NAFCU Calls for Automatic Small PPP Loan Forgiveness

With a June 30 application deadline looming and more than $100 billion in Paycheck Protection Program money remaining, NAFCU has joined financial leaders in urging the government to make it easier for borrowers and lenders to obtain forgiveness for small loans.

The PPP is a business stimulus program created under the Coronavirus Aid, Relief and Economic Security (CARES) Act, aimed at helping small businesses pay their staff while the economy stumbles.

But critics have said its loan forgiveness application is too complicated, causing those who need it most to get bogged down in reams of unnecessary paperwork.

NAFCU is among those critics – it asked the House Small Business Committee to lighten the load for borrowers and lenders by streamlining the application process and automatically granting forgiveness for loans under $150,000.

In a letter to the committee Monday, NAFCU Vice President of Legislative Affairs Brad Thaler said that although the PPP program has helped “countless” small businesses navigate lockdowns, there’s more to be done.

“While credit unions are working with their members to assist them with the current loan form, the complexity of the forgiveness rules and application is posing challenges for many small businesses who may not have the staff or expertise for such a complex application, especially with the current economic challenges,” Thaler wrote.

Thaler argued the benefits of automatic forgiveness would outweigh the risks, reasoning that fraudsters are less likely to use smaller PPP loans, and that a simplified loan forgiveness process wouldn’t stop the Small Business Administration from reviewing borrowers’ information.

Thaler said it would also free up “human capital at a time when credit unions and small businesses may be short-staffed due to ramifications of COVID-19.”

Automatic loan forgiveness would apply to the majority of credit union PPP lenders with less than $1 billion in assets, according to data from the SBA. It said the average credit union loan amount is $50,000, while the total program average is $112,000.

In a press release, NAFCU said it will “continue advocating for improvements to the PPP to ensure credit unions can lend effectively through the program.”

Senators have joined the call for action, highlighting to the SBA and Treasury Department that the PPP forgiveness application is lengthier than the initial loan application.

The House Small Business Committee met Wednesday afternoon for a hearing on the issue.

The SBA has also encouraged lenders to focus their efforts on borrowers in underserved, rural and disadvantaged areas. These include new enterprises or businesses owned by women, minority ethnic groups and veterans.