Let’s not bury small business with red tape
For many small businesses, the margins always are tight. This is especially true for seasonal businesses.
For many small businesses, the margins always are tight. This is especially true for seasonal businesses. The volume of customers can make or break a business. The COVID-19 pandemic and government-ordered shutdowns have added to the pressure. Not only are businesses working hard to reopen safely and reintroduce themselves to consumers, many find themselves fighting for financial survival.
Community banks understand these tremendous challenges. After all, community banks delivered the lion’s share of paycheck protection loans, which offered a lifeline for thousands of small businesses and prevented communities all over Pennsylvania from certain economic collapse.
I recently had the privilege to meet with Small Business Administration chief Jovita Carranza. To date, more than 4.5 million businesses nationwide and 158,000 in Pennsylvania are able to keep their doors open and employees on payroll thanks to loans received under the SBA’s Paycheck Protection Program. Loans made to Pennsylvania businesses have averaged about $112,000. They did reach the smallest of businesses, as was intended by Congress, the Treasury Department and the SBA.
Fleetwood Bank reported processing more than PPP loans totaling $15 million to help protect small-business workers.
The SBA has 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 faced an onerous task to navigate the waters of loan forgiveness.
The federal government moved quickly to implement the PPP. However, the goal posts have shifted several times throughout the implementation.
The goal of the program was to infuse billions of dollars into a small business economy that policymakers determined needed to be closed in order to slow the spread of the coronavirus. For some of the earliest loan applicants, the forgiveness process was outlined a full six weeks after the borrower received loan proceeds.
As leader of the state’s trade association representing community banks, I have talked to many of our state’s financial institutions that made loans as small as a few thousand dollars. These bankers 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 prescribed.
A recent survey by the National Federation of Independent Business revealed that nearly 75% of small businesses reported confusion over the terms of their PPP loan. The forgiveness process does nothing to bring clarity or simplicity to these borrowers.
As Congress and the administration work to fix the PPP program, simplification of the forgiveness process for most borrowers must be the top priority. Community bankers were pleased to see Treasury and SBA act to significantly reduce the 11-page forgiveness application in its latest interim final rule. The PACB also is working closely with the Independent Community Bankers Association to extend to borrowers with PPP loan amounts of less than $1 million a presumption of compliance to allow small-business owners to focus on their businesses and the safety of their employees and customers.
Treasury and SBA also should provide an online PPP loan forgiveness calculator. This would allow borrowers to focus on sustaining the viability of their businesses. Complex calculations are not practical for small-business borrowers or lenders.
PPP borrowers also should be allowed to deduct payroll and other business expenses. The inability to do so effectively reduces the value of loan forgiveness for struggling businesses and adds unnecessary complexity to tax preparation.
Small businesses are considered the lifeblood of Pennsylvania’s economy. Ensuring their financial well-being and that of their employees makes good sense. History will judge the PPP as significantly as the Marshall Plan that rebuilt Europe. Let’s not bury the smallbusiness beneficiaries of this historic economic lifeline under a mountain of red tape.