By Christopher Williston
With the phased reopening of Texas, small businesses across the state are facing a pivotal moment. The decision to reopen—and consideration of how to do safely — is all-consuming for small business owners, many of whom are fighting for financial survival. Even as they are facing these day-to-day decisions, there is another challenge looming for many of them in the form of forgiveness of Paycheck Protection Program (PPP) loans they received to keep them afloat the last several months.
To date, more than 4.4 million small businesses nationwide are able to keep their doors open and employees on payroll thanks to loans received under the Small Business Administration’s PPP. Here in our great state, this includes more than 350,000 small businesses. Loans made to Texas businesses have averaged just over $114,000, indicating they did reach the smallest of businesses across our state, as was intended by Congress, the Treasury Department and the Small Business Administration (SBA).
In a rule issued just over a week ago, the SBA prescribed an extremely complicated process by which borrowers must calculate, document, prove and certify their loan forgiveness amount. At 11 pages, even the smallest businesses face an onerous task to navigate the waters of loan forgiveness. Before you say these businesses should have known what they were getting into, I would proactively tell you there is no way that they could have. When they applied for the program, the forgiveness process was not yet defined.
For some of the earliest applicants for these loans, the forgiveness process was outlined a full six weeks after the borrower received loan proceeds. The Treasury and SBA have performed a monumental task in implementing the PPP. However, it would be difficult even for officials of those agencies to deny that the goal posts have shifted several times throughout the implementation.
As president and CEO of the state’s trade association of community banks, I have talked to many of our state’s financial institutions that made loans as small as $300 to $1,000. The idea that these businesses, which are simply trying to make ends meet in a difficult and stressful operating environment, would have their lives consumed by PPP forgiveness calculations is simply unacceptable. They can’t do it. Community banks are concerned for the viability of their small business customers. They know that many businesses do not have the time or sophistication to follow the process as it has been prescribed.
To accomplish this task, the Independent Bankers Association of Texas is advocating that all borrowers with loan amounts of less than $350,000 have access to a highly simplified loan forgiveness process. In a recent survey by the National Federation of Independent Business, nearly 75 percent of small businesses reported confusion over the terms of their PPP loan. The forgiveness process, as currently defined, does nothing to bring clarity or simplicity to these borrowers.
As Congress continues the push for various “fixes” for the PPP program, simplification of the forgiveness process for most borrowers must be top priority. As a nation, we decided to save the lives of small businesses and the financial well-being of their employees through the PPP. If we now bury them under a mountain of red tape, our efforts (and federal expenditures) will have been for naught.
Christopher Williston is the president and CEO of the Independent Bankers Association of Texas, the largest state community banking association in the nation. It represents more than 2,800 community banks and branches throughout Texas.