and the effec-
tiveness of the PPP loan system. I am a chef. I believe that is my
calling. The reason I do what I do is to help people eat healthy,
delicious food that gives them nourishment and joy, and I believe
that supporting the health of this planet is also part of my respon-
sibility.
I own and operate a small farm, and a restaurant in Midcoast
Maine, and this is where I bring my beliefs to life. We operate on
a seasonal calendar, open for 9 months, closed for 3. This April was
the beginning of my 21st season. Through hard work and dedica-
tion, the business has grown steadily over the years, and now I em-
ploy a team of 50 farmers, managers, cooks, dishwashers, servers,
hosts, and office staff.
When the Governor of Maine wisely put our State on lockdown,
we were preparing to open our doors. My first worry was my peo-
ple. I had enough money in reserves to see them through a couple
of payroll periods, but I didn’t have any idea how long I would need
to take to support—before we get back to work. I did not want to
lay them off.
The team that I have assembled is the reason we are able to do
great things that we do. I have won the James Beard Award for
best chef Northeast twice, and my team is a big part of the reason
why.
My restaurant seats 165 diners inside, and we normally serve
over 32,000 meals a season. My staff of 50 have an average earning
of $26 an hour. Our revenue is earned mostly between July and
October. I am here today not only representing myself, but also as
a spokesperson for the restaurant industry in general.
I operate in Maine, a State that is especially dependent on rev-
enue from seasonal tourists. Many of my fellow restaurateurs are
not going to make this. They are not going to survive the govern-
ment-mandated restrictions on a restaurant operation due to
COVID-19.
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Regardless of State approved openings in industry, patrons may
still have hesitance or face financial stresses of their own, which
will take us time to recover. I worry for us all.
When the PPP was first offered, I thought long and hard about
applying for it. Rules on eligibility periods for calculating the FTE
count and the payroll meant that I was forced to use a base period
when I had a very reduced operation. For example, my allowed
FTE count was 24 when normally, when I am in season, I have 50
FTE.
I was also concerned with what expenses could be covered by
PPP. There have been many added operating costs directly attrib-
uted to COVID-19, PPEs, staff training. I am building an outdoor
area, and they cannot be reimbursed.
I closed on my PPP for $185,000 on the 17th of April. At the time
of the closing, I was supposed to spend all of the money in 56 days.
Given the 8-week timeframe, I was extremely concerned about
being able to stay current of allowable costs to make the loan com-
pletely forgiven. The last thing I need is more debt.
For most of the period of the loan, the restaurant has been closed
to dine-in operations by State mandate. We used the PPP loans
funds to bring back staff, and to begin to offer takeout. Revenue
from takeout has been less than 20 percent of what we would nor-
mally gross on normal operations.
On May 13th, the SBA issued a new ruling allowing seasonal
businesses to use an alternative seasonal operation base period to
calculate the maximum loan amount. For this calculation, I was el-
igible for up to $513,000, but I would have had only until June
30th to utilize the funds.
At that time, the restaurant was still closed for dine-in by our
State orders. As such, it would have been a poor decision to obtain
additional funds that almost certainly would not have been for-
given.
The recent passage of the Paycheck Protection Program Flexi-
bility Act is a positive step in the right direction to provide nec-
essary flexibility and assistance to businesses that are struggling
during this pandemic. Upon passage, I applied to increase my loan
to $400,000 to support operations as we continue to face signifi-
cantly reduced revenue.
Unfortunately, I was soon notified that, because my local bank
had filed an SBA form 1502 report on May 18th, the loan could not
be increased due to SBA rules.
Given all of this and the ongoing future challenges faced by the
hospitality business, I am recommending changes to the SBA rules
regarding closing of a loan after form 1502 submission to allow for
an increase in PPP loans for eligible businesses after——
Chairwoman VELÁZQUEZ. Ms. Kelly, your time has expired.
You could expand during the question and answers period.
I now recognize Mr. Sosa. Thank you.
STATEMENT OF EDUARDO SOSA
Mr. SOSA. Thank you for inviting me.
As a former migrant farm worker who has spent the last 25
years as an SBA lender, I am especially honored to be here. I am
a senior vice president at Commerce National Bank in Austin,
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Texas, where I helped to oversee our participation in PPP, making
approximately 3,500 loans totaling over $477 million, supporting
over 57,000 employees.
I am grateful for Congress’ quick action to address the problem
of unemployed Americans and understand why Congress and the
agencies felt pressure to produce statute and guidance as fast as
possible, and to have lenders implement the program immediately.
But lenders and borrowers are now paying the price for the
speed, and we need to look for a middle ground that balances speed
with common sense. Let me explain.
First, PPP guidance. Includes 19 interim final rules, and 48
FAQs which have frequently changed. I am an experienced lender,
but I have never fully understood how to make a PPP loan from
beginning to end. No one does. Forgiveness guidance was issued 7
weeks into the program after millions of borrowers signed contracts
without lenders or borrowers knowing all the terms and conditions.
We still don’t know how eligibility and forgiveness decisions will be
made. We need clear, complete guidance.
Next, the credit elsewhere confusion. Congress allowed loans up
to $10 million, broadened size standards, relaxed affiliation rules,
and eliminated the traditional 7(a) credit elsewhere test. We be-
lieve Congress intended most small businesses would be able to
certify to the necessity of a loan. The law never said the business
needed to first use other available capital, and need remains unde-
fined. But, as the media began highlighting negative stories, atti-
tudes shifted. FAQs and IFRs now require that borrower’s self-as-
sess need based on the eliminated credit elsewhere test.
I have watched my customers fearfully repay needed loans. Of
my bank’s $477 million in loans, $31 million were repaid because
of contradictory guidance and perceived threats.
The saddest part is the majority of the loans repaid were the
smallest, as low as $1,400. Imagine a borrower’s fear when the gov-
ernment says it must return loan funds or face serious con-
sequences. The Federal Government said, ‘‘We are here to help,’’
and then changed its mind about who the program intends to help,
threatening the very businesses that it invited to participate. Con-
gress can require the agencies to acknowledge the credit elsewhere
waiver, amend FAQs that directly contradict the statute, and cease
threatening small businesses.
Next, forgiveness issues. Lenders still don’t know how or where
to submit their borrowers’ forgiveness applications, and borrowers
still don’t know how to appeal adverse decisions. What guidance we
do have isn’t clear, and places a tremendous burden on borrowers,
especially those whose—especially those with smaller loans.
We need a simplified forgiveness process. I strongly recommend
that Congress provide statutory direction to create automatic for-
giveness for borrowers with loans of 150,000 or less.
Next, lender liability. The law said lenders can rely on borrower
documents and certifications, but the agencies confused this man-
date. One FAQ says we can rely on a borrower’s certification, but
a recent IFR says lenders must review borrowers’ calculations and
documentation. If forgiveness applications are not appropriately
documented, they can be denied.
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Lenders are increasingly worried about participating when the
rules are constantly changing. Should we be surprised that they
are skeptical about any program expansion without complete guid-
ance being provided first?
Congress required promptly paid lender processing fees, but only
now are we starting to get paid. And we are just learning that the
agencies will refuse to pay fees for loans if there is an after-the-
fact determination of ineligibility based on new interpretations.
That is unfair and unprincipled.
Despite these issues, here is why we chose to participate. We
provided a loan to a husband-and-wife-owned bakery. Not only
were they able to keep their 24 employees——
Chairwoman VELÁZQUEZ. Mr. Sosa, your time expired, so you
will be able to expand during the question and answer period.
Thank you.
Mr. SOSA. Thank you.
Chairwoman VELÁZQUEZ. Ms. Harrington, you are now recog-
nized for 5 minutes.
STATEMENT OF ASHLEY HARRINGTON
Ms. HARRINGTON. Thank you.
Good afternoon, Chairwoman Velázquez, Ranking Member
Chabot, and members of the Committee. My name is Ashley Har-
rington, and I am a Federal advocacy director and senior counsel
at the Center for Responsible Lending. We are a nonprofit, non-
partisan research and policy organization working to advance eco-
nomic opportunity. CRL is an affiliate of Self-Help, one of the Na-
tion’s largest community development financial institutions, CDFI.
A long-time Small Business Administration lender, Self-Help has
focused on helping underserved applicants access the Paycheck
Protection Program. The PPP is one of the largest taxpayer-funded,
crisis relief programs in our Nation’s history. The program’s inten-
tion is good, and was built around an important premise: Provide
a lifeboat for small business owners so that they and their employ-
ees can stay afloat during this pandemic.
But the execution and rollout of the PPP fell short, creating a
barrier for small business owners of color to access relief, and that
is what I hope to underscore for you today.
Since the start of the crisis, business owners of color had been
especially and unfairly hard hit. Active black- and Latino-owned
businesses have declined by 41 percent and 32 percent respectively.
Asian American-owned business owners dropped by 26 percent. By
comparison, active white business owners declined by 17 percent.
These business owners of color are from the same communities that
were the most adversely affected by the Great Recession, and un-
fortunately, they are the ones most likely to have been underserved
by the PPP.
This program disadvantages the smallest businesses. Businesses
owned by people of color on average have fewer employees than
white-owned businesses. CRL’s analysis of the latest government
study shows that for 95 percent of black-owned businesses, and 91
percent of Latino-owned businesses, the owner is the only current
employee as compared with 78 percent of white-owned businesses.
These businesses are the least likely to be served by the PPP.
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Business owners of color are less likely than white owners to
have a relationship with a commercial lender. This puts them at
a sharp disadvantage, especially during the first-come, first-served
opening round of PPP, which caused serious fair lending concerns.
Businesses of color have historically lacked access to SBA loans
and credit generally. A recent study found steep reductions in SBA
7(a) lending to black businesses between 2008 and 2016. In 2018
and 2019, only 5 percent of all SBA 7(a) loans were made to black-
owned businesses, and only 9 percent were made to Latino-owned
businesses.
Business owners of color are more likely than white business
owners to feel discouraged from seeking loans. Minority depository
institutions, MDIs, and CDFIs are helping to increase PPP access
who have been hindered by unnecessary loan volume thresholds
and other difficult requirements.
And, finally, the SBA’s 11-page application for loan forgiveness,
which largely tracks the documentation requirements under
CARES, is so complex and cumbersome that businesses too small
to afford an accountant or lawyer will find it extremely difficult to
complete, turning what was supposed to be a grant into long-term
debt.
This burden, too, will disproportionately fall on business owners
of color. And, while the easy form released today is an improve-
ment, it still requires extensive documentation.
Last month, the SBA inspector general reported that, despite a
requirement in the CARES Act, SBA and the Treasury Department
failed to issue guidance to lenders to ensure that they prioritized
underserved markets, including rural, minority, and women-owned
businesses. As of today, we are yet to see any guidance.
The IG also noted that the SBA did not collect standard demo-
graphic data on its PPP form. This failure made it unlikely that
the SBA could determine whether funds reached underserved mar-
kets. Despite the SBA’s failure to collect and release data, there is
ample evidence that PPP has not equitably served businesses of
color.
My written testimony provides more detail along with rec-
ommendations to address the problem and fully support business
owners of color fully going forward.
As we know, recent people-led protests across our country decried
the pain of communities long denied equal access to the most basic
aspects of America’s promise of justice and equal opportunity.
These communities continue to suffer the consequences of Federal
policy decisions that needlessly and unjustly make economic oppor-
tunities harder to access.
Right now, under your watch, the public is looking at you to ad-
dress these inequalities, and they deserve a response. I urge you
to seize this moment. CRL and other organizations are ready to
help you. It is already too late for many small businesses, and
those that remain can’t wait any longer. The PPP is set to expire
in 2 weeks. If it is not extended and reformed to serve these busi-
nesses, many will never recover.
Thank you. I look forward to your questions.
Chairwoman VELÁZQUEZ. Thank you, Ms. Harrington. I now
recognize Mr. Coleman for 5 minutes. Welcome.
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STATEMENT OF DR. RICH COLEMAN
Dr. COLEMAN. Thank you very much.
Honorable Congresswomen and Congressmen, I am honored to be
here, and thank you for allowing me to come before you today as
a representative of small businesses across the country.
My wife Jen and I purchased a veterinary practice from another
veterinarian and quickly made it our own in 2007. At the time of
the purchase, the practice was a single doctor practice. We now
have expanded to become a five doctor practice with 34 employees.
In 2012, we moved from a strip-mall store to our own state-of-
the-art, 5,400-square-foot standalone building in the heart of the
Lebanon business corridor. For the past few years, we have seen
an amazing level of growth from client standpoint, as well as rev-
enue standpoint. Over the past few years of prosperity, we have
been able to give raises, purchase equipment, and add additional
staff members.
In March, all that changed. COVID-19 hit the United States, and
people were asked to stay home. Ohio was one of the earliest to
shut down. Fortunately for us, we were deemed an essential busi-
ness, and we were still able to operate as a veterinary hospital, but
with severe restrictions in place.
Because of these restrictions, we went from monthly continuous
growth numbers to being down 30 percent or more. We were fearful
that, at any time, we would have to shut down the hospital if one
of the staff members fell ill from coronavirus.
We first heard about the PPP loans on the national news. I im-
mediately reached out to our local bank to start the wheels in mo-
tion. I stayed in contact with them and asked for any information
they were getting as far as the loan application and what it would
look like. I filled out sample applications, had my numbers con-
firmed by my accountant, and tried to get any documentation that
was needed for when the loans would be approved by Congress, the
SBA, and the President.
Once the bank let me know that the applications were ready, I
filled them out, submitted them the next day, and the bank kept
me in the loop where we stood with the application process, and
the approval process occurred, and, quickly, we signed documents,
and within a week, our PPP was funded.
I cannot say enough about the way that Congress and the SBA
got such a huge undertaking done so quickly. The funds were ex-
actly what our business needed to make up the shortfall in rev-
enue, allow us to keep all of our employees. We did not lay off any
of the staff, and everyone was able to keep their hours, especially
if they were able to come to work.
A few staff members had to stay home for 2-week quarantines
due to unknown nature of things in their early stages. We asked
anyone with a fever or cough to stay at home for those 14 days,
but no one in the hospital tested positive for COVID-19, and every-
one was able to return to work.
The only concern that we had with the loan process was the loan
documents that we signed did not have language in them that dis-
cussed the loan forgiveness. We were signing a loan with good faith
that the government would honor their word and forgive the PPP
loan.
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I looked to the loan as a lifeboat that my business needed and
to provide for my staff and my family. If the loan was forgiven, it
would be a Godsend. If the loan was not, then I, at least, had a
government loan with a reasonable term to help me get through
this unusual time.
The loan was funded during the first phase, and we received
$206,000. Now, I saw an interesting statistic that, during that first
phase, the average loan was $206,000, so I joked with my wife that
we owned the most average business in the United States.
Our 8-week loan period actually ends on June 17th, today. We
have elected to extend to the 24 weeks as allowed by the new provi-
sions passed 2 weeks ago. We opened an account that was only to
be used for the PPP loan funds. That way, there was complete
transparency with every dollar that was used.
Our business has rebounded, and we are digging out. We are still
not practicing veterinary medicine the way I have the last 18
years, but we are currently doing car calls with clients staying in
the hospital and only the pets coming in. It is a new business
model, and my staff has been amazing in completely reinventing
ourselves. I cannot thank them enough for getting our veterinary
hospital and all of our patients and clients through these tough
times.
In conclusion, again, I cannot thank Congress enough for pro-
viding the funds that all small businesses in the U.S. needed to
survive this time of uncertainty. I feel that the loan process could
not have gone any smoother than it did. Congress is known for
doing things at glacial speed, and I was amazed at how quickly this
came together. It was amazing that—what an accomplishment can
happen when we all work together.
I would like to thank our local community bank, Lebanon Citi-
zens National Bank, for making the process as easy as possible
under the circumstances; my accountant, Pelfrey & Associates, for
helping navigate through the application process.
Thank you again for having me today and allowing me to tell my
story. Because of the bipartisan efforts of Congress, the 34 staff
members at Four Paws Animal Hospital were able to go home
every night knowing that they could pay their rent, feed their fam-
ily, and, more importantly, feed the massive amounts of pets that
they own.
Thank you.
Chairwoman VELÁZQUEZ. Thank you, Mr. Coleman.
I will begin by recognizing myself for 5 minutes.
Ms. Harrington, just last week, Secretary Mnuchin announced
that no PPP loan data will be published. As we both know, this is
in contradiction with conventional 7(a) practices, under which indi-
vidual loan data is publicly accessible on the SBA website.
Can you expound on the issue of the lack of PPP loan data re-
porting and how it will impede the ability of Congress and the pub-
lic to track the demographic breakdown of PPP access?
Ms. HARRINGTON. Absolutely. Thank you, Congresswoman.
It is definitely a big issue and departs from everything SBA has
done previously, and all of the reporting it does for the 7(a) pro-
gram. The demographic information is so important to know where
these funds are going and which communities are being served.
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We have already heard about all of the communities—the
black—the businesses owned by people of color who are struggling
and who have had—not had access to these programs, who have
gone to institutions and been denied, or never heard anything
about their application, and they are struggling. So, without this
information from the SBA itself, we cannot hold this—hold the
SBA accountable for the $660 billion taxpayer investment.
Chairwoman VELÁZQUEZ. Thank you.
Mr. Sosa, does the lending community have similar concerns
with data reporting?
Mr. SOSA. The regular 7(a) program, you are correct. As far as
I know, all of the information there is public information.
There might be some consideration as to some proprietary infor-
mation on the PPP loan, but I don’t want to get into any kind of
political thing here, because I am not a politician. I support pub-
licly available information or oversight. If somebody is not playing
by the rules, they need to answer for that lack of rules.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Kelly, how many of your employees have you been able to
retain, and do you think you will be able to keep rehiring as your
local economy slowly begins to reopen?
Ms. KELLY. I have been able to retain 16 employees at this mo-
ment. We have not opened the restaurant for indoor dining as of
yet. Like I stated earlier, I am building an outdoor area because
the State of Maine allows 50 guests inside and 50 outside. I intend
to open inside slowly soon with caution, and, as soon as we get the
outside area open, I will bring back my other employees, abso-
lutely.
Chairwoman VELÁZQUEZ. Ms. Harrington, surveys have shown
that the COVID-19 pandemic has disproportionately affected micro
businesses and sole proprietors. In your view, what more needs to
be done to ensure that PPP and other small business programs are
assisting the smallest of small businesses?
Ms. HARRINGTON. We need to ensure that the remaining funds
in the PPP program are getting to these really small businesses,
the businesses who have not yet been served. There is over $100
billion left that is set to expire. The program needs to be extended,
but also reformed, providing for things like a minimum origination
fee, set-asides for CDFIs and MDIs. All of these things will help
ensure that funding gets to the really small businesses and the
businesses owned by people of color who have yet to be served by
this program.
Chairwoman VELÁZQUEZ. So, at minimum, we should expect
for the administration to provide data as to the demographics,
similar to what any 7(a) lender or borrower has to provide when
they apply for those loans. That is the only way that we could de-
termine whether or not the smallest of the small businesses have
been able to access the system that they need.
Should we consider automatic loan forgiveness for the minimum
loan amounts, Ms. Harrington?
Ms. HARRINGTON. Absolutely. The forgiveness application as
laid out, and the process as laid out, even this EZ form, is incred-
ibly burdensome for the really small businesses. We advocate for
a streamlined automatic forgiveness for loans under 100K, and this
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will disproportionately serve the really small businesses. On aver-
age, these are businesses that will likely have 13 or fewer employ-
ees, the businesses that we really want to be able to survive and
make it through this crisis.
Chairwoman VELÁZQUEZ. Thank you, Ms. Harrington.
My time has now expired. The Ranking Member, Mr. Chabot, is
recognized for 5 minutes.
Mr. CHABOT. Thank you very much, Madam Chair.
Dr. Coleman, I will begin with you. What time and expense do
you estimate that it might take to complete the PPP forgiveness
application process?
Dr. COLEMAN. Well, did you say the time and expense? Well,
you know, the key with small businesses, we are not Fortune 500
companies. We are—we don’t have accountants on staff. So, you
know, a caterer is going to make 400 sandwiches and then go do
business. A mechanic may go change out a muffler, and then go do
their business work. With me, I am going to go spay the family pet,
and then come back, and now I have to do all this business work,
and sometimes it is at the detriment of my family time.
The key here is, we have to outsource all these things, so stream-
lining it for these small businesses would be great, and it sounded
like the SBA started that today with the EZ form, I have this 11-
page document right here from what it was before. And, you know,
I showed it to my wife last night, and it was, it was like a tax form.
I—I am not going to lie to you. I missed a few of the words in
there. I didn’t know what they meant.
And so, I was concerned that this was going to be a massive un-
dertaking and be something that would require me just going to
the accountant and having the accountant do the entire work for
me.
Mr. CHABOT. Let’s see. I will go to Mr. Sosa next. Considering
the kind of piecemeal issuing of guidance and FAQs, frequently
asked questions, and the IFRs, interim financial rules, would some
form of comprehensive program guide have been more, or would it
be more helpful to lenders and recipients in your opinion?
Mr. Sosa, I think you are not muted. I think you are muted.
Chairwoman VELÁZQUEZ. You need to unmute.
Mr. SOSA. Thank you. I think that would be incredibly helpful.
Under—we are a PPP lender under Amarillo National Bank, our
ownership group, and, under that program, we have standard oper-
ating procedures that give us the guidelines for that.
You will—in my opinion, you would find that you would have
lenders participating in greater numbers, and borrowers particu-
larly less concerned and less scared by having definite guidelines
of what rules they can follow, not only for the application, but as
well, particularly for the forgiveness process.
That is an onerous process. Forgiveness, even under the sim-
plified applications that were issued this morning, the—they are
still quite onerous, as far as documentation is concerned. I think
a standard automatic forgiveness at 150,000 would be called for.
Mr. CHABOT. Thank you very much.
Ms. Kelly, I will go to you next. Are there issues that you think
the Congress should address as we consider policies for the long-
term economic recovery that we are going to be working towards?
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Ms. KELLY. I want to stress the need to revise and amend the
PPP, like maybe call it a PPP 2.0 to provide additional funding to
support restaurants and hospitality businesses in the weeks and
months ahead, as we are still dealing with the impact of the virus.
I tried to give you a brief description today about my experience
as a small business owner in Maine. I am very grateful to this
Committee for all of the bipartisan work that you have done and
continue to do, but I want you all to think about restaurants in a
different way. After 30 years being in the business, our industry is
in a crisis. Without additional support, we will lose the important
sector and the dynamic contributions that we have in our local
communities.
Our fray goes far and wide, all of the local businesses that we
support, and we are in a crisis.
Mr. CHABOT. I think I have about one more question. I have got
a lot of them, but one more.
Ms. Harrington, I will go to you now. As Congress examines the
approximately 130 billion that we still have remaining in the PPP
program, where should we concentrate our efforts, in your opinion,
to produce the most impact for small businesses?
Ms. HARRINGTON. They should concentrate on ensuring that
these funds get to the really small businesses with ten or fewer em-
ployees, that they are getting to businesses located in LMI Census
tracts, that they are working with lenders who traditional serve
underserved businesses, like CDFIs and MDIs, and also the first
step, right, is extending the program to ensure that that $130 bil-
lion can actually get to the communities who have yet to be served.
It is great to hear that it has worked for some businesses, but
I think the numbers about the nonactive business owners cur-
rently, 41 percent of black-owned businesses and 32 percent of
Latino-owned businesses, speak for themselves that changes need
to be made to this program for it to work for everyone.
Mr. CHABOT. Thank you very much.
My time has expired, Madam Chair, so I yield back.
Chairwoman VELÁZQUEZ. Thank you. I now recognize the gen-
tleman from Maine, Mr. Golden, for 5 minutes.
Mr. GOLDEN. Thank you, Madam Chair. I am just setting my
clock and filling up my—that I need for questions. There we go.
I want to start with Mr. Sosa. I appreciate your sharing your ex-
perience from the lender perspective, some of the challenges of the
PPP, and I have heard similar concerns from lenders and bor-
rowers about the lack of clarity surrounding, loan procedures and
how that complicated their decision making on whether or not to
use the PPP. Hopefully those people are feeling like they have the
information they need to come forward and [Inaudible] that $130
billion that remains.
[Inaudible] it is my view—and I think a lot of people do, that
lenders and borrowers in Maine, in dealing with the forgiveness
process, the streamlined, you know, kind of set up over the smaller
business owners in particular, and you talked a little bit about the
3508 EZ.
I wanted to ask you if you knew any statistics—and I am sorry
to put you on the spot, but, if the SBA were to follow your advice
and grant automatic forgiveness for loans worth $150,000 or less,
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roughly what proportion of your PPP clients do you think would
benefit from that change?
Mr. SOSA. Thank you for the question.
Chairwoman VELÁZQUEZ. You need to unmute. Okay.
Mr. SOSA. At Commerce National Bank, currently 83 percent of
our loans were below 150,000, so 83 percent of those borrowers—
that is, 2,868 borrowers—would automatically be forgiven. On the
national basis, which is really an impact, 86 percent of the busi-
ness loans would be forgiven. That is somewhat significant, espe-
cially when you consider that only represents—that represents 86
percent of number of loans. That only represents approximately 27
percent of the dollars.
So there is still robust oversight availability on that—on the re-
maining dollars just at the bulk of the small businesses, those guys
that, with the boot on the ground, with that 10 employees or less,
would be forgiven.
Mr. GOLDEN. Yes. And I appreciate you pointing out the 10 em-
ployees or less.
How might you estimate the number of hours per client that
might be saved in regards to how they spend their time and their
focus?
Mr. SOSA. That is a tough math question. Well, it—jeez. If you
just go back and you use the 3 hours that SBA estimates, which
I sincerely and humbly submit is very, very low, the—and then
multiply that out times how many loans, jeez. I know that there
is 3 million loans just below $50,000. Just in that category is 3 mil-
lion loans, so, if you multiply those 3 hours against that——
Mr. GOLDEN. That is a lot of work around the country.
Mr. SOSA. It is a lot of work saved, yes, sir.
Mr. GOLDEN. Well, thank you so much. I have got about a
minute and a half left.
Ms. Kelly, so glad to have you joining us. People love your busi-
ness in Maine. I have talked to a lot of businesses that share some
of the, you know, same challenges that you have shared. As you
think again about like the next 6 to 12 months, some of the unique
challenges that you see lying ahead, talk more about what you
need from Congress and the government to help you take the next
step towards recovery and [inaudible]——
Ms. KELLY. Okay. Yeah. For me, a lot of the next 6 months
ahead are very unknown. We—actually, we are approaching July,
which I would have my whole team being trained and ready for the
busiest peak of my season, July through October. I have lost all of
my business that is in my farm. Weddings and everything has been
canceled.
We need support. We need to figure out a way—the whole unem-
ployment average of $600 has been like a little bit of a catch-22 for
us, because we cannot—a lot of employees don’t necessarily want
to come home—back to work when they are making over $1,000 a
week just staying home and golfing and things like that.
However, I think, if there was—I know the work share program,
and those are really important and ways that we can have our em-
ployees come back, spark the economy, and we share in that cost
to keep them at the level that they are used to, the money that
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they are used to making, and I don’t understand how we are going
to get past this if we don’t work together in that.
Chairwoman VELÁZQUEZ. Thank you. The gentleman’s time
has expired.
I now recognize the gentlelady from American Samoa, Ms.
Radewagen.
Ms. Radewagen, you need to unmute.
Mrs. RADEWAGEN. Can you hear me now?
Chairwoman VELÁZQUEZ. Yes, we can.
Mrs. RADEWAGEN. Can you hear me now?
Chairwoman VELÁZQUEZ. Yes, we can.
Mrs. RADEWAGEN. Talofa lava. Good morning, or good after-
noon, depending on where you may be. I feel sorry for all of you.
You are all stuck on the continent, and I am getting to enjoy the
sun in paradise.
But I want to thank Chairman Velázquez and Ranking Member
Chabot for organizing this hearing, and thank you all for testifying
today.
The PPP has been extremely helpful to the people of American
Samoa, but, like many great things, we can always work to make
it even better.
My question here is for Ms. Harrington: Do you believe small
businesses were aware of the resources available to them within
the SBA prior to COVID-19?
Ms. HARRINGTON. I think part of COVID-19, the SBA lending
has not served businesses of color well. If you look at the data for
2018 and 2019 for the 7(a) program, which is the largest SBA lend-
ing program, only 5 percent went to business owners who were
black, only 9 percent went to Latino business owners. I think there
is a lot more we can do to support business owners of color, even
beyond the PPP. I think historically communities, individuals and
business owners of color have lacked access to credit through tradi-
tional means, even through the SBA, which is a government guar-
anteed program. And I think recognizing that and looking at the
types of businesses who have not been served even before COVID
is very important. That is why the data and the transparency is
also important.
So I think that there are a number of ways to do this. It is not
just about resources, it is about addressing the root causes of lack
of access to credit in this country that extends to small business
owners.
Mrs. RADEWAGEN. Mr. Sosa, can you provide for the committee
a brief overview of how credit elsewhere has changed from the be-
ginning of PPP to today? Mr. Sosa?
Mr. SOSA. Yes, I am here. Just had to remember to unmute.
The statute eliminated credit elsewhere for the PPP program.
The agencies, it reinstituted the PPP credit elsewhere task by re-
quiring small businesses to self-certify that they needed the money.
And then they failed to provide a definition of what ‘‘need’’ is. It
is completely undefined. Then they started criticizing those small
businesses for applying and scared several of my borrowers away.
I had a borrower that paid off $2,200, a little $2,200 loan, just
because he heard the threats from the government. ‘‘Or else,’’ they
said. He came from a country where the government regularly car-
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ried out threats and acted on those threats. As an immigrant, he
ran scared from the program. That is unfair. That is not our coun-
try. That upset me quite a bit and I think it is wrong.
We all need to remember that words mean something and not to
threaten these poor small business people.
Mrs. RADEWAGEN. Thank you, Madam Chairwoman. I yield
back.
Chairwoman VELÁZQUEZ. The gentlelady yields back. Now we
recognize the gentleman from New Jersey, Mr. Kim, for 5 minutes.
Mr. KIM. Thank you, Madam Chair, for pulling together this
very important hearing, which is one of the most issues that I hear
constantly about in my district here in New Jersey. What we are
talking about reforms in the Paycheck Protection Program and how
we are making sure that funds are getting into the hands of those
that need it the most. As I said, that is really the critical question.
And Ms. Harrington, I thought you have really eloquently spoken
to just the challenges that are faced, certainly by making sure that
we are getting these funds to businesses owned by minority-owned
businesses in communities of color, and other places where people
are in dire need.
I have also been hearing from small businesses from various
other industries, like nonprofits, after-school programs, and med-
ical providers that were excluded from the program and are in dire
need of aid. And a lot of their work very integral to different as-
pects to reopening.
So, I guess, Ms. Harrington, I wanted to ask you, as we are start-
ing to think about upcoming stimulus bills and other additional ef-
forts that we can do on the PPP, do you think it would be beneficial
to expand the PPP to other types of businesses, like some of the
ones that I mentioned?
Ms. HARRINGTON. I think, first, I want to reiterate it is very
important to reform and extend the current PPP just until that
funds run out. I think moving forward, we do need to think about
programs that are not just loan programs. We need to think about
traditional, straight-up grant programs that would benefit and be
targeted to the small businesses and to the businesses that are lo-
cated in low- and middle-income communities, low- and moderate-
income communities. There are ways to do that. Also, thinking
about which agencies we are working with. If it is a loan program,
which lenders we are working with.
So, I think there are a number of ways to do it that, but I think
you are absolutely right. We need to look at the sectors that
haven’t been served, the populations that haven’t been served, and
recognize that maybe the Paycheck Protection Program was helpful
for some, but it doesn’t work for all businesses, and, therefore, we
have to think about more creative ways moving forward.
Mr. KIM. [Inaudible] having supportive data, and just needing to
have that data, to, first of all, understand what sectors are getting
hardest hit, and to be able to overlay on top of that, just when we
think some of these different sectors will be able to get back on
their feet, as we know there is asymmetry to that, and some sec-
tors may be able to get back on their feet earlier than others.
And I think, Ms. Kelly, I just wanted to just turn to you here——
Chairwoman VELÁZQUEZ. I think we lost——
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Ms. KELLY. I am here. Can you hear me?
Mr. KIM. [Inaudible] getting back open, in particular when it
comes to seasonal issues here. My district is—my district is one
where seasonal tourism is a huge part of the economy, especially
out on the Jersey Shore; a lot of restaurants are in a similar situa-
tion to you. If you could elaborate a little bit more on the unique
challenges that you are facing in terms of seasonality of your busi-
ness, and the uncertainty of how the next couple of weeks and
months will look when it comes to opening back up?
Ms. KELLY. Well, we are already in almost the kickoff of the
season here in Maine. So it has been very daunting to have to be
in this position at this point. I mean, we are living in a historic mo-
ment right now, where we need to expand—in my opinion, we need
to expand the PPP, which may be the survival for small businesses
who really depend on a certain window of time for the amount of
revenue that they make. I think grants would be beneficial for dif-
ferent loans, but somehow, we have to capture this moment or the
whole year for us is a wash.
Mr. KIM. Well, thank you for that. I have certainly been hearing
from a lot of restaurants. I got to go visit a number of them in my
district as they are starting with outdoor seating today—earlier
this week. But we continue to hear the same thing that you are
saying, which is restaurants cannot operate off of 30 percent capac-
ity or 40 percent capacity, that the margins are already hard
enough at peak levels.
So I certainly want to continue to work with you and others to
see what we can do to try to get you the help that you need.
So with that, Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
I now recognize the gentleman from Ohio, Mr. Balderson.
Mr. BALDERSON. Madam Chair, thank you very much. Thank
you for sitting in today, Ms. Kelly and Dr. Coleman. My first ques-
tion is a few weeks ago, I joined many of my colleagues, including
Mr. Burchett and Mr. Hern who also sit alongside me in this com-
mittee and requested a simplified PPP forgiveness application. In
this letter to the SBA and Treasury, as well as the Senate leader-
ship, we voiced our concerns of the complexity of the 11-page PPP
loan, forgiveness application, and asked a new, simplified version
be created, much like the IRS relies on the 1040-EZ form for some
taxpayers.
Just this morning Treasury and SBA released 3508-EZ loan for-
giveness application, which seeks to ease the forgiveness process
for many small businesses. I think this is a step in the right direc-
tion. I want to thank the administration for making this update.
Ms. Kelly and Dr. Coleman, have either of you had a chance to
take a look at this new 3508-EZ form application?
Dr. COLEMAN. I apologize, I have not. I was working this morn-
ing, and came straight from appointments to this. I did get a notice
by email from one of my colleagues that it had passed this morning
by the SBA. And so, I have not had a chance to look at it. I am
sure it is less daunting than the 11-page document that we have
seen already. But unfortunately, I have not seen it yet.
Mr. BALDERSON. Dr. Coleman, I completely understand. I was
on a flight this morning myself.
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Ms. Kelly?
Ms. KELLY. Absolutely. Same as Dr. Rich, I was working this
morning. And I did not have an opportunity to see it.
Mr. BALDERSON. Again, I understand completely. I was won-
dering if you had a chance to see it.
This is for Dr. Coleman. My next question is for Dr. Coleman,
thank you. Is it vital to be working during this health crisis, care
crisis, but today we are here to understand the economic impact
this had on our Nation’s small businesses ?
In your written testimony, you talk about the great faith agree-
ment between small businesses applying for PPP, and the Federal
Government, because the documents you signed didn’t have for-
giveness language included. Over the last few weeks, SBA and
Treasury have worked together to release the language relevant to
PPP forgiveness, as well as the application itself. Have you had an
opportunity to look through this new information?
Dr. COLEMAN. Yes. Yes, I have.
Mr. BALDERSON. And if so, what are your thoughts?
Dr. COLEMAN. As far as the forgiveness, a couple of the big
keys that I saw, and I actually made a list of them, the biggest
change between the first one and second one, the first one [Inaudi-
ble] PPP weeks with the payroll was huge [Inaudible]. Our biggest
issues that we had was, we were concerned about once we got fund-
ed, are we 8 weeks from that date? Well, if it occurred in the mid-
dle of a payroll cycle and so we were a little off on schedule, so that
was a big one. The flexibility from the 8 weeks to the 24 weeks,
we are going to extend to the 24 weeks, just because we are actu-
ally holding back 5 percent of our loan just as a precautionary. We
don’t know where COVID is going to go from here. So we are going
to hold that back.
The 25 to 40 percent. We have been open the whole time, so our
biggest deduction was from payroll. And, so, where Ms. Kelly may
have had more of an issue with paying rent, paying everything
else, because she didn’t have as many employees on staff. I had 34
employees the entire time. So the 75, 25 was perfect for us; but for
another business that may have been closed, that is going to be
hugely beneficial to them because they are going to be able to grab
that 40 percent and pay more to keep the actual standing business.
The extension to December 31st to rehire the FTEs is going to
be important, because now you are going to be able keep the full-
time equivalents. The hardest part right now is we have this extra
$600 that people are making on unemployment and getting people
back is the hardest part. People are coming back to work angry be-
cause they are making less money, but they have to come back to
their job or they could lose their job.
So that expiring is going to help, but it gives us until Decem-
ber—until January to get that. And then, you know, the other one
was the good faith of rehiring. That was going to be a massive
thing. If I am trying to rehire, but I can’t rehire, that is going to—
if I can show, look, I have done all these interviews, I just can’t
get anybody in, that is going to be with a Godsend for some of
these businesses that can’t rehire, but they have been trying very
hard to.
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So those were just some examples I thought were fantastic.
Yeah.
Chairwoman VELÁZQUEZ. Your time has expired.
Mr. BALDERSON. Thank you very much. I yield back, Madam
Chair.
Chairwoman VELÁZQUEZ. The gentleman yields back. Now we
recognize the gentlelady from California, Ms. Chu.
Ms. CHU. Thank you. Mr. Sosa, since the start of the COVID cri-
sis, it has been a top priority of mine to ensure that SBA loans and
resources are provided in non English languages. And I am thank-
ful for all the work the committee has done to make that happen.
The CARES Act provided $25 million for the SBA to develop these
resources, and the agency has now posted several guides and trans-
lations in 17 languages, including Asian languages.
But it is key that the SBA also provides proactive outreach to
small business owners with limited English proficiency, and sup-
ports the lenders that are responsible for processing their PPP ap-
plications.
So, I am interested in your perspective as a lender. Could you
explain what processes you have to serve business owners who
need service in non English languages? And can you discuss what
guidance, if any, that SBA has provided to help you serve these
businesses?
Mr. SOSA. Unfortunately, we have not received much guidance
on the multiple languages available and documentation. In our
footprint, the largest language is Spanish. We are very fortunate
within our organization that we have several people that are Span-
ish speakers, and we are able to deploy their talents to be able to
address the needs of the particular borrowers that needed that as-
sistance.
Ms. CHU. Now, you said in your testimony that the PPP forgive-
ness application is so complex that small businesses would need to
hire professionals to help them understand it. Do you believe the
SBA’s done enough to help limited English proficient business own-
ers navigate these forgiveness applications?
Mr. SOSA. Well, you are exactly correct, my view on the former
11-page application is that it is extremely daunting. Now, the for-
giveness application that came out this morning is a step in the
right direction. I have had only an opportunity to review it cursory,
so I can’t speak to it in detail. But there are—like anything else,
the devil is in the detail, and there are a couple of items in there
that are still requiring all the documentation as before.
So my recommendation to this committee and to the Congress is
an auto forgiveness legislation is passed to direct the agencies to
set up a $150,000 automatic forgiveness of loans.
Ms. CHU. Yeah. Thank you.
Ms. Harrington, SBA was directed by Congress to prioritize un-
derserved businesses, including those owned by minorities, women,
and veterans in their administration of the PPP. However, when I
chaired a forum last month with the SBA inspector general, he told
me that SBA had not provided any formal guidance to lenders, but
had merely emailed a few community banks and encouraged them
to serve these businesses. Can you explain what specific type of
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guidance SBA must ensure—provide lenders to ensure that they
can adequately prioritize underserved businesses?
Ms. HARRINGTON. You are absolutely right and, we have yet
to see any of that guidance. They should provide guidance about
who they should be working with, and just guidance about how im-
portant this is. I think the fact that this was included in the
CARES Act and was a stated express intent of Congress that these
businesses and communities be served is important, and the fact
that SBA did not reach out to lenders with specific information
about how to reach these communities, different partners that they
could work with. Also, the technical assistance that was provided
in the Act was provided to universities, and not necessarily
through community-based organizations. The guidance could have
also included information about working with other community
partners beyond the community-based organizations, like CDFIs
and MDIs, who do a good job of serving these communities.
There is so much that SBA could have done to ensure that these
communities were prioritized that they did not do. And some of it
is, like, very simple things, and they just didn’t take the steps to
do so, in addition to not actually collecting the data to know what
was happening with the lending itself.
Ms. CHU. Thank you. I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back. And now
we now recognize the gentleman from Oklahoma, Mr. Hern, for 5
minutes.
Mr. HERN. Thank you, Madam Chairwoman. Thank you, Rank-
ing Member Chabot. I appreciate you having this hearing today. It
is great to see we have a hearing, and before we can have the hear-
ing, the simplified form comes out. How about that for congres-
sional work? You all ought to be happy about that. Don’t we wish
everything else could happen in that kind of speed.
I really sympathize with each of you being a small business
owner for 35 years, and the majority of them in the restaurant in-
dustry. And it has been very, very difficult for everyone, but specifi-
cally those in the restaurant and hotel industry.
But I am also very thankful that we are able to find a way to
get money to businesses very quickly by using our financial institu-
tions out there, and thankful for what has all been done with the
PPP loans and the auto loans to help as many businesses stay in
business as possible. We know that there will be many that will file
for bankruptcy, and it is tragic that COVID-19 pandemic has
caused this to happen. The PPP loans, in my State, have been—
the State of Oklahoma, 61,000 loans, and roughly $5 billion in
loans to help small businesses, and I am greatly appreciative of
that money to help the folks stay in business.
As we all know, and we sometimes forget, that we put about 15
to 20 years’ worth of work that SBA normally does and shoved it
into about a 12-week period. That is no easy task for any industry,
for any business, or lending institution, much less the government
institution. So I want to be recognizing of the hard work of the
staff. And I know this is not to be critical of the staff, more of the
institution, but I know the staff has worked long hours to make
sure that businesses were saved.
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The first question I have is really, because there has been mini-
mal actual guidance, and instead the, SBA has had a series of re-
leased frequently asked questions that have been kind of leaked
out, or just trickled out, if you will. The administrator to guide
American business owners and employees in a hectic and confusing
time.
And further adding confusion are the multiple releases of the in-
terim final rules, that sometimes contradicted themselves.
Dr. Coleman, Ms. Kelly, each of you talked about this confusion
in your testimony. And I was wondering if you could, as people that
look at small business, I know none of us want to spend any time
in the past, certainly not the last 4 months, but as we go forward,
what are some of the solutions that both of you think the SBA
could implement moving forward to perfect the PPP program, there
is still roughly $90 billion out there, so that we could help with the
money that we currently have authorized and appropriated that we
can currently help the small businesses that are out there? Ms.
Kelly, do you want to go first?
Ms. KELLY. Absolutely. You know the recent package of the
PPP-FA was great. I applied to increase my loan, and unfortu-
nately, I was notified by the bank that they basically changed the
field goal. So I couldn’t—they had already submitted their 1502.
And I was approved for a certain amount of money, but then I was
denied. I would like that to be revisited. I mean, many Mainers
and small businesses are [Inaudible] and none of us thought that
this was going to last more than 8 weeks, and here we are.
Mr. HERN. Dr. Coleman, could you give us your thoughts?
Chairwoman VELÁZQUEZ. You need to unmute, sir.
Dr. COLEMAN. The 60 percent that is out there right now as
far as what we use for payroll, I think one thing that is scaring
some people is that cliff. Is that a cliff that is if I don’t hit that
60 percent, am I going to still get my forgiveness?
So, maybe the Small Business Committee can come out and say,
Look, if you use 55 percent, we will forgive 35 percent of your other
one. So there is a little concern as far as that goes, because every-
body is saying the same thing, the website actually said something
a little bit different online. So making that a concrete. Look, here
is where you are at, if you can’t hit one of these markers you
change that other marker now. That would be one of the big ones.
The other big concern I have is the taxation of the loan. I don’t
know if this is something to discuss here, but if we have to save
25 to 35 percent of the loan to repay on the taxes, because it is not
currently deductible on our taxes, now we are concerned that okay,
we get a loan for $200,000, so I need to keep $60,000 to $65,000
back to be able to pay that tax back.
Thank you very much.
Chairwoman VELÁZQUEZ. We recognize the gentlelady from
Kansas—Ms. Davids for 5 minutes.
Ms. DAVIDS. Thank you, Chairwoman Velázquez, and also
would like to thank Ranking Member Chabot for holding this hear-
ing today. Unfortunately, there have been many challenges for
small businesses who tried to access the Paycheck Protection Pro-
gram and the EIDL programs. And in more recent conversations
with small businesses owners, one of their main concerns is com-
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plexity around the loan forgiveness. I, of course, was glad to see,
and others are too, that today, the SBA revised its forgiveness ap-
plication and introduced a streamline application for smaller bor-
rowers.
However, many challenges and questions about the process re-
main, and I am glad we have both small business owners and lend-
ers on the panel today, because I would like to hear from both per-
spectives.
Do you believe that the rolling and piecemeal nature of the PPP
guidance from the SBA has discouraged or disincentivized small
businesses from entering the program?
Dr. COLEMAN. I can go first. That was the biggest thing I heard
from my colleagues, the people that didn’t get it was, this is some-
thing where I don’t know the rules, and therefore, I don’t want to
take on that debt. Because it wasn’t a slam dunk, this is what is
going to happen, I would prefer not to take on any additional debt,
because debt is scary to small business. We don’t want debt. We
have our mortgages, we have equipment loans already. So taking
on additional debt without that concrete agreement and, hey, you
do this, it is forgiven. That was the biggest concern, I would say.
Ms. HARRINGTON. I think it is definitely a major issue in
terms of the rollout of the program and the confusion, particularly
for the really small businesses and the businesses owned by people
of color. There were so many hurdles throughout and changes to
the process. The time it took to even figure out what forgiveness
would look like, right? And you are right. So many business owners
are afraid that this will not end up being a grant and be a debt
they will have to pay back in just over 2 years.
We don’t even know what next year will look like yet, because
we are in the midst of a pandemic. And so the idea that they are
going to have debt that they will have to pay back in the next 2
years is extremely scary for many of them. And just other things
in the program that don’t get talked about as much. The fact that
for the first week, sole proprietors and self-employed couldn’t even
apply for the funding.
So all of these things indicate to people, and that is the vast ma-
jority of business owners of color who are self-employed, that this
program is not for them, and that it will not work for them in the
long run.
Ms. KELLY. I would like to say that since the PPP rules have
changed, and the pandemic actually lasted longer than we ex-
pected, and all of this is compacted in a seasonal area where we
depend on 36 million tourists a year, and we only have 1.5 million
residents in our State. We need the PPP support, and we need
change. And we also need to know what the rules are, because you
are afraid if you do, you are afraid if you don’t.
Ms. DAVIDS. Well, I appreciate that, and I appreciate the rec-
ognition of our small businesses, and sole proprietors, and particu-
larly the small business owners who are from marginalized commu-
nities needing that certainty around the rules and the rollout. I
know a lot of folks here in Kansas who are small business owners,
who were really concerned about what felt like a very tumultuous
and uncertain time with the rollout of the programs, even though
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they recognized that they really did need the relief. So I appreciate
the work you all are doing.
And with that, I will yield the balance of my time. Thank you,
Chairwoman.
Chairwoman VELÁZQUEZ. The gentlelady yields back. We now
recognize the gentleman from Tennessee, Mr. Burchett.
Mr. BURCHETT. [No response.]
Chairwoman VELÁZQUEZ. I guess that he just logged off. Now
we recognize the gentleman from North Carolina, Mr. Bishop.
Mr. BISHOP. She just called me. I am ready to go.
I am en route, Madam Chair. If you can’t, skip me——
Chairwoman VELÁZQUEZ. I see Mr. Burchett, the gentleman
from Tennessee is recognized.
Mr. BURCHETT. Thank you, Chairlady. Sorry about that. I have
been all over the Zoom today trying to figure this out. Can you
hear me? I can’t hear you, but I just read your lips, I think you
said yes, we can. So I will go with that.
Well, thank y’all so much. I guess my question was, I want to
tell Ms. Kelly that my nephew is a Culinary Institute of America
graduate. But he was not alumni of the year as you were. But I
assume one day he will aspire to that.
You know, I have heard from our small business lenders and
folks in the district that we need simplification and a loan forgive-
ness process for the small lenders. And I was proud to join with
our friend, Representative Andy Barr, in writing a letter to the
Treasury and the SBA advocating a streamline forgiveness process
for borrowers under a $350,000 threshold.
Also on a personal note, I hope everybody remembers Andy Barr
and his two lovely little girls in their prayers. Andy lost his wife
last night, and the little girls lost their mama. I know that is a
tragedy. So if we can remember him in our prayers.
But, today, according to the SBA, also announced a new easy for-
giveness application that I look forward to reviewing. Mr. Sosa, in
your opinion, are there any roadblocks hindering a small business
from obtaining a full loan forgiveness?
Mr. SOSA. I am sorry, I was having a little bit of difficulty
unmuting there for a minute. Prior to the issuance of this morn-
ing’s 3508-EZ form, which I, too, have not had an opportunity it re-
view in depth, just the mere fact, like the doctor stated earlier, that
it was 11 pages long scared most people. And now, while the ap-
pearance appears that we are in the step in the right direction, it
also appears that what they have done on the EZ form is simply
separated the instructions from the actual form. So it looks a lot
simpler. But it still has some certifications and all the traditional
documentation that was asked for in the first go-round to be in-
cluded with that EZ form. That is highly disenfranchising, or high-
ly difficult for small businesses to obtain.
I still think the best situation is to address, very much like what
Ms. Kelly has said and very much like what doctor has said, that
we need a sure forgiveness that says, you had a loan of $150,000
or less, you are forgiven, and the and the Congress has that ability
to do that.
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Mr. BURCHETT. Also Mr. Sosa, is there any way you can pro-
vide the committee an overview of how credit elsewhere has
changed beginning of the PPP and today?
Mr. SOSA. Yes, sir. At the beginning, the statute eliminated
credit elsewhere. It just, plain and simple, did that. Now they need
to certify that they need the application, and no funds and nobody
has defined what ‘‘need’’ is.
Mr. BURCHETT. Thank you. Chairlady, I yield back the rest of
my time. It is all a pleasure seeing you.
Chairwoman VELÁZQUEZ. Thank you. The gentleman yields
back. Now we recognize the gentleman from Pennsylvania, Mr.
Evans.
Mr. EVANS. Thank you, Madam Chairperson. Ms. Harrington, I
want to follow up on something you said because it sounds like to
me and I am not going to put words in your mouth, it sounds like
we could lose a lot of black businesses specifically—obviously there
is the pandemic, and then there is the unrest, and then there is
the PPP. So tell me in a very specific way, what percentage of
black businesses do you think we have lost?
Ms. HARRINGTON. I think we are definitely at risk of that. I
think it is hard to tell, but the numbers we do know are very tell-
ing, and the stories that we are hearing are very telling. When we
hear numbers like 41 percent of active black business owners have
dropped by 41 percent. When we look at the unemployment num-
bers that are still so high and so much higher even in black com-
munities and communities of color, right?
We know there are businesses that were already struggling be-
fore we even came to the pandemic. There were so many businesses
that entered the pandemic with less than 3 weeks or so of reserves
that could sustain them. And now, we don’t know how long this is
going to last. There is so much—there are so many other issues in
this country. And so, we are watching as so many businesses that
are inactive now, many of them probably won’t reopen, and there
are some that are still waiting on answers on PPP who may close
and never reopen. And as this pandemic extends, that number will
only increase. And that is why we have to think about not only how
we fix the PPP, but fix small business credit and support in gen-
eral, and how to make sure it works for the businesses in every
community, not just [Inaudible].
Mr. EVANS. So take the next step, and tell me what specifically
you think the kinds of things that should happen.
Ms. HARRINGTON. Absolutely. So with regard to the PPP, we
advocate for creating a minimum origination fee, for creating that
streamline automatic forgiveness for loans under 100k, which
would save countless hours. 71 million hours of labor we estimate
on behalf of business owners who would provide all of that docu-
mentation and go through all of those pieces of labor, and the lend-
ers as well; data collection and transparency, so important; a re-
serve for CDFIs and MDIs who do the best job of serving busi-
nesses in these communities; requiring guidance on underserved
markets, and making sure that you are targeting the funds to
those small businesses, and the businesses in the low- to moderate-
income census tract. And also thinking beyond just loan programs,
grant programs that are provided directly through the Federal Gov-
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ernment, so we can remove the intermediary and financial institu-
tion.
We recognize that there is already issues with accessing a pro-
gram through a mainstream lender when we see the lack of access
to credit that has plagued these communities for decades. So if we
know that there is a barrier to accessing a program through inter-
mediary, let’s remove it.
Mr. EVANS. Are you talking about, for example, the EIDL pro-
gram?
Ms. HARRINGTON. The EIDL program, absolutely, is one exam-
ple. There have been grant programs through FEMA. You can do
grant programs directly through the IRS and Treasury. There are
a number of ways to do that that we should think about beyond
just having the financial institution as intermediary. That already
places a barrier for many of the businesses owned by people of
color.
Mr. EVANS. I thank you, Madam Chair. I appreciate it. Thank
you very much.
Chairwoman VELÁZQUEZ. Thank you. The gentleman yields
back. Now we recognize the gentleman from North Carolina, Mr.
Bishop.
Mr. BISHOP. Thank you, Madam Chairman. And Ranking Mem-
ber Chabot and witnesses, thank you for joining us today for an im-
portant conversation on this Paycheck Protection Program. I am in
the committee room, as I have been in the previous meeting, and
was taken to task by the Chairwoman for having making people
disinfect it, but I do it for a very important reason, which is to em-
phasize that we can be in Washington. There are two other people
in this room, three other people. They are many, many feet away
from me, but if we were closer, we could be wearing masks. We
could do our business in Washington. And I think it would make
the meeting more effective, and your testimony more effective, but
thank you very much for being with us.
Fortunately, the hearing comes at a fitting moment as Demo-
cratic members of the Select Subcommittee on the Coronavirus Cri-
sis have proceeded with another witch hunt, this time aimed at
Secretary Mnuchin, Administrator Carranza, and PPP lenders.
When Congress overwhelmingly passed the Paycheck Protection
Program, we did that in a bipartisan fashion. Last week, the Direc-
tor of the Congressional Budget Office Phillip Swagel praised the
Treasury Department and Small Business Administration for mov-
ing quickly and efficiently while also stating the stimulus to
COVID-19 went out faster than the stimulus during the 2008 fi-
nancial crisis.
Unfortunately my Democratic colleagues who helped design the
Paycheck Protection Program fail to recognize the Trump adminis-
tration’s swift actions to save our economy. There is more work to
be done, but Democrats would rather investigate, critique, and un-
dermine the good work performed by the Trump administration
than provide adequate recovery to Americans.
Make no mistake, Democrats’ antics and sham investigations are
not limited to the Trump administration. They also want to inves-
tigate PPP lenders who served as the conduit for providing small
business relief. Lenders didn’t ask for that role, but they delivered.
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Prior to PPP going live in March, I heard from lenders throughout
North Carolina about obstacles it would take to participate in the
program. They were nervous and skeptical, but they stepped up to
the plate to help small businesses in their communities.
Mr. Sosa, in your testimony, you worried about the way the Fed-
eral Government is treating lenders right now, that it might lead
to less lending partners in the future. In fact, you used the term
‘‘threat.’’ I wonder, would you agree that the same logic apply to
Congress as it begins investigating lenders for their role in the
PPP?
Mr. SOSA. You know, the difficulty that I face is that I am not
a politician, so I don’t really have an axe to grind either way. What
I look at is that when we put out a program under the regular SBA
program, we know what the rules are. We know how to put a loan
on the books; we know how to take it through the process; we knew
how to collect that loan. That is the process that assures that over-
sight is fair, that it is process that is trying to assure that lending
is fair to our communities, and so if we could get something like
that, I think you would have much more participation from all the
lenders.
Mr. BISHOP. I appreciate that, Mr. Sosa. Let me just ask you
this: If Amarillo National Bank were asked to turn over all commu-
nications with Treasury and the SBA related to administering PPP,
would it serve as a disincentive to your bank as well as other lend-
ers from doing business with the Federal Government in this situa-
tion?
Mr. SOSA. Let me ask you a question for clarification, please.
You want to know—you are asking if we could give you all the doc-
umentation that SBA and Treasury used, or the agencies used to
direct the program?
Mr. BISHOP. Well, no. Your correspondence, your bank’s cor-
respondence, if you had to—in the face of a retrospective request,
to turn over all correspondence you had, so that someone’s going
to go through it with a fine-tooth comb, wouldn’t that deter you
from wanting to cooperate in a program like this?
Mr. SOSA. We have been participating in SBA lending for at
least 15 years.
Mr. BISHOP. Okay.
Mr. SOSA. Our books are open. And it would be a simple task
of printing all the FAQs and all the 2018, 2019 IFRs.
Mr. BISHOP. Very well. Thank you.
Ms. Kelly, you mentioned the Federal supplemental unemploy-
ment that caused you some difficulty getting your employees back.
And I think you mentioned it was ending in July. If that were ex-
tended to December 31st, would that be harmful to you?
Chairwoman VELÁZQUEZ. Excuse me, sorry. Your time has ex-
pired.
Mr. BISHOP. Thank you, Madam Chair.
Chairwoman VELÁZQUEZ. We recognize the gentleman from Il-
linois, Mr. Schneider.
Mr. SCHNEIDER. Thank you, Madam Chairwoman. I want to
thank you for holding this important hearing today. I also want to
take a moment to thank you, the committee, and in particular, the
committee staff, for really being at the forefront for standing up the
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remote capabilities of our committee, allowing us to numerous
briefings in hearings like this to do the business of the American
people, to do what we have it to do to help America’s small busi-
nesses in this very difficult time. The work of you and Ranking
Member Chabot has been extraordinary, as have the members of
this committee. So I just want to thank everyone for that.
PPP, for the country, and my district in particular, has been a
lifeline for workers and businesses, but we have heard in this com-
mittee and we have heard from businesses, I hear about it almost
on a daily basis, that they have had to wrangle not just the chal-
lenges of the COVID pandemic, but the lack of clarity from the
SBA and Treasury on the program, the PPP program.
My offices work directly with our local SBA representatives, in
my community, small business development center, to help busi-
nesses, providing them with up-to-date guidance on the SBA pro-
grams. I commend the incredible hard work of the SBA’s local staff,
who my team has found to be an incredibly valued resource and a
group of dedicated employees. But the guidance coming from SBA
and Treasury has been anything but clear. The SBA and Treasury
have released 17 interim final rules on these programs and 47 or
maybe 48 FAQs. The application for the loan forgiveness process
was 11 pages, and released only a week before applicants became
eligible.
This morning, the SBA did release a revamped, shortened appli-
cation for the EZ process, but I am already hearing from lenders
who say that neither of these actually simplify the process at all.
I have already begun to hear from local banks in my districts,
starting to receive loan forgiveness applications. And my staff has
fielded innumerable questions about the complicated loan forgive-
ness process.
So, I want to focus on those two issues: simplification and clarity.
First on simplification, as the committee knows, oftentimes, the ac-
counting department of a small business is but one individual.
When I had my own business with 10 employees, I was doing the
accounting myself. There was a whole list of other tasks that these
people have to do. It is critical that the loan forgiveness process,
particularly for the smallest loans, be simple enough for the busi-
ness owners to complete without having to rely on outside assist-
ances, as witnesses have testified.
Looking to our two businesses owners on the panel, Ms. Kelly
and Dr. Coleman, can you provide some context, not just how much
funding you received, but you laid out, but the amount of energy
and time that was invested to get the loan, and then as you are
looking to go through the forgiveness process? Ms. Kelly, maybe we
will start with you.
Ms. KELLY. Absolutely. I did spend quite a bit of time getting
all of my ducks in a row [Inaudible] submit my application. I am
fortunate I have a very good relationship with a local bank [Inaudi-
ble] was but it was very difficult. Unfortunately [Inaudible] nec-
essary rule change with the ability to go back and borrow the origi-
nal [Inaudible] as the financial need has changed, as we have pro-
gressed with this COVID-19 and it has made it very difficult. As
far as [Inaudible] has gone, I was unable to have with the current
restrictions on capacity of a restaurant and lost revenue [Inaudible]
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season, I did not [Inaudible] it was very challenging for me to have
the FTE count so my forgiveness seems impossible.
Chairwoman VELÁZQUEZ. Mr. Schneider, you need to mute.
Dr. COLEMAN. I thought the loan process went very well. I
pride myself on being somebody that is ahead of the curve. I said
in my testimony, I was really seeking out all the information I
could seek out, and get everything together as soon as I could. Im-
mediately I knew there was going to be a frenzy, so I got my loan
application in. The first thing—I found the application, even as a
business owner, pretty straightforward. I did require some help
from my accountant to get the proper 941s and all those documents
together. As far as the forgiveness, I am hoping I am on track for
everything we are actually up in the 80s as far as our payroll per-
centage wise. So we have, hopefully, a good chance of getting for-
giveness. We are holding back about 5 percent of our loan just in
calamity down the road, if anything happens, if somebody gets sick
or anything else, my business suffers. We are saving some back.
And I am actually hoping to return that 5 percent, in the best-case
scenario.
Mr. SCHNEIDER. Thank you. My time has expired. I want to
thank Ms. Harrington and Mr. Sosa. Mr. Sosa, I appreciate your
testimony, especially the story of the American Dream in 50 years,
so I wish you all the best.
Chairwoman VELÁZQUEZ. The gentleman’s time has expired.
Now we recognize the gentlelady from Pennsylvania, Ms.
Houlahan.
Ms. HOULAHAN. Hi, Madam Chair. And I want to echo Mr.
Schneider’s appreciation to you and to the staff for allowing this to
be possible and making it look so easy. I also want to thank the
folks who are testifying in front of us. I can actually palpably feel
the tension and the pain, even remotely in your testimony, because
I know how exasperating it is. As a former business owner and op-
erator myself, and a former entrepreneur, I can feel the pain. And
I hope that we can be at least helpful or a little bit more in alle-
viating that.
My questions have to do with the concept of forgiveness, auto-
matic forgiveness. And I understand from Mr. Sosa, as well as Ms.
Kelly, and as well as from a lot of other folks who testified, that
$150,000, 100 or so thousand seems to be the line that people are
drawing. And I understand that represents about 80 percent of the
total loans, and about 20 or so percent of the amount. But getting
back to some of the testimony about transparency, and the impor-
tance of data that has to do with where loans are going, I also
think it is really, really important that we have transparency to
understand where they were spent. Because I believe that this
won’t be the first or last time that we have to implement some-
thing like the Paycheck Protection Program.
I want it to be more expedient the next time that we do it, and
we are more efficacious the next time we do it. And so if we just
blanket forgive anybody under $150,000, $100,000, then we will
have lost all the granularity of that data of where it went and how
it was spent.
And so, if you guys wouldn’t mind, I guess, maybe, if I could
start with Mr. Sosa: What kind of effort could we do, undertake,
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that would allow us to be able to capture some of that important
data, but not take the hours and hours of time away from both the
business people as well as the lenders to be able to allow to us to
have that information?
Mr. SOSA. That is a challenge, Congresswoman. When you look
at this, even if we just take the case of $50,000 or less, that is 3
million loans. That is a significant challenge for anyone to go
through and do a review. $150,000 does, as you mentioned, does
take care of the majority of the applicants out there. But there is
nothing wrong with getting a simple certification from the folks,
that yes, we spent the money, even if you ask for an estimation,
but——
Ms. HOULAHAN. I guess that is what I am asking is couldn’t
we simply have, like, literally a chart that says I spent 20 percent
on overhead, I spent 80 percent on salary certified by this organiza-
tion. Is that not something that is practical?
Mr. SOSA. That would be very simple and very appropriate. We
just need to be sure that the agencies are directed as such, so as
to avoid the fact that they might continue on the road that they
have even on the EZ program, EZ application. It needs to be sim-
pler than that. Part of the concern is that if a small business per-
son has this loan outstanding, and a year from now, 2 years from
now, 3 years from now, somebody changes their mind and finds
that they weren’t eligible at that point——
Ms. HOULAHAN. I understand.
Mr. SOSA.—that is a very scary thought for a lot of small busi-
nesses.
Ms. HOULAHAN. I understand. I understand. I would like to
hear from Ms. Harrington to know how important it is to track
that data. Is there anything that we can implement by legislation
that we can be helpful to make sure that we actually know where
this money was spent, just as it is important knowing who got it,
we are also trying to make sure we are good stewards to the tax-
payers of where it got spent.
Ms. HARRINGTON. Absolutely. I think a simple certification
form going to what Mr. Sosa was describing, we absolutely support.
Certifying that they spent the money on eligible expenses, and a
good faith certification, and a space to leave—to print their demo-
graphic data, a one-page form, very simple, easy to fill out. Also,
making sure that SBA and the lenders themselves are directed
that they can rely on these good faith certifications for these small
dollar loans. I think it can be as simple as that, but it is something
that Congress will have to do because their documentation require-
ments under the CARES Act are so extensive.
So I think there has to be direction from you, to borrowers, to
SBA, to lenders that enables them to really take part of that. And
this will absolutely benefit the smallest businesses, but, also, give
you the transparency that you need to know where these funds are
going.
Ms. HOULAHAN. Thank you. And I know my time has expired.
And I was wondering if the Chair would allow me one more ques-
tion, because I think I am the last person asking questions.
Chairwoman VELÁZQUEZ. Yes, ma’am.
Ms. HOULAHAN. That would be terrific.
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My question is to Ms. Kelly and to Mr. Coleman, I know right
now, you are working to make sure that you can get your loans for-
given in an ideal scenario. What kind of—will be the biggest chal-
lenge for you to be able to do that? Do you feel is it now a matter
of data or making sure you can track things? And how have you
been keeping track of all the changes with SBA and the PPP pro-
gram?
Ms. KELLY. I would like to say, similar to Dr. Rich, we initially
set up separate bank accounts and really tracked everything we
spent with that loan. So the problem with it was I couldn’t speak
up for lack of business because we are on State mandated shut-
down, we couldn’t bring back the proper count of FTE. So I felt like
I knew I was not going to be forgiven for a loan either way I did
it. It was helpful for a time period, but in the long run, it is not
really that helpful if [Inaudible] after we did the recalculations to
be able to go back and take a second bite at the apple was denied
because of the filing of the 1502. So that became a big issue for me
here with my business.
Ms. HOULAHAN. Thank you.
Dr. COLEMAN. As far as my concerns, most of my information
actually came through from my accountant. He will send out a nice
little newsletter once the—it was changed last week, we got a nice
little newsletter saying, Hey, these are the changes. So that would
be one place I would have the small businesses committee reach
out to is the accountants and say, Hey, please send this informa-
tion out to your clientele. It was simple email that they put to-
gether, but it gave me a massive amount of information and defi-
nitely put my mind at ease as far as where to go from here. What
concerns——
Chairwoman VELÁZQUEZ. The gentlelady’s time has expired.
Ms. HOULAHAN. I am sorry, my time has expired. I yield back
and thank you, Madam Chair, for giving me an extra 5.
Chairwoman VELÁZQUEZ. Thank you. And thank you again to
all the witnesses today for their testimony and for offering their
views on the PPP. By sharing your experiences, we will be able to
conduct more effective oversight, and continue to optimize the PPP
program.
Though I am pleased the program appears to be saving small
business jobs, as we intended, your testimonies have confirmed
that there are still some issues that need to be addressed. I assure
you we will continue to make the program work and be as acces-
sible for borrowers and lenders as it can be. I ask unanimous con-
sent that Members have 5 legislative days to submit statements
and supportive materials for the record. Without objection, so or-
dered. And if there is no further business before the committee, we
are adjourned.
[Whereupon, at 2:55 p.m., the committee was adjourned.]
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APPENDIX
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71
SBD026 with DISTILLER Insert offset folio 71 here 41293.038
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72
SBD026 with DISTILLER Insert offset folio 72 here 41293.039
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73
SBD026 with DISTILLER Insert offset folio 73 here 41293.040
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74
SBD026 with DISTILLER Insert offset folio 74 here 41293.041
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75
SBD026 with DISTILLER Insert offset folio 75 here 41293.042
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76
SBD026 with DISTILLER Insert offset folio 76 here 41293.043
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77
SBD026 with DISTILLER Insert offset folio 77 here 41293.044
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78
SBD026 with DISTILLER Insert offset folio 78 here 41293.045
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79
SBD026 with DISTILLER Insert offset folio 79 here 41293.046
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80
SBD026 with DISTILLER Insert offset folio 80 here 41293.047
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81
SBD026 with DISTILLER Insert offset folio 81 here 41293.048
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82
SBD026 with DISTILLER Insert offset folio 82 here 41293.049
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83
SBD026 with DISTILLER Insert offset folio 83 here 41293.050
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84
SBD026 with DISTILLER Insert offset folio 84 here 41293.051
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85
SBD026 with DISTILLER Insert offset folio 85 here 41293.052
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86
SBD026 with DISTILLER Insert offset folio 86 here 41293.053
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87
SBD026 with DISTILLER Insert offset folio 87 here 41293.054
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88
SBD026 with DISTILLER Insert offset folio 88 here 41293.055
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89
SBD026 with DISTILLER Insert offset folio 89 here 41293.056
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90
SBD026 with DISTILLER Insert offset folio 90 here 41293.057
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91
SBD026 with DISTILLER Insert offset folio 91 here 41293.058
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92
SBD026 with DISTILLER Insert offset folio 92 here 41293.059
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93
SBD026 with DISTILLER Insert offset folio 93 here 41293.060
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94
SBD026 with DISTILLER Insert offset folio 94 here 41293.061
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95
SBD026 with DISTILLER Insert offset folio 95 here 41293.062
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96
SBD026 with DISTILLER Insert offset folio 96 here 41293.063
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97
SBD026 with DISTILLER Insert offset folio 97 here 41293.064
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98
SBD026 with DISTILLER Insert offset folio 98 here 41293.065
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99
SBD026 with DISTILLER Insert offset folio 99 here 41293.066
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100
Insert offset folio 100 here 41293.067
SBD026 with DISTILLER
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101
Insert offset folio 101 here 41293.068
SBD026 with DISTILLER
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102
Insert offset folio 102 here 41293.069
SBD026 with DISTILLER
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103
Æ
Insert offset folio 103 here 41293.070
SBD026 with DISTILLER
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File and source
- File
- supporting-available-at-https-www-congress-gov-117-chrg-chrg-117hhrg43965-chrg-117hhrg43965-pdf-long-lasting-solutions-f.pdf
- Size
- 5,960,429 bytes
- SHA-256
- c2b71203d023b6da07dd1d373d3adf5203c3686850bf4fed0031cb8828ea5ece
- Original
- www.congress.gov