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Bipartisan effort pressing SBA, Treasury on PPP loan forgiveness

covid-19 economy
(© Alexander Borisenko –

Abigail Spanberger, Mike Gallagher and Josh Gottheimer are leading a bipartisan effort urging the SBA and Treasury to improve flexibility and cut red tape for American small businesses seeking federal assistance and loan forgiveness through the SBA’s Paycheck Protection Program.

Just prior to the rollout of PPP last Friday, the SBA introduced guidance that severely restricted non-payroll loan forgiveness for U.S. small businesses applying for PPP loans by explicitly requiring businesses to spend 75 percent of the PPP loan on maintaining payroll in order to receive loan forgiveness—a stipulation not included by Congress in the Coronavirus, Aid, Relief and Economic Security (CARES) Act.

According to small business owners in Virginia, Wisconsin, and New Jersey, these restrictions place greater stress on businesses with higher non-payroll costs to cover during the coronavirus crisis—such as high rent or utilities payments—and stifle the business owners’ ability to adapt the loans to best suit the challenges faced by their individual businesses.

Additionally, according to current PPP guidance, many small businesses unable to rehire employees by June 30, 2020 could see reductions in their federal loan forgiveness percentage. These additional stipulations could mean the difference between a business successfully reopening or permanently closing its doors, which flies in the face of Congress’ intention in creating this program through the CARES Act.

In a letter sent today to Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza, the bipartisan group of lawmakers pressed the SBA and Treasury Department to rescind burdensome requirements on loan forgiveness related to non-payroll costs. Additionally, they called on the administration to provide additional guidance to borrowers with employees who might not be able to immediately return to their prior employment due to extenuating circumstances caused by COVID-19.

“We were disappointed to learn that, contrary to Congressional intent, the Department of Treasury and the Small Business Administration (SBA) have added stipulations to this loan forgiveness. According to this guidance, not more than 25% of the forgiven amount may be for non-payroll costs and compensation levels of employees must be maintained—rather than the Congressional stipulation of not reducing compensation beyond 25%. We ask that you share your agencies’ rationale for including this additional stipulation, and we ask that you rescind this requirement and allow small businesses the flexibility, within the parameters set forth by Congress, to use the PPP loans as necessary to keep their individual business afloat.”

The letter continues, “We also call on the SBA and Department of the Treasury to provide guidance for borrowers that are unable to rehire employees by June 30, 2020. Many small businesses are concerned that, due to the extenuating factors surrounding the pandemic, employees that have been let go will not want to immediately return to their employment. According to current PPP guidance, this would negatively affect a borrower’s loan forgiveness, even though this is a factor outside of said borrower’s control. These small businesses require direction on how to navigate this aspect of the PPP loans, without sacrificing their loan forgiveness.”