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WASHINGTON – U.S. Senator Kevin Cramer (R-ND), a Senate Banking Committee member, issued the following statement today on the U.S. Government Accountability Office’s (GAO) report on the federal government’s ongoing response to the COVID-19 pandemic:

“The GAO report further demonstrates the need for Congress to pass our Paycheck Protection Small Business Forgiveness Act. Our bill streamlines the forgiveness process for small businesses, removing the ‘burden’ placed on them as noted by the GAO. It also simplifies the complexity and uncertainty of the status quo. Congress has to act to help our small businesses, and nothing should stand in the way of us meeting that obligation.”

Below are excerpts from the report:

  • Need for additional rules and guidance. As SBA did for the loan application process, the agency has issued rules and guidance on the loan forgiveness process on a rolling basis. SBA posted interim final rules on the loan forgiveness process and on loan review procedures on May 22, 2020, and revised these rules to reflect changes made by the Paycheck Protection Program Flexibility Act in an additional interim final rule posted on June 22, 2020. The agency also posted a procedural notice on the loan forgiveness process on July 23, 2020, and responses to frequently asked questions on loan forgiveness on August 4, 2020. Finally, on August 11, 2020, SBA posted an interim final rule on appealing SBA loan review decisions, including its decisions related to loan forgiveness.
    • However, questions remain about the process, including the extent of SBA’s review of lenders’ loan forgiveness decisions. According to SBA officials, SBA intends to put all lender decisions granting full or partial loan forgiveness through an automated review tool provided by one of its contractors, and—when requested by borrowers—to review lenders’ decisions to deny loan forgiveness. However, as of August 14, 2020, SBA was still developing its processes for reviewing lenders’ forgiveness decisions.
  • Complexity of loan forgiveness process creates burden. In part because the CARES Act includes specific requirements for loan forgiveness, applying for loan forgiveness is more time consuming than applying for the PPP loan itself and requires more lender review.
    • SBA estimated that the loan application would take 8 minutes to complete, and its interim final rules and guidance have stated that lenders could rely on the applicant’s certifications regarding its eligibility and use of the loan proceeds. In contrast, SBA estimates on its loan forgiveness applications that borrowers will need 3 hours to fill out the standard form, or 20 minutes for the abbreviated application. And, as previously discussed, lenders are to do a good-faith review of loan forgiveness applications and make a decision about whether the loan should be forgiven. As noted previously, SBA officials told us that loan forgiveness is more complex than the loan origination process because the CARES Act has specific requirements for loan forgiveness. In addition, OMB officials stated that it makes sense for the loan forgiveness process to take longer than the application process to ensure the necessary accountability to warrant forgiveness and prevent fraud.
    • Representatives of all four lender associations we interviewed stated they had concerns about the complexity of the loan forgiveness process and the amount of time it would take borrowers and lenders. Although SBA states on its standard loan forgiveness application that it will take borrowers 3 hours to complete, representatives from one association heard from lenders that it could take 15 hours for some borrowers to complete. To help applicants with these applications, there are free online forgiveness calculators that borrowers can use to populate their loan forgiveness applications. Representatives from a lender association estimated it could take 50-75 hours for lenders to review a complex forgiveness application and the supporting documentation.
    • Representatives of all four lender associations we interviewed favored simplifying the process for smaller loans, citing the resources that could be saved for borrowers and lenders. Legislation has been proposed that would simplify the loan forgiveness process for borrowers with loans under a certain threshold.

Background

Senator Cramer’s bipartisan bill streamlines forgiveness for Paycheck Protection Program (PPP) loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. The approximately 4.2 million PPP loans of $150,000 or less account for 85 percent of all PPP approved loans but only 26 percent of the PPP funds delivered. Learn more here.