Trade groups support simplification of PPP loan forgiveness

WASHINGTON, D.C. — Trade associations representing the automotive aftermarket are among dozens of trade groups calling for automatic forgiveness of Paycheck Protection Program (PPP) loans for under $150,000.

In a letter sent to this week to ranking members of the Senate and House Committees on Small Business and Entrepreneurship, the trade groups voice their support for Senate Bill 4117, the Paycheck Protection Program Small Business Forgiveness Act, a measure that's receiving bipartisan report.

Among the groups that signed the letter are the Auto Care Association (ACA), International Franchise Association (IFA), Motor & Equipment Manufacturers Association (MEMA), Specialty Equipment Market Association (SEMA) and Tire Industry Association (TIA).

"We can avoid the burdensome cost of superfluous bureaucracy required to arrive at the foregone conclusion of loan forgiveness by implementing a few commonsense changes," Sen. Kevin Cramer, R-S.D., one of the bill's sponsors, said.

PPP went into place earlier this year as a lifeline to businesses impacted by COVID-19, and the program is part of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. More than $500 billion in loans have been given to businesses to help with paying employees and covering other expenses.

"The Paycheck Protection Small Business Forgiveness Act would give small businesses peace of mind by eliminating unnecessary bureaucratic requirements and simplifying the process for forgiving smaller loans," Mr. Cramer said in a statement.

More than 85% of PPP loans to small businesses are less than $150,000, according to SEMA.

"Under the current program, the loan has restrictions on how monies are spent, including a requirement that 60% be spent on payroll cost," SEMA said, "and company officials must then spend many hours completing paperwork to document the spending. The proposed legislation would instead simply require borrowers to submit a one-page forgiveness document."

PPP forgiveness could occur when Congress considers another COVID-19 stimulus package later in July. That relief could be in the form of a stand-alone measure or part of a larger measure, SEMA said.

"The bipartisan Paycheck Protection Small Business Forgiveness Act cuts these struggling small businesses a break when they need it most by providing them full forgiveness on PPP loans of $150,000 or less," Sen. Bob Menendez, D-N.J., said.

"Automatically forgiving PPP loans for these small businesses allows them to focus their limited resources on keeping their business going and makes it easier for them to have their PPP loans forgiven."

Lawmakers said the cost to apply for PPP forgiveness is $2,000 for small businesses and $500 for lenders. Creating automatic forgiveness could save small businesses $7.4 billion and banks nearly $2 billion.

The trade groups estimate the cost to business at between $2,000 and $4,000 as between 20 and 100 hours of work will be needed to complete current requirements.

Borrowers would fill out a one-page form to their lenders seeking forgiveness under the new idea. Lenders would be held harmless if borrowers lie on the form, but those receiving funds could face enforcement action if they deceive.

"The current forgiveness application is unnecessarily burdensome for many businesses, particularly the smallest of small businesses without the administrative support needed to complete the form," Consumer Bankers Association CEO Richard Hunt said in a statement.

PPP program guidelines originally required 75% of borrowed money be spent on employee costs to have a loan considered for forgiveness. That later was lowered to 60%.

Other trade groups signing the letter include: National Independent Automobile Dealers Associaton; National Retail Federation; Small Business Majority; and Small Business Legislative Council.