[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]



 
   PAYCHECK PROTECTION PROGRAM: LOAN FORGIVENESS AND OTHER CHALLENGES

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JUNE 17, 2020

                               __________

                               
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                  


            Small Business Committee Document Number 116-082
             Available via the GPO Website: www.govinfo.gov
             
             
             
                             ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
41-293                 WASHINGTON : 2021             
             
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          JARED GOLDEN, Maine
                          ANDY KIM, New Jersey
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                         KWEISI MFUME, Maryland
                          JUDY CHU, California
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                         ANGIE CRAIG, Minnesota
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania
                       DAN BISHOP, North Carolina

                 Melissa Jung, Majority Staff Director
   Justin Pelletier, Majority Deputy Staff Director and Chief Counsel
                   Kevin Fitzpatrick, Staff Director
                   
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Nydia Velazquez.............................................     1
Hon. Steve Chabot................................................     3

                               WITNESSES

Ms. Melissa Kelly, Executive Chef and Proprietor, Primo, 
  Rockland, ME...................................................     7
Mr. Eduardo Sosa, Senior Vice President, SBA Lending, Commerce 
  National Bank, West Lake Hills, TX.............................     8
Ms. Ashley Harrington, Director of Federal Advocacy and Senior 
  Counsel, Center for Responsible Lending, Washington, DC........    10
Dr. Rich Coleman, DVM, Owner, Four Paws Animal Hospital, Lebanon, 
  OH.............................................................    12

                                APPENDIX

Prepared Statements:
    Ms. Melissa Kelly, Executive Chef and Proprietor, Primo, 
      Rockland, ME...............................................    34
    Mr. Eduardo Sosa, Senior Vice President, SBA Lending, 
      Commerce National Bank, West Lake Hills, TX................    43
    Ms. Ashley Harrington, Director of Federal Advocacy and 
      Senior Counsel, Center for Responsible Lending, Washington, 
      DC.........................................................    53
    Dr. Rich Coleman, DVM, Owner, Four Paws Animal Hospital, 
      Lebanon. OH................................................    77
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    American Farm Bureau Federation..............................    79
    Independent Community Bankers of America (ICBA)..............    81
    National Association of Federally-Insured Credit Unions 
      (NAFCU)....................................................    84
    National Association of Realtors (NAR).......................    86
    NFIB.........................................................    89
    Statement of Hon. Steve Chabot...............................    92
    Team85 Fitness & Wellness, LLC...............................    94
    Engine Advocacy..............................................    96


   PAYCHECK PROTECTION PROGRAM: LOAN FORGIVENESS AND OTHER CHALLENGES

                              ----------                              


                        WEDNESDAY, JUNE 17, 2020

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., via 
Webex, Hon. Nydia M. Velazquez [chairwoman of the Committee] 
presiding.
    Present: Representatives Velazquez, Finkenauer, Golden, 
Kim, Crow, Davids, Chu, Evans, Schneider, Delgado, Houlahan, 
Craig, Chabot, Radewagen, Balderson, Hern, Burchett, Spano, 
Joyce, and Bishop.
    Chairwoman VELAZQUEZ. Good afternoon. I call this hearing 
to order.
    Without objection, the Chair is authorized to declare a 
recess at any time.
    I want to thank everyone for joining us this afternoon for 
our Committee's second official remote hearing. I want to note 
some important requirements.
    Let me begin by saying that standing House and Committee 
rules and practice will continue to apply during remote 
hearings. Members will be expected to continue to adhere to the 
rules of the Committee and the House.
    All Members are reminded that they are expected to observe 
standing rules of Committee decorum when they are participating 
in any remote event. The technology we are utilizing today 
requires us to make some small modifications to ensure that the 
Members can fully participate in these proceedings.
    During the covered period as designated by the Speaker, the 
Committee will operate in accordance with House Resolution 965, 
and the subsequent guidance from the Rules Committee in a 
manner that respects the rights of all Members to participate.
    House regulations require Members to be visible through a 
video connection throughout the proceeding, so please keep your 
cameras on.
    Also, if you have to participate in another proceeding, 
please exit this one and log back in later.
    In the event a Member encounters technical issues that 
prevent them from being recognized for their questioning, I 
will move to the next available Member of the same party, and 
will recognize that Member at the next appropriate time slot, 
provided they have returned to the proceeding.
    Should a Member's time be interrupted by technical issues, 
I will recognize that Member at the next appropriate spot for 
the remainder of their time once their issues have been 
resolved.
    In the event a witness loses connectivity during testimony 
or questioning, I will preserve their time as staff address the 
technical issue. I may need to recess the proceedings to 
provide time for the witness to reconnect.
    Finally, remember to remain muted until you are recognized 
to minimize background noise.
    In accordance with the rules established under House 
Resolution 965, staff have been advised to mute participants 
only in the event there is inadvertent background noise. Should 
a Member wish to be recognized, they must unmute themselves and 
seek recognition at the appropriate time.
    Before we get started, I wanted to offer a warm welcome to 
our newest Member, Representative Kweisi Mfume from Maryland. 
Mr. Mfume represented Maryland's 7th Congressional District for 
five terms, beginning in 1987 before leaving office in 1996, to 
take on the critical role of heading the Baltimore-based NAACP.
    Being a Member of the Small Business Committee is nothing 
new, as he previously sat on the Committee and served as the 
Chair of the then-Subcommittee on Minority Enterprise, Finance, 
and Urban Development.
    I look forward to continuing our work to elevate the needs 
of small businesses across the country. Welcome, Mr. Mfume, and 
we are all pleased to have you join us.
    Over the last few months, the outbreak of COVID-19 has led 
to an unprecedented public health crisis. Congress took swift 
steps to address both, but, today, we will be focusing on the 
Paycheck Protection Program, created by the CARES Act.
    The Paycheck Protection Program is a subprogram of the 7(a) 
loan guarantee program, and began with almost $350 billion for 
fully guaranteed forgivable loans designed to meet payroll 
costs and other business expenses. The goal of the program is 
to save as many small business jobs as possible, as quickly as 
possible.
    To do so, SBA stood up the program within a week and has 
guaranteed over 50 times as many loans than it did in the 
entire 2019 fiscal year, all this in just a few short weeks. We 
appreciate all of the hard work by everyone at the SBA, and are 
equally grateful to the lending partners who participated in 
PPP for helping small businesses stay afloat during these 
uncertain times.
    However, given the size and scope of PPP and the speed with 
which it was stood up, implementation was bound to be less than 
perfect. As Members of the Small Business Committee, we are 
tasked with assessing areas for improvements in all of SBA's 
programs, and the first run of Paycheck Protection Program 
funding exposed some of those areas.
    For example, too many main street mom-and-pop shops were 
forced to sit on the sidelines as the program was first rolled 
out with larger, better-capitalized businesses receiving those 
loans. All they were left with was the hope that Congress will 
add more money to the program.
    Eventually Congress did, and on April 24th, the Paycheck 
Protection Program and Healthcare Enhancement Act was signed 
into law, providing an additional $310 billion in Paycheck 
Protection Program funding. Importantly, the additional funding 
included a set-aside of $60 million for small banks and credit 
unions, as well as CDFIs, MDIs, CDCs, and SBA micro loan 
intermediaries with the intent of furthering a greater portion 
of PPP funds to underserved business communities who struggle 
to access affordable capital.
    This second round of funding has not drawn down as fast as 
the first, in part, I suspect, because of the lack of clear 
guidance with the forgiveness rule in the first several weeks 
of the program. Agency rules like this rule forced us to act 
yet again, and, on June 5th, the Paycheck Protection Program 
Flexibility Act was signed into law.
    The Flexibility Act extended the covered period to use the 
loan from 8 weeks to 24 weeks, and up until December 31st. It 
also permitted borrowers to spend a greater portion of their 
loans on loan payroll costs and remain eligible for 
forgiveness.
    That makes today's forum a timely one, as we will be able 
to hear from stakeholders about what has worked with the 
program, what hasn't worked, and how Congress can keep 
optimizing the program as our local economies slowly begin to 
reopen.
    There were also a number of regulatory decisions made by 
SBA and Treasury in the early weeks of the program that may 
have limited the appeal of the loans to some prospective 
borrowers. For example, the agencies added a resource test to 
the program, and established a rule that required borrowers to 
spend 75 percent of proceeds on payroll costs in order to be 
eligible for full forgiveness.
    This rule greatly restricted the ability of many different 
kinds of small businesses who spend their loan funds as needed 
and made the PPP product much less appealing for borrowers.
    As the program enters the forgiveness phase, we must 
analyze the issues borrowers and lenders are currently facing. 
The primary concern we have heard about is the needlessly long 
and complex forgiveness application, which, according to 
experts, reads more like a tax form than a loan application. If 
loan forgiveness is the key feature of the program, applying 
for it should be as easy as possible.
    We have also heard that minority-owned small businesses, 
micro businesses, and sole proprietors continue to struggle 
with accessing PPP loans, despite about $130 billion remaining 
in the program amount. Just last week, Secretary Mnuchin 
testified before our Senate counterparts that Treasury will not 
be publishing detailed loan information for PPP, robbing 
Congress and the public of the data we need to evaluate the 
program.
    I look forward to hearing from our distinguished panelists 
today about how Congress can keep improving the Paycheck 
Protection Program, and whether Congress should consider 
further fixes before the second round of PPP funding expires, 
or the program closes on June 30th.
    Again, I want to thank the panelists for joining us here 
today. I now yield to the Ranking Member, Mr. Chabot, for his 
opening statement.
    Mr. CHABOT. Thank you, Madam Chair. Thank you for holding 
this hearing today, and I also want to extend our welcome to 
Mr. Mfume. I was elected in 1994, and he left in 1996, so I had 
the honor and pleasure of serving one term with him, and, as 
you indicated, he is former Chair, and I believe his portrait 
is on our wall in the Committee room. So we want to welcome him 
back to the Committee. I am sure he will make a great 
contribution to small businesses, again, all over the country.
    On a different note, I must, once again, register my 
concern on behalf of our side of the aisle about the continuing 
conducting of Committee meetings by virtual format. The House 
has important work that needs to be completed, yet we are 
forced to have these hearings virtually. With States and 
localities opening up, it is a concern that the House of 
Representatives remains a virtual entity. And I certainly don't 
hold the chair responsible for this. It is obviously above her 
pay grade, as I have said in the past. I do believe the Speaker 
and the Democratic leadership should make sure that Congress is 
in session, because we have a lot of work to do.
    I am actually in Washington right now in the Capitol, the 
Visitors Center, because we are holding a hearing relative to 
the George Floyd killing and, you know, Congress' response to 
that, and there is obviously a number of legislation. The 
Senate has legislation. The administration offered their 
suggestions as to how we move forward in an executive order 
yesterday; so, we are all discussing this. So I am here in 
Washington. But unfortunately, other than that, the other 
committees are not in session, and we ought to be.
    Now, relative to today's hearing, the Paycheck Protection 
Program application portal opened up on April 3rd, so it hasn't 
been that long. In just 2 months, the SBA approved and 
disbursed more than 4.5 million loans, totaling over half a 
trillion dollars. It has been a truly Herculean effort by the 
SBA, which is a relatively small government agency, which is 
really, you know, working extremely hard, and really it is 
incredible how much they have done, and, of course, they have 
more to do.
    According to the May employment report released by the 
Bureau of Labor Statistics, nonfarm payroll employment rose by 
2.5 million, so that is good news, and the unemployment rate 
declined to 13.3 percent.
    Now, it is good news that it went down. It is unfortunate 
that it is still that high. So, we obviously have a lot of work 
to do to get that unemployment rate down and get the American 
economy moving again. There is clearly a long way to go in this 
recovery, but it appears that the PPP is having a major impact 
in saving many American jobs.
    I have seen the enormous impact to these loans in my 
district back in southwestern Ohio, where I visited nearly two 
dozen businesses now that have utilized the PPP loan, so 
including restaurants and learning centers and manufacturers 
and medical practices and many others.
    For example, on May 8th, I had the honor and pleasure of 
visiting Four Paws Animal Hospital in Lebanon, Ohio, and I 
asked the owner and head veterinarian, Rich Coleman, if he 
would share his experience with the PPP program with us, and he 
is going to be one of our witnesses here today, and we 
certainly welcome him. We will be introducing him shortly.
    We know the program hasn't been perfect, especially early 
on. Congress made adjustments, including the Paycheck 
Protection Program Enhancement Act, and then the Flexibility 
Act, and these adjustments included--expanded the loan 
forgiveness from 8 weeks to 24 weeks at the option of the small 
business and what they determine is in their best interests. 
They now have that option of picking one or the other. That is 
going to help a lot of people.
    Also, modifying the loan amount that must be spent on 
nonpayroll or payroll costs. We went from the 75/25 to 60/40. I 
have heard from a lot of folks that is going to help a lot, and 
other things that we did.
    The PPP program is the result of tireless work between 
Congress and the administration. We hope to achieve a delicate 
balance between flexibility for lenders and loan recipients, 
protecting the integrity of the program's mission, and 
conducting needed oversight. Transparency continues to be a 
hallmark of all government programs. We must ensure that 
transparency, without compromising confidential information and 
personal information. I think that is very important.
    Additionally, as small businesses move closer to the end of 
their forgiveness covered period, it will be instrumental for 
Members of Congress to examine how forgiveness is treated. 
Today's discussion will add value to this element of PPP.
    We are all committed to making sure this program has a 
maximum impact for small businesses all across the country, and 
I want to thank all the witnesses today and the countless 
businesses that have provided feedback to me and to other 
Members of Congress, especially those on this Committee, about 
how the PPP program has worked with them. Their impact will 
have an immediate impact on the program and the Nation's 
economic recovery.
    And, again, Madam Chair, I want to thank you for holding 
the hearing, and I yield back.
    Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
    I would like to take a moment to explain how this hearing 
will proceed. Each witness will have 5 minutes to provide a 
statement, and each Committee Member will have 5 minutes for 
questions. Please ensure that your microphone is on when you 
begin speaking, and that you return to mute when finished. With 
that, I would like to thank our witnesses for taking time out 
of their busy schedule to join us.
    Our first witness is Melissa Kelly, Executive Chef and 
Proprietor of Primo, a seasonal farm-to-table restaurant in 
Rockland, Maine. After an esteemed career in teaching across 
the world, she opened this restaurant in 2000 with the help of 
an SBA loan. Since then, she has partnered with JW Marriott, 
who opened two additional locations and has been recognized for 
excellence by numerous industry publications.
    However, the outbreak of COVID-19 has put her restaurant in 
jeopardy, and she took out a PPP loan with the hopes that it 
will save her business.
    Chef Kelly, thank you for joining us today.
    Our second witness is Mr. Eduardo Sosa. He is the Senior 
Vice President of SBA Lending at Commerce National Bank, an 
independent community bank in the Austin, Texas area with about 
$5 billion in assets. The bank is the 7(a) preferred lender, 
owing to the years of experience with the program. His insight 
will, therefore, be helpful for the Committee as we evaluate 
implementation of the PPP.
    Mr. Sosa, thank you for joining us today.
    Our third witness is Ms. Ashley Harrington, the director of 
Federal Advocacy and Senior Counsel at the Center for 
Responsible Lending, a leading research and advocacy 
organization dedicated to a fair financial services market that 
provides meaningful opportunities for community asset building 
and economic security.
    Ms. Harrington, thank you for joining us today.
    Finally, I would like to turn it over to the Ranking 
Member, Mr. Chabot, to introduce our last witness.
    Mr. CHABOT. Thank you, Madam Chair.
    Our final witness today is Dr. Rich Coleman, owner of Four 
Paws Animal Hospital in Lebanon, Ohio. Dr. Rich completed his 
undergraduate studies at the University of Cincinnati before 
graduating from the Ohio State University, College in 
Veterinary Medicine, in 2002.
    He took over Plum Veterinary Clinic, changed the name to 
Four Paws Animal Hospital in 2007, built a new facility in 
2012, and began a remodel in March of 2019--so just last year--
to allow for more growth and opportunities for his clientele, 
and obviously, none of us anticipated at that time of what was 
coming down the pike. So I am sure it would be interesting to 
hear how that has affected it.
    Dr. Rich is a dedicated community servant, and sponsor of 
many local programs in Warren County. His wife, Jen, is a 
teacher at Lebanon City Schools, and when I visited, I had an 
opportunity to speak with her about what was going on in the 
school system up there at that time.
    Also, it was delightful to meet his two delightful 
daughters and their two cats and two black labs, although I 
don't think I met all of those that day.
    My staff and I visited Four Paws Animal Hospital last month 
to see how they have benefited from the PPP as they have, as I 
mentioned, many other businesses in our community.
    So I want to thank you, Doctor, for having us, and your 
great animal care facility and for joining us here today. I 
look forward to your testimony, as I do all the other witnesses 
as well, and I yield back.
    Chairwoman VELAZQUEZ. Thank you, Mr. Chabot, and thank you 
all for being here.
    I would now like to begin by recognizing Ms. Kelly for 5 
minutes. Thank you.

  STATEMENTS OF MELISSA KELLY, EXECUTIVE CHEF AND PROPRIETOR, 
   PRIMO; EDUARDO SOSA, SENIOR VICE PRESIDENT, SBA LENDING, 
COMMERCE NATIONAL BANK; ASHLEY HARRINGTON, DIRECTOR OF FEDERAL 
 ADVOCACY AND SENIOR COUNSEL, CENTER FOR RESPONSIBLE LENDING; 
  AND DR. RICH COLEMAN, DVM, OWNER, FOUR PAWS ANIMAL HOSPITAL

                   STATEMENT OF MELISSA KELLY

    Ms. KELLY. Good afternoon. I would like to thank Chairwoman 
Velazquez, Ranking Member Chabot, as well as the members of the 
Committee for this opportunity to represent and address the 
concerns of the hospitality industry.
    I am Chef Melissa Kelly, owner of Primo Restaurant in 
Rockland, Maine. I am here in my kitchen, alone. In normal 
times, this kitchen would be filled with my staff, as we would 
be preparing for dinner service. Unfortunately the corona 
pandemic has changed all of that.
    Today, I would like to share my thoughts and concerns in 
three areas: the people I work with, the industry at large, and 
the effectiveness of the PPP loan system. I am a chef. I 
believe that is my calling. The reason I do what I do is to 
help people eat healthy, delicious food that gives them 
nourishment and joy, and I believe that supporting the health 
of this planet is also part of my responsibility.
    I own and operate a small farm, and a restaurant in 
Midcoast Maine, and this is where I bring my beliefs to life. 
We operate on a seasonal calendar, open for 9 months, closed 
for 3. This April was the beginning of my 21st season. Through 
hard work and dedication, the business has grown steadily over 
the years, and now I employ a team of 50 farmers, managers, 
cooks, dishwashers, servers, hosts, and office staff.
    When the Governor of Maine wisely put our State on 
lockdown, we were preparing to open our doors. My first worry 
was my people. I had enough money in reserves to see them 
through a couple of payroll periods, but I didn't have any idea 
how long I would need to take to support--before we get back to 
work. I did not want to lay them off.
    The team that I have assembled is the reason we are able to 
do great things that we do. I have won the James Beard Award 
for best chef Northeast twice, and my team is a big part of the 
reason why.
    My restaurant seats 165 diners inside, and we normally 
serve over 32,000 meals a season. My staff of 50 have an 
average earning of $26 an hour. Our revenue is earned mostly 
between July and October. I am here today not only representing 
myself, but also as a spokesperson for the restaurant industry 
in general.
    I operate in Maine, a State that is especially dependent on 
revenue from seasonal tourists. Many of my fellow restaurateurs 
are not going to make this. They are not going to survive the 
government-mandated restrictions on a restaurant operation due 
to COVID-19.
    Regardless of State approved openings in industry, patrons 
may still have hesitance or face financial stresses of their 
own, which will take us time to recover. I worry for us all.
    When the PPP was first offered, I thought long and hard 
about applying for it. Rules on eligibility periods for 
calculating the FTE count and the payroll meant that I was 
forced to use a base period when I had a very reduced 
operation. For example, my allowed FTE count was 24 when 
normally, when I am in season, I have 50 FTE.
    I was also concerned with what expenses could be covered by 
PPP. There have been many added operating costs directly 
attributed to COVID-19, PPEs, staff training. I am building an 
outdoor area, and they cannot be reimbursed.
    I closed on my PPP for $185,000 on the 17th of April. At 
the time of the closing, I was supposed to spend all of the 
money in 56 days. Given the 8-week timeframe, I was extremely 
concerned about being able to stay current of allowable costs 
to make the loan completely forgiven. The last thing I need is 
more debt.
    For most of the period of the loan, the restaurant has been 
closed to dine-in operations by State mandate. We used the PPP 
loans funds to bring back staff, and to begin to offer takeout. 
Revenue from takeout has been less than 20 percent of what we 
would normally gross on normal operations.
    On May 13th, the SBA issued a new ruling allowing seasonal 
businesses to use an alternative seasonal operation base period 
to calculate the maximum loan amount. For this calculation, I 
was eligible for up to $513,000, but I would have had only 
until June 30th to utilize the funds.
    At that time, the restaurant was still closed for dine-in 
by our State orders. As such, it would have been a poor 
decision to obtain additional funds that almost certainly would 
not have been forgiven.
    The recent passage of the Paycheck Protection Program 
Flexibility Act is a positive step in the right direction to 
provide necessary flexibility and assistance to businesses that 
are struggling during this pandemic. Upon passage, I applied to 
increase my loan to $400,000 to support operations as we 
continue to face significantly reduced revenue.
    Unfortunately, I was soon notified that, because my local 
bank had filed an SBA form 1502 report on May 18th, the loan 
could not be increased due to SBA rules.
    Given all of this and the ongoing future challenges faced 
by the hospitality business, I am recommending changes to the 
SBA rules regarding closing of a loan after form 1502 
submission to allow for an increase in PPP loans for eligible 
businesses after----
    Chairwoman VELAZQUEZ. Ms. Kelly, your time has expired. You 
could expand during the question and answers period.
    I now recognize Mr. Sosa. Thank you.

                   STATEMENT OF EDUARDO SOSA

    Mr. SOSA. Thank you for inviting me.
    As a former migrant farm worker who has spent the last 25 
years as an SBA lender, I am especially honored to be here. I 
am a senior vice president at Commerce National Bank in Austin, 
Texas, where I helped to oversee our participation in PPP, 
making approximately 3,500 loans totaling over $477 million, 
supporting over 57,000 employees.
    I am grateful for Congress' quick action to address the 
problem of unemployed Americans and understand why Congress and 
the agencies felt pressure to produce statute and guidance as 
fast as possible, and to have lenders implement the program 
immediately.
    But lenders and borrowers are now paying the price for the 
speed, and we need to look for a middle ground that balances 
speed with common sense. Let me explain.
    First, PPP guidance. Includes 19 interim final rules, and 
48 FAQs which have frequently changed. I am an experienced 
lender, but I have never fully understood how to make a PPP 
loan from beginning to end. No one does. Forgiveness guidance 
was issued 7 weeks into the program after millions of borrowers 
signed contracts without lenders or borrowers knowing all the 
terms and conditions. We still don't know how eligibility and 
forgiveness decisions will be made. We need clear, complete 
guidance.
    Next, the credit elsewhere confusion. Congress allowed 
loans up to $10 million, broadened size standards, relaxed 
affiliation rules, and eliminated the traditional 7(a) credit 
elsewhere test. We believe Congress intended most small 
businesses would be able to certify to the necessity of a loan. 
The law never said the business needed to first use other 
available capital, and need remains undefined. But, as the 
media began highlighting negative stories, attitudes shifted. 
FAQs and IFRs now require that borrower's self-assess need 
based on the eliminated credit elsewhere test.
    I have watched my customers fearfully repay needed loans. 
Of my bank's $477 million in loans, $31 million were repaid 
because of contradictory guidance and perceived threats.
    The saddest part is the majority of the loans repaid were 
the smallest, as low as $1,400. Imagine a borrower's fear when 
the government says it must return loan funds or face serious 
consequences. The Federal Government said, ``We are here to 
help,'' and then changed its mind about who the program intends 
to help, threatening the very businesses that it invited to 
participate. Congress can require the agencies to acknowledge 
the credit elsewhere waiver, amend FAQs that directly 
contradict the statute, and cease threatening small businesses.
    Next, forgiveness issues. Lenders still don't know how or 
where to submit their borrowers' forgiveness applications, and 
borrowers still don't know how to appeal adverse decisions. 
What guidance we do have isn't clear, and places a tremendous 
burden on borrowers, especially those whose--especially those 
with smaller loans.
    We need a simplified forgiveness process. I strongly 
recommend that Congress provide statutory direction to create 
automatic forgiveness for borrowers with loans of 150,000 or 
less.
    Next, lender liability. The law said lenders can rely on 
borrower documents and certifications, but the agencies 
confused this mandate. One FAQ says we can rely on a borrower's 
certification, but a recent IFR says lenders must review 
borrowers' calculations and documentation. If forgiveness 
applications are not appropriately documented, they can be 
denied.
    Lenders are increasingly worried about participating when 
the rules are constantly changing. Should we be surprised that 
they are skeptical about any program expansion without complete 
guidance being provided first?
    Congress required promptly paid lender processing fees, but 
only now are we starting to get paid. And we are just learning 
that the agencies will refuse to pay fees for loans if there is 
an after-the-fact determination of ineligibility based on new 
interpretations. That is unfair and unprincipled.
    Despite these issues, here is why we chose to participate. 
We provided a loan to a husband-and-wife-owned bakery. Not only 
were they able to keep their 24 employees----
    Chairwoman VELAZQUEZ. Mr. Sosa, your time expired, so you 
will be able to expand during the question and answer period. 
Thank you.
    Mr. SOSA. Thank you.
    Chairwoman VELAZQUEZ. Ms. Harrington, you are now 
recognized for 5 minutes.

                 STATEMENT OF ASHLEY HARRINGTON

    Ms. HARRINGTON. Thank you.
    Good afternoon, Chairwoman Velazquez, Ranking Member 
Chabot, and members of the Committee. My name is Ashley 
Harrington, and I am a Federal advocacy director and senior 
counsel at the Center for Responsible Lending. We are a 
nonprofit, nonpartisan research and policy organization working 
to advance economic opportunity. CRL is an affiliate of Self-
Help, one of the Nation's largest community development 
financial institutions, CDFI.
    A long-time Small Business Administration lender, Self-Help 
has focused on helping underserved applicants access the 
Paycheck Protection Program. The PPP is one of the largest 
taxpayer-funded, crisis relief programs in our Nation's 
history. The program's intention is good, and was built around 
an important premise: Provide a lifeboat for small business 
owners so that they and their employees can stay afloat during 
this pandemic.
    But the execution and rollout of the PPP fell short, 
creating a barrier for small business owners of color to access 
relief, and that is what I hope to underscore for you today.
    Since the start of the crisis, business owners of color had 
been especially and unfairly hard hit. Active black- and 
Latino-owned businesses have declined by 41 percent and 32 
percent respectively. Asian American-owned business owners 
dropped by 26 percent. By comparison, active white business 
owners declined by 17 percent. These business owners of color 
are from the same communities that were the most adversely 
affected by the Great Recession, and unfortunately, they are 
the ones most likely to have been underserved by the PPP.
    This program disadvantages the smallest businesses. 
Businesses owned by people of color on average have fewer 
employees than white-owned businesses. CRL's analysis of the 
latest government study shows that for 95 percent of black-
owned businesses, and 91 percent of Latino-owned businesses, 
the owner is the only current employee as compared with 78 
percent of white-owned businesses. These businesses are the 
least likely to be served by the PPP.
    Business owners of color are less likely than white owners 
to have a relationship with a commercial lender. This puts them 
at a sharp disadvantage, especially during the first-come, 
first-served opening round of PPP, which caused serious fair 
lending concerns.
    Businesses of color have historically lacked access to SBA 
loans and credit generally. A recent study found steep 
reductions in SBA 7(a) lending to black businesses between 2008 
and 2016. In 2018 and 2019, only 5 percent of all SBA 7(a) 
loans were made to black-owned businesses, and only 9 percent 
were made to Latino-owned businesses.
    Business owners of color are more likely than white 
business owners to feel discouraged from seeking loans. 
Minority depository institutions, MDIs, and CDFIs are helping 
to increase PPP access who have been hindered by unnecessary 
loan volume thresholds and other difficult requirements.
    And, finally, the SBA's 11-page application for loan 
forgiveness, which largely tracks the documentation 
requirements under CARES, is so complex and cumbersome that 
businesses too small to afford an accountant or lawyer will 
find it extremely difficult to complete, turning what was 
supposed to be a grant into long-term debt.
    This burden, too, will disproportionately fall on business 
owners of color. And, while the easy form released today is an 
improvement, it still requires extensive documentation.
    Last month, the SBA inspector general reported that, 
despite a requirement in the CARES Act, SBA and the Treasury 
Department failed to issue guidance to lenders to ensure that 
they prioritized underserved markets, including rural, 
minority, and women-owned businesses. As of today, we are yet 
to see any guidance.
    The IG also noted that the SBA did not collect standard 
demographic data on its PPP form. This failure made it unlikely 
that the SBA could determine whether funds reached underserved 
markets. Despite the SBA's failure to collect and release data, 
there is ample evidence that PPP has not equitably served 
businesses of color.
    My written testimony provides more detail along with 
recommendations to address the problem and fully support 
business owners of color fully going forward.
    As we know, recent people-led protests across our country 
decried the pain of communities long denied equal access to the 
most basic aspects of America's promise of justice and equal 
opportunity. These communities continue to suffer the 
consequences of Federal policy decisions that needlessly and 
unjustly make economic opportunities harder to access.
    Right now, under your watch, the public is looking at you 
to address these inequalities, and they deserve a response. I 
urge you to seize this moment. CRL and other organizations are 
ready to help you. It is already too late for many small 
businesses, and those that remain can't wait any longer. The 
PPP is set to expire in 2 weeks. If it is not extended and 
reformed to serve these businesses, many will never recover.
    Thank you. I look forward to your questions.
    Chairwoman VELAZQUEZ. Thank you, Ms. Harrington. I now 
recognize Mr. Coleman for 5 minutes. Welcome.

                 STATEMENT OF DR. RICH COLEMAN

    Dr. COLEMAN. Thank you very much.
    Honorable Congresswomen and Congressmen, I am honored to be 
here, and thank you for allowing me to come before you today as 
a representative of small businesses across the country.
    My wife Jen and I purchased a veterinary practice from 
another veterinarian and quickly made it our own in 2007. At 
the time of the purchase, the practice was a single doctor 
practice. We now have expanded to become a five doctor practice 
with 34 employees.
    In 2012, we moved from a strip-mall store to our own state-
of-the-art, 5,400-square-foot standalone building in the heart 
of the Lebanon business corridor. For the past few years, we 
have seen an amazing level of growth from client standpoint, as 
well as revenue standpoint. Over the past few years of 
prosperity, we have been able to give raises, purchase 
equipment, and add additional staff members.
    In March, all that changed. COVID-19 hit the United States, 
and people were asked to stay home. Ohio was one of the 
earliest to shut down. Fortunately for us, we were deemed an 
essential business, and we were still able to operate as a 
veterinary hospital, but with severe restrictions in place.
    Because of these restrictions, we went from monthly 
continuous growth numbers to being down 30 percent or more. We 
were fearful that, at any time, we would have to shut down the 
hospital if one of the staff members fell ill from coronavirus.
    We first heard about the PPP loans on the national news. I 
immediately reached out to our local bank to start the wheels 
in motion. I stayed in contact with them and asked for any 
information they were getting as far as the loan application 
and what it would look like. I filled out sample applications, 
had my numbers confirmed by my accountant, and tried to get any 
documentation that was needed for when the loans would be 
approved by Congress, the SBA, and the President.
    Once the bank let me know that the applications were ready, 
I filled them out, submitted them the next day, and the bank 
kept me in the loop where we stood with the application 
process, and the approval process occurred, and, quickly, we 
signed documents, and within a week, our PPP was funded.
    I cannot say enough about the way that Congress and the SBA 
got such a huge undertaking done so quickly. The funds were 
exactly what our business needed to make up the shortfall in 
revenue, allow us to keep all of our employees. We did not lay 
off any of the staff, and everyone was able to keep their 
hours, especially if they were able to come to work.
    A few staff members had to stay home for 2-week quarantines 
due to unknown nature of things in their early stages. We asked 
anyone with a fever or cough to stay at home for those 14 days, 
but no one in the hospital tested positive for COVID-19, and 
everyone was able to return to work.
    The only concern that we had with the loan process was the 
loan documents that we signed did not have language in them 
that discussed the loan forgiveness. We were signing a loan 
with good faith that the government would honor their word and 
forgive the PPP loan.
    I looked to the loan as a lifeboat that my business needed 
and to provide for my staff and my family. If the loan was 
forgiven, it would be a Godsend. If the loan was not, then I, 
at least, had a government loan with a reasonable term to help 
me get through this unusual time.
    The loan was funded during the first phase, and we received 
$206,000. Now, I saw an interesting statistic that, during that 
first phase, the average loan was $206,000, so I joked with my 
wife that we owned the most average business in the United 
States.
    Our 8-week loan period actually ends on June 17th, today. 
We have elected to extend to the 24 weeks as allowed by the new 
provisions passed 2 weeks ago. We opened an account that was 
only to be used for the PPP loan funds. That way, there was 
complete transparency with every dollar that was used.
    Our business has rebounded, and we are digging out. We are 
still not practicing veterinary medicine the way I have the 
last 18 years, but we are currently doing car calls with 
clients staying in the hospital and only the pets coming in. It 
is a new business model, and my staff has been amazing in 
completely reinventing ourselves. I cannot thank them enough 
for getting our veterinary hospital and all of our patients and 
clients through these tough times.
    In conclusion, again, I cannot thank Congress enough for 
providing the funds that all small businesses in the U.S. 
needed to survive this time of uncertainty. I feel that the 
loan process could not have gone any smoother than it did. 
Congress is known for doing things at glacial speed, and I was 
amazed at how quickly this came together. It was amazing that--
what an accomplishment can happen when we all work together.
    I would like to thank our local community bank, Lebanon 
Citizens National Bank, for making the process as easy as 
possible under the circumstances; my accountant, Pelfrey & 
Associates, for helping navigate through the application 
process.
    Thank you again for having me today and allowing me to tell 
my story. Because of the bipartisan efforts of Congress, the 34 
staff members at Four Paws Animal Hospital were able to go home 
every night knowing that they could pay their rent, feed their 
family, and, more importantly, feed the massive amounts of pets 
that they own.
    Thank you.
    Chairwoman VELAZQUEZ. Thank you, Mr. Coleman.
    I will begin by recognizing myself for 5 minutes.
    Ms. Harrington, just last week, Secretary Mnuchin announced 
that no PPP loan data will be published. As we both know, this 
is in contradiction with conventional 7(a) practices, under 
which individual loan data is publicly accessible on the SBA 
website.
    Can you expound on the issue of the lack of PPP loan data 
reporting and how it will impede the ability of Congress and 
the public to track the demographic breakdown of PPP access?
    Ms. HARRINGTON. Absolutely. Thank you, Congresswoman.
    It is definitely a big issue and departs from everything 
SBA has done previously, and all of the reporting it does for 
the 7(a) program. The demographic information is so important 
to know where these funds are going and which communities are 
being served.
    We have already heard about all of the communities--the 
black--the businesses owned by people of color who are 
struggling and who have had--not had access to these programs, 
who have gone to institutions and been denied, or never heard 
anything about their application, and they are struggling. So, 
without this information from the SBA itself, we cannot hold 
this--hold the SBA accountable for the $660 billion taxpayer 
investment.
    Chairwoman VELAZQUEZ. Thank you.
    Mr. Sosa, does the lending community have similar concerns 
with data reporting?
    Mr. SOSA. The regular 7(a) program, you are correct. As far 
as I know, all of the information there is public information.
    There might be some consideration as to some proprietary 
information on the PPP loan, but I don't want to get into any 
kind of political thing here, because I am not a politician. I 
support publicly available information or oversight. If 
somebody is not playing by the rules, they need to answer for 
that lack of rules.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. Kelly, how many of your employees have you been able to 
retain, and do you think you will be able to keep rehiring as 
your local economy slowly begins to reopen?
    Ms. KELLY. I have been able to retain 16 employees at this 
moment. We have not opened the restaurant for indoor dining as 
of yet. Like I stated earlier, I am building an outdoor area 
because the State of Maine allows 50 guests inside and 50 
outside. I intend to open inside slowly soon with caution, and, 
as soon as we get the outside area open, I will bring back my 
other employees, absolutely.
    Chairwoman VELAZQUEZ. Ms. Harrington, surveys have shown 
that the COVID-19 pandemic has disproportionately affected 
micro businesses and sole proprietors. In your view, what more 
needs to be done to ensure that PPP and other small business 
programs are assisting the smallest of small businesses?
    Ms. HARRINGTON. We need to ensure that the remaining funds 
in the PPP program are getting to these really small 
businesses, the businesses who have not yet been served. There 
is over $100 billion left that is set to expire. The program 
needs to be extended, but also reformed, providing for things 
like a minimum origination fee, set-asides for CDFIs and MDIs. 
All of these things will help ensure that funding gets to the 
really small businesses and the businesses owned by people of 
color who have yet to be served by this program.
    Chairwoman VELAZQUEZ. So, at minimum, we should expect for 
the administration to provide data as to the demographics, 
similar to what any 7(a) lender or borrower has to provide when 
they apply for those loans. That is the only way that we could 
determine whether or not the smallest of the small businesses 
have been able to access the system that they need.
    Should we consider automatic loan forgiveness for the 
minimum loan amounts, Ms. Harrington?
    Ms. HARRINGTON. Absolutely. The forgiveness application as 
laid out, and the process as laid out, even this EZ form, is 
incredibly burdensome for the really small businesses. We 
advocate for a streamlined automatic forgiveness for loans 
under 100K, and this will disproportionately serve the really 
small businesses. On average, these are businesses that will 
likely have 13 or fewer employees, the businesses that we 
really want to be able to survive and make it through this 
crisis.
    Chairwoman VELAZQUEZ. Thank you, Ms. Harrington.
    My time has now expired. The Ranking Member, Mr. Chabot, is 
recognized for 5 minutes.
    Mr. CHABOT. Thank you very much, Madam Chair.
    Dr. Coleman, I will begin with you. What time and expense 
do you estimate that it might take to complete the PPP 
forgiveness application process?
    Dr. COLEMAN. Well, did you say the time and expense? Well, 
you know, the key with small businesses, we are not Fortune 500 
companies. We are--we don't have accountants on staff. So, you 
know, a caterer is going to make 400 sandwiches and then go do 
business. A mechanic may go change out a muffler, and then go 
do their business work. With me, I am going to go spay the 
family pet, and then come back, and now I have to do all this 
business work, and sometimes it is at the detriment of my 
family time.
    The key here is, we have to outsource all these things, so 
streamlining it for these small businesses would be great, and 
it sounded like the SBA started that today with the EZ form, I 
have this 11-page document right here from what it was before. 
And, you know, I showed it to my wife last night, and it was, 
it was like a tax form. I--I am not going to lie to you. I 
missed a few of the words in there. I didn't know what they 
meant.
    And so, I was concerned that this was going to be a massive 
undertaking and be something that would require me just going 
to the accountant and having the accountant do the entire work 
for me.
    Mr. CHABOT. Let's see. I will go to Mr. Sosa next. 
Considering the kind of piecemeal issuing of guidance and FAQs, 
frequently asked questions, and the IFRs, interim financial 
rules, would some form of comprehensive program guide have been 
more, or would it be more helpful to lenders and recipients in 
your opinion?
    Mr. Sosa, I think you are not muted. I think you are muted.
    Chairwoman VELAZQUEZ. You need to unmute.
    Mr. SOSA. Thank you. I think that would be incredibly 
helpful. Under--we are a PPP lender under Amarillo National 
Bank, our ownership group, and, under that program, we have 
standard operating procedures that give us the guidelines for 
that.
    You will--in my opinion, you would find that you would have 
lenders participating in greater numbers, and borrowers 
particularly less concerned and less scared by having definite 
guidelines of what rules they can follow, not only for the 
application, but as well, particularly for the forgiveness 
process.
    That is an onerous process. Forgiveness, even under the 
simplified applications that were issued this morning, the--
they are still quite onerous, as far as documentation is 
concerned. I think a standard automatic forgiveness at 150,000 
would be called for.
    Mr. CHABOT. Thank you very much.
    Ms. Kelly, I will go to you next. Are there issues that you 
think the Congress should address as we consider policies for 
the long-term economic recovery that we are going to be working 
towards?
    Ms. KELLY. I want to stress the need to revise and amend 
the PPP, like maybe call it a PPP 2.0 to provide additional 
funding to support restaurants and hospitality businesses in 
the weeks and months ahead, as we are still dealing with the 
impact of the virus.
    I tried to give you a brief description today about my 
experience as a small business owner in Maine. I am very 
grateful to this Committee for all of the bipartisan work that 
you have done and continue to do, but I want you all to think 
about restaurants in a different way. After 30 years being in 
the business, our industry is in a crisis. Without additional 
support, we will lose the important sector and the dynamic 
contributions that we have in our local communities.
    Our fray goes far and wide, all of the local businesses 
that we support, and we are in a crisis.
    Mr. CHABOT. I think I have about one more question. I have 
got a lot of them, but one more.
    Ms. Harrington, I will go to you now. As Congress examines 
the approximately 130 billion that we still have remaining in 
the PPP program, where should we concentrate our efforts, in 
your opinion, to produce the most impact for small businesses?
    Ms. HARRINGTON. They should concentrate on ensuring that 
these funds get to the really small businesses with ten or 
fewer employees, that they are getting to businesses located in 
LMI Census tracts, that they are working with lenders who 
traditional serve underserved businesses, like CDFIs and MDIs, 
and also the first step, right, is extending the program to 
ensure that that $130 billion can actually get to the 
communities who have yet to be served.
    It is great to hear that it has worked for some businesses, 
but I think the numbers about the nonactive business owners 
currently, 41 percent of black-owned businesses and 32 percent 
of Latino-owned businesses, speak for themselves that changes 
need to be made to this program for it to work for everyone.
    Mr. CHABOT. Thank you very much.
    My time has expired, Madam Chair, so I yield back.
    Chairwoman VELAZQUEZ. Thank you. I now recognize the 
gentleman from Maine, Mr. Golden, for 5 minutes.
    Mr. GOLDEN. Thank you, Madam Chair. I am just setting my 
clock and filling up my--that I need for questions. There we 
go.
    I want to start with Mr. Sosa. I appreciate your sharing 
your experience from the lender perspective, some of the 
challenges of the PPP, and I have heard similar concerns from 
lenders and borrowers about the lack of clarity surrounding, 
loan procedures and how that complicated their decision making 
on whether or not to use the PPP. Hopefully those people are 
feeling like they have the information they need to come 
forward and [Inaudible] that $130 billion that remains.
    [Inaudible] it is my view--and I think a lot of people do, 
that lenders and borrowers in Maine, in dealing with the 
forgiveness process, the streamlined, you know, kind of set up 
over the smaller business owners in particular, and you talked 
a little bit about the 3508 EZ.
    I wanted to ask you if you knew any statistics--and I am 
sorry to put you on the spot, but, if the SBA were to follow 
your advice and grant automatic forgiveness for loans worth 
$150,000 or less, roughly what proportion of your PPP clients 
do you think would benefit from that change?
    Mr. SOSA. Thank you for the question.
    Chairwoman VELAZQUEZ. You need to unmute. Okay.
    Mr. SOSA. At Commerce National Bank, currently 83 percent 
of our loans were below 150,000, so 83 percent of those 
borrowers--that is, 2,868 borrowers--would automatically be 
forgiven. On the national basis, which is really an impact, 86 
percent of the business loans would be forgiven. That is 
somewhat significant, especially when you consider that only 
represents--that represents 86 percent of number of loans. That 
only represents approximately 27 percent of the dollars.
    So there is still robust oversight availability on that--on 
the remaining dollars just at the bulk of the small businesses, 
those guys that, with the boot on the ground, with that 10 
employees or less, would be forgiven.
    Mr. GOLDEN. Yes. And I appreciate you pointing out the 10 
employees or less.
    How might you estimate the number of hours per client that 
might be saved in regards to how they spend their time and 
their focus?
    Mr. SOSA. That is a tough math question. Well, it--jeez. If 
you just go back and you use the 3 hours that SBA estimates, 
which I sincerely and humbly submit is very, very low, the--and 
then multiply that out times how many loans, jeez. I know that 
there is 3 million loans just below $50,000. Just in that 
category is 3 million loans, so, if you multiply those 3 hours 
against that----
    Mr. GOLDEN. That is a lot of work around the country.
    Mr. SOSA. It is a lot of work saved, yes, sir.
    Mr. GOLDEN. Well, thank you so much. I have got about a 
minute and a half left.
    Ms. Kelly, so glad to have you joining us. People love your 
business in Maine. I have talked to a lot of businesses that 
share some of the, you know, same challenges that you have 
shared. As you think again about like the next 6 to 12 months, 
some of the unique challenges that you see lying ahead, talk 
more about what you need from Congress and the government to 
help you take the next step towards recovery and [inaudible]--
--
    Ms. KELLY. Okay. Yeah. For me, a lot of the next 6 months 
ahead are very unknown. We--actually, we are approaching July, 
which I would have my whole team being trained and ready for 
the busiest peak of my season, July through October. I have 
lost all of my business that is in my farm. Weddings and 
everything has been canceled.
    We need support. We need to figure out a way--the whole 
unemployment average of $600 has been like a little bit of a 
catch-22 for us, because we cannot--a lot of employees don't 
necessarily want to come home--back to work when they are 
making over $1,000 a week just staying home and golfing and 
things like that.
    However, I think, if there was--I know the work share 
program, and those are really important and ways that we can 
have our employees come back, spark the economy, and we share 
in that cost to keep them at the level that they are used to, 
the money that they are used to making, and I don't understand 
how we are going to get past this if we don't work together in 
that.
    Chairwoman VELAZQUEZ. Thank you. The gentleman's time has 
expired.
    I now recognize the gentlelady from American Samoa, Ms. 
Radewagen.
    Ms. Radewagen, you need to unmute.
    Mrs. RADEWAGEN. Can you hear me now?
    Chairwoman VELAZQUEZ. Yes, we can.
    Mrs. RADEWAGEN. Can you hear me now?
    Chairwoman VELAZQUEZ. Yes, we can.
    Mrs. RADEWAGEN. Talofa lava. Good morning, or good 
afternoon, depending on where you may be. I feel sorry for all 
of you. You are all stuck on the continent, and I am getting to 
enjoy the sun in paradise.
    But I want to thank Chairman Velazquez and Ranking Member 
Chabot for organizing this hearing, and thank you all for 
testifying today.
    The PPP has been extremely helpful to the people of 
American Samoa, but, like many great things, we can always work 
to make it even better.
    My question here is for Ms. Harrington: Do you believe 
small businesses were aware of the resources available to them 
within the SBA prior to COVID-19?
    Ms. HARRINGTON. I think part of COVID-19, the SBA lending 
has not served businesses of color well. If you look at the 
data for 2018 and 2019 for the 7(a) program, which is the 
largest SBA lending program, only 5 percent went to business 
owners who were black, only 9 percent went to Latino business 
owners. I think there is a lot more we can do to support 
business owners of color, even beyond the PPP. I think 
historically communities, individuals and business owners of 
color have lacked access to credit through traditional means, 
even through the SBA, which is a government guaranteed program. 
And I think recognizing that and looking at the types of 
businesses who have not been served even before COVID is very 
important. That is why the data and the transparency is also 
important.
    So I think that there are a number of ways to do this. It 
is not just about resources, it is about addressing the root 
causes of lack of access to credit in this country that extends 
to small business owners.
    Mrs. RADEWAGEN. Mr. Sosa, can you provide for the committee 
a brief overview of how credit elsewhere has changed from the 
beginning of PPP to today? Mr. Sosa?
    Mr. SOSA. Yes, I am here. Just had to remember to unmute.
    The statute eliminated credit elsewhere for the PPP 
program. The agencies, it reinstituted the PPP credit elsewhere 
task by requiring small businesses to self-certify that they 
needed the money. And then they failed to provide a definition 
of what ``need'' is. It is completely undefined. Then they 
started criticizing those small businesses for applying and 
scared several of my borrowers away.
    I had a borrower that paid off $2,200, a little $2,200 
loan, just because he heard the threats from the government. 
``Or else,'' they said. He came from a country where the 
government regularly carried out threats and acted on those 
threats. As an immigrant, he ran scared from the program. That 
is unfair. That is not our country. That upset me quite a bit 
and I think it is wrong.
    We all need to remember that words mean something and not 
to threaten these poor small business people.
    Mrs. RADEWAGEN. Thank you, Madam Chairwoman. I yield back.
    Chairwoman VELAZQUEZ. The gentlelady yields back. Now we 
recognize the gentleman from New Jersey, Mr. Kim, for 5 
minutes.
    Mr. KIM. Thank you, Madam Chair, for pulling together this 
very important hearing, which is one of the most issues that I 
hear constantly about in my district here in New Jersey. What 
we are talking about reforms in the Paycheck Protection Program 
and how we are making sure that funds are getting into the 
hands of those that need it the most. As I said, that is really 
the critical question. And Ms. Harrington, I thought you have 
really eloquently spoken to just the challenges that are faced, 
certainly by making sure that we are getting these funds to 
businesses owned by minority-owned businesses in communities of 
color, and other places where people are in dire need.
    I have also been hearing from small businesses from various 
other industries, like nonprofits, after-school programs, and 
medical providers that were excluded from the program and are 
in dire need of aid. And a lot of their work very integral to 
different aspects to reopening.
    So, I guess, Ms. Harrington, I wanted to ask you, as we are 
starting to think about upcoming stimulus bills and other 
additional efforts that we can do on the PPP, do you think it 
would be beneficial to expand the PPP to other types of 
businesses, like some of the ones that I mentioned?
    Ms. HARRINGTON. I think, first, I want to reiterate it is 
very important to reform and extend the current PPP just until 
that funds run out. I think moving forward, we do need to think 
about programs that are not just loan programs. We need to 
think about traditional, straight-up grant programs that would 
benefit and be targeted to the small businesses and to the 
businesses that are located in low- and middle-income 
communities, low- and moderate-income communities. There are 
ways to do that. Also, thinking about which agencies we are 
working with. If it is a loan program, which lenders we are 
working with.
    So, I think there are a number of ways to do it that, but I 
think you are absolutely right. We need to look at the sectors 
that haven't been served, the populations that haven't been 
served, and recognize that maybe the Paycheck Protection 
Program was helpful for some, but it doesn't work for all 
businesses, and, therefore, we have to think about more 
creative ways moving forward.
    Mr. KIM. [Inaudible] having supportive data, and just 
needing to have that data, to, first of all, understand what 
sectors are getting hardest hit, and to be able to overlay on 
top of that, just when we think some of these different sectors 
will be able to get back on their feet, as we know there is 
asymmetry to that, and some sectors may be able to get back on 
their feet earlier than others.
    And I think, Ms. Kelly, I just wanted to just turn to you 
here----
    Chairwoman VELAZQUEZ. I think we lost----
    Ms. KELLY. I am here. Can you hear me?
    Mr. KIM. [Inaudible] getting back open, in particular when 
it comes to seasonal issues here. My district is--my district 
is one where seasonal tourism is a huge part of the economy, 
especially out on the Jersey Shore; a lot of restaurants are in 
a similar situation to you. If you could elaborate a little bit 
more on the unique challenges that you are facing in terms of 
seasonality of your business, and the uncertainty of how the 
next couple of weeks and months will look when it comes to 
opening back up?
    Ms. KELLY. Well, we are already in almost the kickoff of 
the season here in Maine. So it has been very daunting to have 
to be in this position at this point. I mean, we are living in 
a historic moment right now, where we need to expand--in my 
opinion, we need to expand the PPP, which may be the survival 
for small businesses who really depend on a certain window of 
time for the amount of revenue that they make. I think grants 
would be beneficial for different loans, but somehow, we have 
to capture this moment or the whole year for us is a wash.
    Mr. KIM. Well, thank you for that. I have certainly been 
hearing from a lot of restaurants. I got to go visit a number 
of them in my district as they are starting with outdoor 
seating today--earlier this week. But we continue to hear the 
same thing that you are saying, which is restaurants cannot 
operate off of 30 percent capacity or 40 percent capacity, that 
the margins are already hard enough at peak levels.
    So I certainly want to continue to work with you and others 
to see what we can do to try to get you the help that you need.
    So with that, Madam Chair, I yield back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    I now recognize the gentleman from Ohio, Mr. Balderson.
    Mr. BALDERSON. Madam Chair, thank you very much. Thank you 
for sitting in today, Ms. Kelly and Dr. Coleman. My first 
question is a few weeks ago, I joined many of my colleagues, 
including Mr. Burchett and Mr. Hern who also sit alongside me 
in this committee and requested a simplified PPP forgiveness 
application. In this letter to the SBA and Treasury, as well as 
the Senate leadership, we voiced our concerns of the complexity 
of the 11-page PPP loan, forgiveness application, and asked a 
new, simplified version be created, much like the IRS relies on 
the 1040-EZ form for some taxpayers.
    Just this morning Treasury and SBA released 3508-EZ loan 
forgiveness application, which seeks to ease the forgiveness 
process for many small businesses. I think this is a step in 
the right direction. I want to thank the administration for 
making this update. Ms. Kelly and Dr. Coleman, have either of 
you had a chance to take a look at this new 3508-EZ form 
application?
    Dr. COLEMAN. I apologize, I have not. I was working this 
morning, and came straight from appointments to this. I did get 
a notice by email from one of my colleagues that it had passed 
this morning by the SBA. And so, I have not had a chance to 
look at it. I am sure it is less daunting than the 11-page 
document that we have seen already. But unfortunately, I have 
not seen it yet.
    Mr. BALDERSON. Dr. Coleman, I completely understand. I was 
on a flight this morning myself.
    Ms. Kelly?
    Ms. KELLY. Absolutely. Same as Dr. Rich, I was working this 
morning. And I did not have an opportunity to see it.
    Mr. BALDERSON. Again, I understand completely. I was 
wondering if you had a chance to see it.
    This is for Dr. Coleman. My next question is for Dr. 
Coleman, thank you. Is it vital to be working during this 
health crisis, care crisis, but today we are here to understand 
the economic impact this had on our Nation's small businesses ?
    In your written testimony, you talk about the great faith 
agreement between small businesses applying for PPP, and the 
Federal Government, because the documents you signed didn't 
have forgiveness language included. Over the last few weeks, 
SBA and Treasury have worked together to release the language 
relevant to PPP forgiveness, as well as the application itself. 
Have you had an opportunity to look through this new 
information?
    Dr. COLEMAN. Yes. Yes, I have.
    Mr. BALDERSON. And if so, what are your thoughts?
    Dr. COLEMAN. As far as the forgiveness, a couple of the big 
keys that I saw, and I actually made a list of them, the 
biggest change between the first one and second one, the first 
one [Inaudible] PPP weeks with the payroll was huge 
[Inaudible]. Our biggest issues that we had was, we were 
concerned about once we got funded, are we 8 weeks from that 
date? Well, if it occurred in the middle of a payroll cycle and 
so we were a little off on schedule, so that was a big one. The 
flexibility from the 8 weeks to the 24 weeks, we are going to 
extend to the 24 weeks, just because we are actually holding 
back 5 percent of our loan just as a precautionary. We don't 
know where COVID is going to go from here. So we are going to 
hold that back.
    The 25 to 40 percent. We have been open the whole time, so 
our biggest deduction was from payroll. And, so, where Ms. 
Kelly may have had more of an issue with paying rent, paying 
everything else, because she didn't have as many employees on 
staff. I had 34 employees the entire time. So the 75, 25 was 
perfect for us; but for another business that may have been 
closed, that is going to be hugely beneficial to them because 
they are going to be able to grab that 40 percent and pay more 
to keep the actual standing business.
    The extension to December 31st to rehire the FTEs is going 
to be important, because now you are going to be able keep the 
full-time equivalents. The hardest part right now is we have 
this extra $600 that people are making on unemployment and 
getting people back is the hardest part. People are coming back 
to work angry because they are making less money, but they have 
to come back to their job or they could lose their job.
    So that expiring is going to help, but it gives us until 
December--until January to get that. And then, you know, the 
other one was the good faith of rehiring. That was going to be 
a massive thing. If I am trying to rehire, but I can't rehire, 
that is going to--if I can show, look, I have done all these 
interviews, I just can't get anybody in, that is going to be 
with a Godsend for some of these businesses that can't rehire, 
but they have been trying very hard to.
    So those were just some examples I thought were fantastic. 
Yeah.
    Chairwoman VELAZQUEZ. Your time has expired.
    Mr. BALDERSON. Thank you very much. I yield back, Madam 
Chair.
    Chairwoman VELAZQUEZ. The gentleman yields back. Now we 
recognize the gentlelady from California, Ms. Chu.
    Ms. CHU. Thank you. Mr. Sosa, since the start of the COVID 
crisis, it has been a top priority of mine to ensure that SBA 
loans and resources are provided in non English languages. And 
I am thankful for all the work the committee has done to make 
that happen. The CARES Act provided $25 million for the SBA to 
develop these resources, and the agency has now posted several 
guides and translations in 17 languages, including Asian 
languages.
    But it is key that the SBA also provides proactive outreach 
to small business owners with limited English proficiency, and 
supports the lenders that are responsible for processing their 
PPP applications.
    So, I am interested in your perspective as a lender. Could 
you explain what processes you have to serve business owners 
who need service in non English languages? And can you discuss 
what guidance, if any, that SBA has provided to help you serve 
these businesses?
    Mr. SOSA. Unfortunately, we have not received much guidance 
on the multiple languages available and documentation. In our 
footprint, the largest language is Spanish. We are very 
fortunate within our organization that we have several people 
that are Spanish speakers, and we are able to deploy their 
talents to be able to address the needs of the particular 
borrowers that needed that assistance.
    Ms. CHU. Now, you said in your testimony that the PPP 
forgiveness application is so complex that small businesses 
would need to hire professionals to help them understand it. Do 
you believe the SBA's done enough to help limited English 
proficient business owners navigate these forgiveness 
applications?
    Mr. SOSA. Well, you are exactly correct, my view on the 
former 11-page application is that it is extremely daunting. 
Now, the forgiveness application that came out this morning is 
a step in the right direction. I have had only an opportunity 
to review it cursory, so I can't speak to it in detail. But 
there are--like anything else, the devil is in the detail, and 
there are a couple of items in there that are still requiring 
all the documentation as before.
    So my recommendation to this committee and to the Congress 
is an auto forgiveness legislation is passed to direct the 
agencies to set up a $150,000 automatic forgiveness of loans.
    Ms. CHU. Yeah. Thank you.
    Ms. Harrington, SBA was directed by Congress to prioritize 
underserved businesses, including those owned by minorities, 
women, and veterans in their administration of the PPP. 
However, when I chaired a forum last month with the SBA 
inspector general, he told me that SBA had not provided any 
formal guidance to lenders, but had merely emailed a few 
community banks and encouraged them to serve these businesses. 
Can you explain what specific type of guidance SBA must 
ensure--provide lenders to ensure that they can adequately 
prioritize underserved businesses?
    Ms. HARRINGTON. You are absolutely right and, we have yet 
to see any of that guidance. They should provide guidance about 
who they should be working with, and just guidance about how 
important this is. I think the fact that this was included in 
the CARES Act and was a stated express intent of Congress that 
these businesses and communities be served is important, and 
the fact that SBA did not reach out to lenders with specific 
information about how to reach these communities, different 
partners that they could work with. Also, the technical 
assistance that was provided in the Act was provided to 
universities, and not necessarily through community-based 
organizations. The guidance could have also included 
information about working with other community partners beyond 
the community-based organizations, like CDFIs and MDIs, who do 
a good job of serving these communities.
    There is so much that SBA could have done to ensure that 
these communities were prioritized that they did not do. And 
some of it is, like, very simple things, and they just didn't 
take the steps to do so, in addition to not actually collecting 
the data to know what was happening with the lending itself.
    Ms. CHU. Thank you. I yield back.
    Chairwoman VELAZQUEZ. The gentlelady yields back. And now 
we now recognize the gentleman from Oklahoma, Mr. Hern, for 5 
minutes.
    Mr. HERN. Thank you, Madam Chairwoman. Thank you, Ranking 
Member Chabot. I appreciate you having this hearing today. It 
is great to see we have a hearing, and before we can have the 
hearing, the simplified form comes out. How about that for 
congressional work? You all ought to be happy about that. Don't 
we wish everything else could happen in that kind of speed.
    I really sympathize with each of you being a small business 
owner for 35 years, and the majority of them in the restaurant 
industry. And it has been very, very difficult for everyone, 
but specifically those in the restaurant and hotel industry.
    But I am also very thankful that we are able to find a way 
to get money to businesses very quickly by using our financial 
institutions out there, and thankful for what has all been done 
with the PPP loans and the auto loans to help as many 
businesses stay in business as possible. We know that there 
will be many that will file for bankruptcy, and it is tragic 
that COVID-19 pandemic has caused this to happen. The PPP 
loans, in my State, have been--the State of Oklahoma, 61,000 
loans, and roughly $5 billion in loans to help small 
businesses, and I am greatly appreciative of that money to help 
the folks stay in business.
    As we all know, and we sometimes forget, that we put about 
15 to 20 years' worth of work that SBA normally does and shoved 
it into about a 12-week period. That is no easy task for any 
industry, for any business, or lending institution, much less 
the government institution. So I want to be recognizing of the 
hard work of the staff. And I know this is not to be critical 
of the staff, more of the institution, but I know the staff has 
worked long hours to make sure that businesses were saved.
    The first question I have is really, because there has been 
minimal actual guidance, and instead the, SBA has had a series 
of released frequently asked questions that have been kind of 
leaked out, or just trickled out, if you will. The 
administrator to guide American business owners and employees 
in a hectic and confusing time.
    And further adding confusion are the multiple releases of 
the interim final rules, that sometimes contradicted 
themselves.
    Dr. Coleman, Ms. Kelly, each of you talked about this 
confusion in your testimony. And I was wondering if you could, 
as people that look at small business, I know none of us want 
to spend any time in the past, certainly not the last 4 months, 
but as we go forward, what are some of the solutions that both 
of you think the SBA could implement moving forward to perfect 
the PPP program, there is still roughly $90 billion out there, 
so that we could help with the money that we currently have 
authorized and appropriated that we can currently help the 
small businesses that are out there? Ms. Kelly, do you want to 
go first?
    Ms. KELLY. Absolutely. You know the recent package of the 
PPP-FA was great. I applied to increase my loan, and 
unfortunately, I was notified by the bank that they basically 
changed the field goal. So I couldn't--they had already 
submitted their 1502. And I was approved for a certain amount 
of money, but then I was denied. I would like that to be 
revisited. I mean, many Mainers and small businesses are 
[Inaudible] and none of us thought that this was going to last 
more than 8 weeks, and here we are.
    Mr. HERN. Dr. Coleman, could you give us your thoughts?
    Chairwoman VELAZQUEZ. You need to unmute, sir.
    Dr. COLEMAN. The 60 percent that is out there right now as 
far as what we use for payroll, I think one thing that is 
scaring some people is that cliff. Is that a cliff that is if I 
don't hit that 60 percent, am I going to still get my 
forgiveness?
    So, maybe the Small Business Committee can come out and 
say, Look, if you use 55 percent, we will forgive 35 percent of 
your other one. So there is a little concern as far as that 
goes, because everybody is saying the same thing, the website 
actually said something a little bit different online. So 
making that a concrete. Look, here is where you are at, if you 
can't hit one of these markers you change that other marker 
now. That would be one of the big ones.
    The other big concern I have is the taxation of the loan. I 
don't know if this is something to discuss here, but if we have 
to save 25 to 35 percent of the loan to repay on the taxes, 
because it is not currently deductible on our taxes, now we are 
concerned that okay, we get a loan for $200,000, so I need to 
keep $60,000 to $65,000 back to be able to pay that tax back.
    Thank you very much.
    Chairwoman VELAZQUEZ. We recognize the gentlelady from 
Kansas--Ms. Davids for 5 minutes.
    Ms. DAVIDS. Thank you, Chairwoman Velazquez, and also would 
like to thank Ranking Member Chabot for holding this hearing 
today. Unfortunately, there have been many challenges for small 
businesses who tried to access the Paycheck Protection Program 
and the EIDL programs. And in more recent conversations with 
small businesses owners, one of their main concerns is 
complexity around the loan forgiveness. I, of course, was glad 
to see, and others are too, that today, the SBA revised its 
forgiveness application and introduced a streamline application 
for smaller borrowers.
    However, many challenges and questions about the process 
remain, and I am glad we have both small business owners and 
lenders on the panel today, because I would like to hear from 
both perspectives.
    Do you believe that the rolling and piecemeal nature of the 
PPP guidance from the SBA has discouraged or disincentivized 
small businesses from entering the program?
    Dr. COLEMAN. I can go first. That was the biggest thing I 
heard from my colleagues, the people that didn't get it was, 
this is something where I don't know the rules, and therefore, 
I don't want to take on that debt. Because it wasn't a slam 
dunk, this is what is going to happen, I would prefer not to 
take on any additional debt, because debt is scary to small 
business. We don't want debt. We have our mortgages, we have 
equipment loans already. So taking on additional debt without 
that concrete agreement and, hey, you do this, it is forgiven. 
That was the biggest concern, I would say.
    Ms. HARRINGTON. I think it is definitely a major issue in 
terms of the rollout of the program and the confusion, 
particularly for the really small businesses and the businesses 
owned by people of color. There were so many hurdles throughout 
and changes to the process. The time it took to even figure out 
what forgiveness would look like, right? And you are right. So 
many business owners are afraid that this will not end up being 
a grant and be a debt they will have to pay back in just over 2 
years.
    We don't even know what next year will look like yet, 
because we are in the midst of a pandemic. And so the idea that 
they are going to have debt that they will have to pay back in 
the next 2 years is extremely scary for many of them. And just 
other things in the program that don't get talked about as 
much. The fact that for the first week, sole proprietors and 
self-employed couldn't even apply for the funding.
    So all of these things indicate to people, and that is the 
vast majority of business owners of color who are self-
employed, that this program is not for them, and that it will 
not work for them in the long run.
    Ms. KELLY. I would like to say that since the PPP rules 
have changed, and the pandemic actually lasted longer than we 
expected, and all of this is compacted in a seasonal area where 
we depend on 36 million tourists a year, and we only have 1.5 
million residents in our State. We need the PPP support, and we 
need change. And we also need to know what the rules are, 
because you are afraid if you do, you are afraid if you don't.
    Ms. DAVIDS. Well, I appreciate that, and I appreciate the 
recognition of our small businesses, and sole proprietors, and 
particularly the small business owners who are from 
marginalized communities needing that certainty around the 
rules and the rollout. I know a lot of folks here in Kansas who 
are small business owners, who were really concerned about what 
felt like a very tumultuous and uncertain time with the rollout 
of the programs, even though they recognized that they really 
did need the relief. So I appreciate the work you all are 
doing.
    And with that, I will yield the balance of my time. Thank 
you, Chairwoman.
    Chairwoman VELAZQUEZ. The gentlelady yields back. We now 
recognize the gentleman from Tennessee, Mr. Burchett.
    Mr. BURCHETT. [No response.]
    Chairwoman VELAZQUEZ. I guess that he just logged off. Now 
we recognize the gentleman from North Carolina, Mr. Bishop.
    Mr. BISHOP. She just called me. I am ready to go.
    I am en route, Madam Chair. If you can't, skip me----
    Chairwoman VELAZQUEZ. I see Mr. Burchett, the gentleman 
from Tennessee is recognized.
    Mr. BURCHETT. Thank you, Chairlady. Sorry about that. I 
have been all over the Zoom today trying to figure this out. 
Can you hear me? I can't hear you, but I just read your lips, I 
think you said yes, we can. So I will go with that.
    Well, thank y'all so much. I guess my question was, I want 
to tell Ms. Kelly that my nephew is a Culinary Institute of 
America graduate. But he was not alumni of the year as you 
were. But I assume one day he will aspire to that.
    You know, I have heard from our small business lenders and 
folks in the district that we need simplification and a loan 
forgiveness process for the small lenders. And I was proud to 
join with our friend, Representative Andy Barr, in writing a 
letter to the Treasury and the SBA advocating a streamline 
forgiveness process for borrowers under a $350,000 threshold.
    Also on a personal note, I hope everybody remembers Andy 
Barr and his two lovely little girls in their prayers. Andy 
lost his wife last night, and the little girls lost their mama. 
I know that is a tragedy. So if we can remember him in our 
prayers.
    But, today, according to the SBA, also announced a new easy 
forgiveness application that I look forward to reviewing. Mr. 
Sosa, in your opinion, are there any roadblocks hindering a 
small business from obtaining a full loan forgiveness?
    Mr. SOSA. I am sorry, I was having a little bit of 
difficulty unmuting there for a minute. Prior to the issuance 
of this morning's 3508-EZ form, which I, too, have not had an 
opportunity it review in depth, just the mere fact, like the 
doctor stated earlier, that it was 11 pages long scared most 
people. And now, while the appearance appears that we are in 
the step in the right direction, it also appears that what they 
have done on the EZ form is simply separated the instructions 
from the actual form. So it looks a lot simpler. But it still 
has some certifications and all the traditional documentation 
that was asked for in the first go-round to be included with 
that EZ form. That is highly disenfranchising, or highly 
difficult for small businesses to obtain.
    I still think the best situation is to address, very much 
like what Ms. Kelly has said and very much like what doctor has 
said, that we need a sure forgiveness that says, you had a loan 
of $150,000 or less, you are forgiven, and the and the Congress 
has that ability to do that.
    Mr. BURCHETT. Also Mr. Sosa, is there any way you can 
provide the committee an overview of how credit elsewhere has 
changed beginning of the PPP and today?
    Mr. SOSA. Yes, sir. At the beginning, the statute 
eliminated credit elsewhere. It just, plain and simple, did 
that. Now they need to certify that they need the application, 
and no funds and nobody has defined what ``need'' is.
    Mr. BURCHETT. Thank you. Chairlady, I yield back the rest 
of my time. It is all a pleasure seeing you.
    Chairwoman VELAZQUEZ. Thank you. The gentleman yields back. 
Now we recognize the gentleman from Pennsylvania, Mr. Evans.
    Mr. EVANS. Thank you, Madam Chairperson. Ms. Harrington, I 
want to follow up on something you said because it sounds like 
to me and I am not going to put words in your mouth, it sounds 
like we could lose a lot of black businesses specifically--
obviously there is the pandemic, and then there is the unrest, 
and then there is the PPP. So tell me in a very specific way, 
what percentage of black businesses do you think we have lost?
    Ms. HARRINGTON. I think we are definitely at risk of that. 
I think it is hard to tell, but the numbers we do know are very 
telling, and the stories that we are hearing are very telling. 
When we hear numbers like 41 percent of active black business 
owners have dropped by 41 percent. When we look at the 
unemployment numbers that are still so high and so much higher 
even in black communities and communities of color, right?
    We know there are businesses that were already struggling 
before we even came to the pandemic. There were so many 
businesses that entered the pandemic with less than 3 weeks or 
so of reserves that could sustain them. And now, we don't know 
how long this is going to last. There is so much--there are so 
many other issues in this country. And so, we are watching as 
so many businesses that are inactive now, many of them probably 
won't reopen, and there are some that are still waiting on 
answers on PPP who may close and never reopen. And as this 
pandemic extends, that number will only increase. And that is 
why we have to think about not only how we fix the PPP, but fix 
small business credit and support in general, and how to make 
sure it works for the businesses in every community, not just 
[Inaudible].
    Mr. EVANS. So take the next step, and tell me what 
specifically you think the kinds of things that should happen.
    Ms. HARRINGTON. Absolutely. So with regard to the PPP, we 
advocate for creating a minimum origination fee, for creating 
that streamline automatic forgiveness for loans under 100k, 
which would save countless hours. 71 million hours of labor we 
estimate on behalf of business owners who would provide all of 
that documentation and go through all of those pieces of labor, 
and the lenders as well; data collection and transparency, so 
important; a reserve for CDFIs and MDIs who do the best job of 
serving businesses in these communities; requiring guidance on 
underserved markets, and making sure that you are targeting the 
funds to those small businesses, and the businesses in the low- 
to moderate-income census tract. And also thinking beyond just 
loan programs, grant programs that are provided directly 
through the Federal Government, so we can remove the 
intermediary and financial institution.
    We recognize that there is already issues with accessing a 
program through a mainstream lender when we see the lack of 
access to credit that has plagued these communities for 
decades. So if we know that there is a barrier to accessing a 
program through intermediary, let's remove it.
    Mr. EVANS. Are you talking about, for example, the EIDL 
program?
    Ms. HARRINGTON. The EIDL program, absolutely, is one 
example. There have been grant programs through FEMA. You can 
do grant programs directly through the IRS and Treasury. There 
are a number of ways to do that that we should think about 
beyond just having the financial institution as intermediary. 
That already places a barrier for many of the businesses owned 
by people of color.
    Mr. EVANS. I thank you, Madam Chair. I appreciate it. Thank 
you very much.
    Chairwoman VELAZQUEZ. Thank you. The gentleman yields back. 
Now we recognize the gentleman from North Carolina, Mr. Bishop.
    Mr. BISHOP. Thank you, Madam Chairman. And Ranking Member 
Chabot and witnesses, thank you for joining us today for an 
important conversation on this Paycheck Protection Program. I 
am in the committee room, as I have been in the previous 
meeting, and was taken to task by the Chairwoman for having 
making people disinfect it, but I do it for a very important 
reason, which is to emphasize that we can be in Washington. 
There are two other people in this room, three other people. 
They are many, many feet away from me, but if we were closer, 
we could be wearing masks. We could do our business in 
Washington. And I think it would make the meeting more 
effective, and your testimony more effective, but thank you 
very much for being with us.
    Fortunately, the hearing comes at a fitting moment as 
Democratic members of the Select Subcommittee on the 
Coronavirus Crisis have proceeded with another witch hunt, this 
time aimed at Secretary Mnuchin, Administrator Carranza, and 
PPP lenders.
    When Congress overwhelmingly passed the Paycheck Protection 
Program, we did that in a bipartisan fashion. Last week, the 
Director of the Congressional Budget Office Phillip Swagel 
praised the Treasury Department and Small Business 
Administration for moving quickly and efficiently while also 
stating the stimulus to COVID-19 went out faster than the 
stimulus during the 2008 financial crisis.
    Unfortunately my Democratic colleagues who helped design 
the Paycheck Protection Program fail to recognize the Trump 
administration's swift actions to save our economy. There is 
more work to be done, but Democrats would rather investigate, 
critique, and undermine the good work performed by the Trump 
administration than provide adequate recovery to Americans.
    Make no mistake, Democrats' antics and sham investigations 
are not limited to the Trump administration. They also want to 
investigate PPP lenders who served as the conduit for providing 
small business relief. Lenders didn't ask for that role, but 
they delivered. Prior to PPP going live in March, I heard from 
lenders throughout North Carolina about obstacles it would take 
to participate in the program. They were nervous and skeptical, 
but they stepped up to the plate to help small businesses in 
their communities.
    Mr. Sosa, in your testimony, you worried about the way the 
Federal Government is treating lenders right now, that it might 
lead to less lending partners in the future. In fact, you used 
the term ``threat.'' I wonder, would you agree that the same 
logic apply to Congress as it begins investigating lenders for 
their role in the PPP?
    Mr. SOSA. You know, the difficulty that I face is that I am 
not a politician, so I don't really have an axe to grind either 
way. What I look at is that when we put out a program under the 
regular SBA program, we know what the rules are. We know how to 
put a loan on the books; we know how to take it through the 
process; we knew how to collect that loan. That is the process 
that assures that oversight is fair, that it is process that is 
trying to assure that lending is fair to our communities, and 
so if we could get something like that, I think you would have 
much more participation from all the lenders.
    Mr. BISHOP. I appreciate that, Mr. Sosa. Let me just ask 
you this: If Amarillo National Bank were asked to turn over all 
communications with Treasury and the SBA related to 
administering PPP, would it serve as a disincentive to your 
bank as well as other lenders from doing business with the 
Federal Government in this situation?
    Mr. SOSA. Let me ask you a question for clarification, 
please. You want to know--you are asking if we could give you 
all the documentation that SBA and Treasury used, or the 
agencies used to direct the program?
    Mr. BISHOP. Well, no. Your correspondence, your bank's 
correspondence, if you had to--in the face of a retrospective 
request, to turn over all correspondence you had, so that 
someone's going to go through it with a fine-tooth comb, 
wouldn't that deter you from wanting to cooperate in a program 
like this?
    Mr. SOSA. We have been participating in SBA lending for at 
least 15 years.
    Mr. BISHOP. Okay.
    Mr. SOSA. Our books are open. And it would be a simple task 
of printing all the FAQs and all the 2018, 2019 IFRs.
    Mr. BISHOP. Very well. Thank you.
    Ms. Kelly, you mentioned the Federal supplemental 
unemployment that caused you some difficulty getting your 
employees back. And I think you mentioned it was ending in 
July. If that were extended to December 31st, would that be 
harmful to you?
    Chairwoman VELAZQUEZ. Excuse me, sorry. Your time has 
expired.
    Mr. BISHOP. Thank you, Madam Chair.
    Chairwoman VELAZQUEZ. We recognize the gentleman from 
Illinois, Mr. Schneider.
    Mr. SCHNEIDER. Thank you, Madam Chairwoman. I want to thank 
you for holding this important hearing today. I also want to 
take a moment to thank you, the committee, and in particular, 
the committee staff, for really being at the forefront for 
standing up the remote capabilities of our committee, allowing 
us to numerous briefings in hearings like this to do the 
business of the American people, to do what we have it to do to 
help America's small businesses in this very difficult time. 
The work of you and Ranking Member Chabot has been 
extraordinary, as have the members of this committee. So I just 
want to thank everyone for that.
    PPP, for the country, and my district in particular, has 
been a lifeline for workers and businesses, but we have heard 
in this committee and we have heard from businesses, I hear 
about it almost on a daily basis, that they have had to wrangle 
not just the challenges of the COVID pandemic, but the lack of 
clarity from the SBA and Treasury on the program, the PPP 
program.
    My offices work directly with our local SBA 
representatives, in my community, small business development 
center, to help businesses, providing them with up-to-date 
guidance on the SBA programs. I commend the incredible hard 
work of the SBA's local staff, who my team has found to be an 
incredibly valued resource and a group of dedicated employees. 
But the guidance coming from SBA and Treasury has been anything 
but clear. The SBA and Treasury have released 17 interim final 
rules on these programs and 47 or maybe 48 FAQs. The 
application for the loan forgiveness process was 11 pages, and 
released only a week before applicants became eligible.
    This morning, the SBA did release a revamped, shortened 
application for the EZ process, but I am already hearing from 
lenders who say that neither of these actually simplify the 
process at all. I have already begun to hear from local banks 
in my districts, starting to receive loan forgiveness 
applications. And my staff has fielded innumerable questions 
about the complicated loan forgiveness process.
    So, I want to focus on those two issues: simplification and 
clarity. First on simplification, as the committee knows, 
oftentimes, the accounting department of a small business is 
but one individual. When I had my own business with 10 
employees, I was doing the accounting myself. There was a whole 
list of other tasks that these people have to do. It is 
critical that the loan forgiveness process, particularly for 
the smallest loans, be simple enough for the business owners to 
complete without having to rely on outside assistances, as 
witnesses have testified.
    Looking to our two businesses owners on the panel, Ms. 
Kelly and Dr. Coleman, can you provide some context, not just 
how much funding you received, but you laid out, but the amount 
of energy and time that was invested to get the loan, and then 
as you are looking to go through the forgiveness process? Ms. 
Kelly, maybe we will start with you.
    Ms. KELLY. Absolutely. I did spend quite a bit of time 
getting all of my ducks in a row [Inaudible] submit my 
application. I am fortunate I have a very good relationship 
with a local bank [Inaudible] was but it was very difficult. 
Unfortunately [Inaudible] necessary rule change with the 
ability to go back and borrow the original [Inaudible] as the 
financial need has changed, as we have progressed with this 
COVID-19 and it has made it very difficult. As far as 
[Inaudible] has gone, I was unable to have with the current 
restrictions on capacity of a restaurant and lost revenue 
[Inaudible] season, I did not [Inaudible] it was very 
challenging for me to have the FTE count so my forgiveness 
seems impossible.
    Chairwoman VELAZQUEZ. Mr. Schneider, you need to mute.
    Dr. COLEMAN. I thought the loan process went very well. I 
pride myself on being somebody that is ahead of the curve. I 
said in my testimony, I was really seeking out all the 
information I could seek out, and get everything together as 
soon as I could. Immediately I knew there was going to be a 
frenzy, so I got my loan application in. The first thing--I 
found the application, even as a business owner, pretty 
straightforward. I did require some help from my accountant to 
get the proper 941s and all those documents together. As far as 
the forgiveness, I am hoping I am on track for everything we 
are actually up in the 80s as far as our payroll percentage 
wise. So we have, hopefully, a good chance of getting 
forgiveness. We are holding back about 5 percent of our loan 
just in calamity down the road, if anything happens, if 
somebody gets sick or anything else, my business suffers. We 
are saving some back. And I am actually hoping to return that 5 
percent, in the best-case scenario.
    Mr. SCHNEIDER. Thank you. My time has expired. I want to 
thank Ms. Harrington and Mr. Sosa. Mr. Sosa, I appreciate your 
testimony, especially the story of the American Dream in 50 
years, so I wish you all the best.
    Chairwoman VELAZQUEZ. The gentleman's time has expired. Now 
we recognize the gentlelady from Pennsylvania, Ms. Houlahan.
    Ms. HOULAHAN. Hi, Madam Chair. And I want to echo Mr. 
Schneider's appreciation to you and to the staff for allowing 
this to be possible and making it look so easy. I also want to 
thank the folks who are testifying in front of us. I can 
actually palpably feel the tension and the pain, even remotely 
in your testimony, because I know how exasperating it is. As a 
former business owner and operator myself, and a former 
entrepreneur, I can feel the pain. And I hope that we can be at 
least helpful or a little bit more in alleviating that.
    My questions have to do with the concept of forgiveness, 
automatic forgiveness. And I understand from Mr. Sosa, as well 
as Ms. Kelly, and as well as from a lot of other folks who 
testified, that $150,000, 100 or so thousand seems to be the 
line that people are drawing. And I understand that represents 
about 80 percent of the total loans, and about 20 or so percent 
of the amount. But getting back to some of the testimony about 
transparency, and the importance of data that has to do with 
where loans are going, I also think it is really, really 
important that we have transparency to understand where they 
were spent. Because I believe that this won't be the first or 
last time that we have to implement something like the Paycheck 
Protection Program.
    I want it to be more expedient the next time that we do it, 
and we are more efficacious the next time we do it. And so if 
we just blanket forgive anybody under $150,000, $100,000, then 
we will have lost all the granularity of that data of where it 
went and how it was spent.
    And so, if you guys wouldn't mind, I guess, maybe, if I 
could start with Mr. Sosa: What kind of effort could we do, 
undertake, that would allow us to be able to capture some of 
that important data, but not take the hours and hours of time 
away from both the business people as well as the lenders to be 
able to allow to us to have that information?
    Mr. SOSA. That is a challenge, Congresswoman. When you look 
at this, even if we just take the case of $50,000 or less, that 
is 3 million loans. That is a significant challenge for anyone 
to go through and do a review. $150,000 does, as you mentioned, 
does take care of the majority of the applicants out there. But 
there is nothing wrong with getting a simple certification from 
the folks, that yes, we spent the money, even if you ask for an 
estimation, but----
    Ms. HOULAHAN. I guess that is what I am asking is couldn't 
we simply have, like, literally a chart that says I spent 20 
percent on overhead, I spent 80 percent on salary certified by 
this organization. Is that not something that is practical?
    Mr. SOSA. That would be very simple and very appropriate. 
We just need to be sure that the agencies are directed as such, 
so as to avoid the fact that they might continue on the road 
that they have even on the EZ program, EZ application. It needs 
to be simpler than that. Part of the concern is that if a small 
business person has this loan outstanding, and a year from now, 
2 years from now, 3 years from now, somebody changes their mind 
and finds that they weren't eligible at that point----
    Ms. HOULAHAN. I understand.
    Mr. SOSA.--that is a very scary thought for a lot of small 
businesses.
    Ms. HOULAHAN. I understand. I understand. I would like to 
hear from Ms. Harrington to know how important it is to track 
that data. Is there anything that we can implement by 
legislation that we can be helpful to make sure that we 
actually know where this money was spent, just as it is 
important knowing who got it, we are also trying to make sure 
we are good stewards to the taxpayers of where it got spent.
    Ms. HARRINGTON. Absolutely. I think a simple certification 
form going to what Mr. Sosa was describing, we absolutely 
support. Certifying that they spent the money on eligible 
expenses, and a good faith certification, and a space to 
leave--to print their demographic data, a one-page form, very 
simple, easy to fill out. Also, making sure that SBA and the 
lenders themselves are directed that they can rely on these 
good faith certifications for these small dollar loans. I think 
it can be as simple as that, but it is something that Congress 
will have to do because their documentation requirements under 
the CARES Act are so extensive.
    So I think there has to be direction from you, to 
borrowers, to SBA, to lenders that enables them to really take 
part of that. And this will absolutely benefit the smallest 
businesses, but, also, give you the transparency that you need 
to know where these funds are going.
    Ms. HOULAHAN. Thank you. And I know my time has expired. 
And I was wondering if the Chair would allow me one more 
question, because I think I am the last person asking 
questions.
    Chairwoman VELAZQUEZ. Yes, ma'am.
    Ms. HOULAHAN. That would be terrific.
    My question is to Ms. Kelly and to Mr. Coleman, I know 
right now, you are working to make sure that you can get your 
loans forgiven in an ideal scenario. What kind of--will be the 
biggest challenge for you to be able to do that? Do you feel is 
it now a matter of data or making sure you can track things? 
And how have you been keeping track of all the changes with SBA 
and the PPP program?
    Ms. KELLY. I would like to say, similar to Dr. Rich, we 
initially set up separate bank accounts and really tracked 
everything we spent with that loan. So the problem with it was 
I couldn't speak up for lack of business because we are on 
State mandated shutdown, we couldn't bring back the proper 
count of FTE. So I felt like I knew I was not going to be 
forgiven for a loan either way I did it. It was helpful for a 
time period, but in the long run, it is not really that helpful 
if [Inaudible] after we did the recalculations to be able to go 
back and take a second bite at the apple was denied because of 
the filing of the 1502. So that became a big issue for me here 
with my business.
    Ms. HOULAHAN. Thank you.
    Dr. COLEMAN. As far as my concerns, most of my information 
actually came through from my accountant. He will send out a 
nice little newsletter once the--it was changed last week, we 
got a nice little newsletter saying, Hey, these are the 
changes. So that would be one place I would have the small 
businesses committee reach out to is the accountants and say, 
Hey, please send this information out to your clientele. It was 
simple email that they put together, but it gave me a massive 
amount of information and definitely put my mind at ease as far 
as where to go from here. What concerns----
    Chairwoman VELAZQUEZ. The gentlelady's time has expired.
    Ms. HOULAHAN. I am sorry, my time has expired. I yield back 
and thank you, Madam Chair, for giving me an extra 5.
    Chairwoman VELAZQUEZ. Thank you. And thank you again to all 
the witnesses today for their testimony and for offering their 
views on the PPP. By sharing your experiences, we will be able 
to conduct more effective oversight, and continue to optimize 
the PPP program.
    Though I am pleased the program appears to be saving small 
business jobs, as we intended, your testimonies have confirmed 
that there are still some issues that need to be addressed. I 
assure you we will continue to make the program work and be as 
accessible for borrowers and lenders as it can be. I ask 
unanimous consent that Members have 5 legislative days to 
submit statements and supportive materials for the record. 
Without objection, so ordered. And if there is no further 
business before the committee, we are adjourned.
    [Whereupon, at 2:55 p.m., the committee was adjourned.]
    
    
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