Democratic lawmaker calls for broader PPP loan forgiveness, citing pain felt by ‘our smallest of small businesses’

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A Democratic congresswoman is urging the Small Business Administration to forgive Paycheck Protection Program loans that did not convert to grants due to accidental errors in loan amounts made by small business owners.

Rep. Chrissy Houlahan, a Democrat from Pennsylvania, said at a press conference Wednesday that while PPP loans have been “instrumental in helping to keep our main streets open during the pandemic,” there are still “unpromised outfits” that need to be processed.

Earlier this month, Houlahan and 39 other Democratic lawmakers signed a letter to SBA Administrator Isabella Guzman asking if her agency “has the legal authority to return PPP loan amounts received as a result of “Excess loan amount errors” eligible for loan forgiveness. The letter noted that more than 300,000 small business owners are facing unexpected debt, despite having in many cases used loan proceeds” for eligible and pardonable purposes”.

Related: Up to three-quarters of $800 billion in disbursed PPP funds went to business owners rather than workers, study finds

“The injustice of this situation is particularly acute in cases where a lender has made an honest mistake, which means that some PPP borrowers will now be liable for unforeseen debt through no fault or error on their part,” the statement said. letter. .

The SBA confirmed to Marketwatch on Thursday that it had received the letter and “will be in touch with the member.”

Houlahan, a member of the House Small Business Committee, was joined on Wednesday by several small business owners whose PPP loans were unexpectedly not fully forgiven, where she noted that the average error on the excess loan amount is of $12,403.

“This is an unexpected bill that hurts our smallest businesses, just as they try to recover from a global pandemic,” she said. “These are companies that have used these funds for their intended purpose, to keep workers on the payroll, to keep our customers safe and our main streets open.”

An SBA Procedural Notice issued on January 15, 2021 explained that “a borrower is not eligible for loan forgiveness for any amount in excess of the correct maximum
loan amount permitted by law for that borrower “whether the excess loan amount was caused by borrower error or lender error”. He also distinguished between honest mistakes and intentional mistakes, which could lead to charges of fraud.

Sunny Glottman, a researcher with the nonprofit research firm Center for Responsible Lending, said at the press conference that “the confusing and chaotic deployment of PPP made mistakes inevitable” and that minority business owners were disproportionately affected by the lack of good faith error. reform.

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“Despite their best efforts to comply with rapidly changing PPP rules, many of the smallest companies now owe unexpected debt that threatens their very survival,” Glottman said in a statement. “This burden is borne disproportionately by micro businesses and businesses owned by people of color. Congress and the SBA should repeal the good faith error rule and remove additional barriers to loan forgiveness.

One PPP loan recipient, Amy Yassinger, said: ‘We have now become ping pong balls between Congress, the SBA and our banks, which have the capacity to fix this insurmountable debt for over 300,000 small companies that employ millions of people.”

Another business owner, Ember Seamen, said her nearly $77,000 PPP loan was retroactively requalified and she now had to “repay the full amount with exorbitant fees”.

“Shock is not a strong enough word to describe the feeling when I was told my repayment plan would be $9,761.26 per month,” she said, adding that she was a single mother plunged into financial instability.

Houlahan introduced a bill in September 2021 that would include excess loan amount errors in the forgiveness of a PPP loan. He has a Democratic co-sponsor. She also dismissed concerns about fraud playing a role in good faith mistakes, saying she thinks it’s “a real atrocity that we bear that of our small business owners and operators”.

This report was first published on September 28, 2022.

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