[Senate Hearing 116-519]
[From the U.S. Government Publishing Office]
S. Hrg. 116-519
SMALL BUSINESS IN CRISIS:
THE 2020 PAYCHECK PROTECTION PROGRAM
AND ITS FUTURE
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
of the
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 10, 2020
__________
Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-604 PDF WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
----------
MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
Meredith West, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
----------
Opening Statements
Page
Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida......... 1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from
Maryland....................................................... 4
Witnesses
Holtz-Eakin, Mr. Douglas, President, American Action Forum,
Washington, DC................................................. 7
McFarland, Ms. Iman, Chief Operating Officer/Co-Owner, 21st
Century Expo Group, Inc., Capital Heights, MD.................. 19
Williams, Ms. Dafina, Senior Vice President, Public Policy,
Opportunity Finance Network, Washington, DC.................... 24
Zernick, Mr. Thomas G., President of SBA Lending, First Home
Bank, St. Petersburg, FL....................................... 34
Alphabetical Listing and Appendix Material Submitted
Cardin, Hon. Benjamin L.
Opening statement............................................ 4
Community Gyms Coalition
Prepared statement........................................... 72
Holtz-Eakin, Mr. Douglas
Testimony.................................................... 7
Prepared statement........................................... 10
McFarland, Ms. Iman
Testimony.................................................... 19
Prepared statement........................................... 21
Rubio, Hon. Marco
Opening statement............................................ 1
Small Business Investor Alliance
Letter dated December 8, 2020................................ 75
Wall Street Journal-Faulkender, Michael and Miran, Stephen
Prepared statement........................................... 77
Williams, Ms. Dafina
Testimony.................................................... 24
Prepared statement........................................... 26
Zernick, Mr. Thomas G.
Testimony.................................................... 34
Prepared statement........................................... 36
SMALL BUSINESS IN CRISIS:
THE 2020 PAYCHECK PROTECTION PROGRAM.
AND ITS FUTURE
----------
THURSDAY, DECEMBER 10, 2020
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 10:03 a.m., via
videoconference and in Room 301, Russell Senate Office
Building, Hon. Marco Rubio, Chairman of the Committee,
presiding.
Present: Senators Rubio, Risch, Scott, Ernst, Inhofe,
Young, Kennedy, Romney, Hawley, Cardin, Cantwell, Shaheen,
Booker, Coons, Hirono, and Rosen.
OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR
FROM FLORIDA
Chairman Rubio. The hearing will come to order, and today's
hearing will be focused on the Paycheck Protection Program. I
would like to thank everyone that is joining us, both in person
and virtually. I want to welcome our witnesses before the
Committee. I believe we have two virtually and two here in
person.
This pandemic, of course, has affected virtually every part
of our lives--our health, our education, our jobs, our
communities, our families, our economy, even the way we conduct
business here.
To explain, I generally do not speak with a mask on. We
have a lot of young people and others here who work in our
process who, at this time of year, go home to see their
families on the holidays. I would hate for anyone to be unable
to do so because somebody tells them they sat too close to me
for too long a period of time, and as a result they have to
stay here over the holidays. So in an abundance of that
caution, if anybody has any problems hearing me they will let
me know and we will figure out how to work through that.
The pandemic, the nationwide lockdowns, were then, and they
remain now, a big crisis for America's small businesses. In
March, as the pandemic and the lockdowns began, crushing small
business, the Senate and bipartisan members of this Committee
responded by coming together and enacting what I think is,
without a doubt, historical support for small businesses.
One of those lifelines was a program that was entirely new,
and it did not exist, it had never existed before, and it was
put together in a very short period of time. It was built upon
the network of community banks that the SBA has worked with for
many years, to deliver needed capital to small businesses, and
that support was what is now known as the Paycheck Protection
Program.
And in this crisis we called upon every inch of America's
financial infrastructure to help deliver that help that it
brought to small businesses. And I think it is fair to say that
it was not a perfect program, because no government program is
possibly perfect, not to mention one put together in six, seven
days and implemented over a short period of time. But I do
think, without a doubt, it is clear that the Paycheck
Protection Program has been the single most effective part of
the CARES Act that was passed, and one of the most effective
Federal relief programs in modern history, delivering more than
$525 billion to small businesses and nonprofits all across the
United States.
It had two goals. The first goal was to help workers keep
their jobs, to provide funds so that employers did not have to
lay people off, keep workers attached to employment, and
second, and related to the first, was helping small businesses
to be able to stay open, not have to permanently close their
doors.
Under the crisis conditions in which we created the
program, to achieve these goals required setting a third goal--
to deliver the support the PPP would provide, and do so as
quickly as possible before those small businesses ran out of
time and money.
As we look back, I believe it is more than fair to say that
the program accomplished all three of those goals. The goal of
worker retention, small businesses receiving PPP report saving
up to 55 million jobs. In May 2020, the first jobs reports
after the full amount of PPP loans had been disbursed showed
the biggest month for jobs gained on record since 1939, and
beat economists' expectations by over 10 million jobs.
As to the goal of helping small businesses, more than 5.2
million small businesses and nonprofits received PPP loans. By
the end of May, the U.S. Census Bureau reported that more than
70 percent of all small businesses in the entire country--70
percent--received PPP loans.
As to the goal of delivering assistance as quickly as
possible, the SBA approved nearly $350 billion in PPP loans in
just two weeks. And this is by far, and by any measure, the
fastest delivery of funds, at this scale, for a fiscal policy
program, in modern history.
This program was a tremendous success in meeting the goals
that we created it to meet, and now I believe, personally, it
is time, in a more tailored and surgical way, to do it again.
The work that the first round of PPP began, though successful,
it is still incomplete. The pandemic is still raging, lockdowns
are again being contemplated, placed on small businesses and/or
restrictions continue to be in place, allowing restrictions on
their ability to operate, consumer activity in certain sectors
is falling. And so by enacting a second round of tailored PPP
assistance we can help build upon the success of the first
round, fix some of the problems that were identified to that
first round, and protect small businesses through the winter as
we walk that bridge toward what we hope will be a widely-
distributed vaccine that gets us to a point where we are no
longer dealing with many of these restrictions.
As we consider that second round, this hearing provides a
good opportunity to look at and take stock of what we learned
in the first round. The priority of speed that we gave the
program, however necessary, it did create some initial problems
in implementation. For example, the average loan size approved
at the beginning of the program was larger, and the number of
companies that had access to capital elsewhere received PPP
loans. That problem was resolved, yet the program's critics
persist in saying that the program was skewed toward larger
businesses.
The fact is 70 percent of PPP loans, 70 percent of the
actual individual loans, went to small businesses that had 10
or less workers. The average business receiving a PPP loan at
the end of the program had 13 workers, and 80 percent of all
funds went to businesses with fewer than 200 employees, even
though all businesses with 500 or fewer were eligible.
Another example is related to fraud. We have learned a good
deal about the need for inspection and oversight by the
administering agencies. However, the evidence so far does not
suggest a fraud rate in PPP that is higher than that of any of
the other programs in the CARES Act, and the evidence suggests,
actually, that PPP suffers from a lower risk of fraud, much
lower risk than the EIDL program, which is an existing program.
And one of the reasons for this success has been the fact that
the banks and credit unions delivering PPP are still subject to
Federal antifraud regulation, and this public-private
partnership, in combination with increased SBA and Treasury
oversight, allowed us to strike an important balance of
ensuring fraud protection while also distributing program funds
in a timely manner.
Another example is with respect to the equitable
distribution of funds to small businesses owned by people of
all backgrounds, all races, and ethnicities. As we explored in
a hearing this past July, we have learned the importance of
community financial institutions, like CDFIs and the technical
assistance grants through agencies like the Minority Business
Development Agency. Though certainly a disparity at the
program's beginning, the heroic work of community financial
institutions such as these helped to overcome much of that.
There was a survey completed by Goldman Sachs that found
that by the conclusion of the program, 93 percent of Black-
owned small businesses applied for a PPP loan, and of those who
applied, 95 percent received a PPP loan. According to the SBA's
demographics survey data, minority-owned small businesses
received a higher percentage of PPP loans than their relative
share of business ownership in the U.S. Black- and Hispanic-
owned small businesses account for 7.8 percent of total small
businesses. So 7.8 percent of the small businesses in the
country are owned by African American or Hispanic, and yet they
successfully received 10.6 percent of the total PPP loans
disbursed.
So despite some negative narratives that I have seen, I
have heard loud and clear about the success of PPP from small
business owners throughout the country. For instance, Between
Pixels, in Marietta, Georgia, said, ``We applied for and
received the PPP loan, which helped us focus our energy on
pivoting our business model. The funds allowed us to reassign
staff to these opportunities rather than cut positions, which
ended up making up for the revenue we lost from our traditional
services,'' end quote.
Mike Zaffaroni, the owner of Liberty Landscape in
Jacksonville, Florida, said, ``If I had to sum up the PPP loan
in one word for us, it gave us confidence. We would be in a
much different position without it.'' That is the end of his
quote.
So these represent only a small portion of the comments we
have received from small businesses about the program. As I
said at the outset, while there are certainly better days ahead
with the promises of successful vaccines--we should have great
confidence that certainly before this time next year we will
all be living a very different situation--we do have an
immediate need over the next few months that requires action.
Small businesses need more help to make it through this winter.
Given a potential second wave looming and impending government
lockdowns in different jurisdictions, it is vitally important.
I think perhaps the biggest evidence of all how this
program has worked is that in a time in which it is difficult
for the parties, and even within the parties to agree on many
things, Congress has voted unanimously, on three separate
occasions, to fund and enhance PPP, and I believe it is far
past time for us to come together and do it once again. It had
been my hope we would have done it months ago, but I hope we
will do it now. I cannot imagine not doing it, what its
implications would be.
So as I said, today's hearing will provide us an
opportunity to evaluate the first round, to discuss the future
of the program, with all these goals in mind, and I look
forward to hearing from today's expert panel on their
experiences with PPP.
And now I am going to recognize the Ranking Member, Senator
Cardin, who will deliver his opening statement.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER, A
U.S. SENATOR FROM MARYLAND
Senator Cardin. Senator Rubio, first thank you, and in the
interest of safety I am doing this remotely so that we can have
fewer people in the committee room.
This is likely to be Senator Rubio's last hearing chairing
the Small Business and Entrepreneurship Committee. He is moving
on to, as I understand, different responsibilities in the next
Congress. And I just wanted to take a moment to congratulate
you on an incredible record during these two years that I have
had the honor to sit next to you as the Ranking Democratic
Member.
You have really put the Small Business and Entrepreneurship
Committee on the map in the United States Senate during this
pandemic. Under your leadership, we have really responded to
the needs of small businesses, and we recognize that small
businesses are the growth engine of this country. It is where
jobs are created and innovation takes place, and they are not
as resilient in dealing with economic downturns. And it was
absolutely essential that we respond in a very major way during
this pandemic, and under your leadership we were able to do
that.
So I want to congratulate you on just a great record, and I
look forward to working on this Committee on other issues, and
I know you will be remaining on this Committee, as we look at
how we can do things moving forward to ensure the success of
small businesses.
The programs that you referred to that we were able to
develop, particularly the Paycheck Protection Program, was one
that involved the work of all the members of Committee, and I
just really wanted to acknowledge that this has been really a
bipartisan group effort to develop ways that we could provide
comprehensive help to small businesses during this pandemic.
Every member needs to be praised. I particularly want to
acknowledge the former Ranking Member on our side, Senator
Shaheen, for the work that she did as we were crafting the
different programs in the CARES Act.
You have mentioned the Paycheck Protection Program was
stood up very quickly. I agree with you. I think the Paycheck
Protection Program, the enhancements in the EIDL program,
including grants, the loan forgiveness program, and the fact
that we not only passed it but we also acted two other times to
replenish and extend the Paycheck Protection Program. We did it
when we replenished, we directed that funds be targeted to
underserved communities. When we look at what we did, it was
very successful and I agree with you. I want to underscore that
this was a program stood up nearly overnight, to get money out
quickly to small businesses to keep them alive, and it
accomplished its intended purpose.
More needs to be done. We passed the CARES Act that
included these programs in mid-March, and when we passed those
in mid-March we really thought that this pandemic would be
behind us by this past summer, but that was not the case. So I
agree with Senator Rubio that we need to act, we should have
acted before now, in extending relief to small businesses. It
is desperately needed.
As we are holding this hearing, the United States is
recording 200,000 new virus cases a day, six times higher than
we saw last spring, three times higher than we saw this past
summer. In the past we have regional breakouts that caused
concern. We now have a nationwide breakout of the virus in
every part of our country. New restrictions are being imposed,
and those businesses that depend upon larger gatherings are
very much compromised as this pandemic continues. Food
services, hospitality, entertainment, travel, tourism--the list
goes on and on.
We need to respond, but we need to target the next round of
relief for several reasons. Let us remember what we learned
from the CARES Act. We learned that our experience is that we
put into the CARES Act a provision to require the Small
Business Administration to issue guidelines for underserved and
underbanked borrowers. They did not do that. We need to be more
prescriptive, as we did when we replenished the funds to
allocate to CDFIs, microlenders, and other mission lenders.
We need to be more specific as to how we allocate these
funds for several reasons. I believe we need to concentrate on
smaller of the small businesses. Senator Rubio, I appreciate
the numbers that you were able to present today. You and I know
we have had one difficult time getting information out of the
SBA as to how this program has worked. Their transparency has
been terrible, and it is something that needs to be corrected.
We need to have accountability and we need to understand the
program as we move forward, and we have been very much
handicapped because we have not been able to get that type of
information.
But one thing is clear as we go into a second round, and
you and I understand this. We are going to have limited
resources. We are not going to have as much as we would like to
have. We are going to be dealing with a bridge aid package, if
we can get it done, that will hold us all for several months.
We need, therefore, to recognize we cannot do everything we
want to do, and the hardest-hit small businesses are the
smaller small businesses. So let us target the program to the
smaller of the small businesses. Let's make sure it is based
upon need so that we get to the small businesses that really
need help, those that have been dependent upon large gatherings
that cannot have those gatherings in their business.
And let us reach out to the underserved community, because
what we learned in the CARES Act, that those who did not have
priority-established relationships with lenders were not first
in line. In some cases they were not able to get into the line
at all. So we have to recognize that we have to reach out and
do more to make sure the help gets to the underserved
community.
And let us also recognize that for many small businesses
another loan is problematic. They need grants. Grants are very
important. That is why, as we look at the next round, let us
concentrate on how we can fine-tune the EIDL advance program,
which are direct grants by the Federal Government without going
to lenders, how we can refine that grant program to meet the
needs of the underserved and underbanked community.
We have already seen this model in action in my hometown of
Baltimore, where the Baltimore Development Corporation has
provided support to small businesses based on need and other
factors, not on first-come, first-served basis. It is vital
that we learn from the best practices of local organizations
like the Baltimore Development Corporation, as well as directly
from small business owners, because they have the best
understanding of what is working and what is not working.
Mr. Chairman, we also need to make sure that we maintain
the bipartisan support that was the hallmark of passing the
original programs to help small business, as we get into the
next round. We need to make sure that we include the Democrats,
Republicans, House, Senate. Let's get this done.
I want to thank our witnesses for providing their testimony
this morning. I am especially looking forward to hearing from
Maryland small business owner, Iman McFarland, who will share
with us the impact COVID-19 has had on her event space, and
tell us how she was able to use the resources provided by the
CARES Act to pivot her business.
My hope is that we will leave this hearing with a better
understanding of how best to improve not only PPP but all the
programs that small businesses need to make it through the
pandemic, including EIDL, Small Business Debt Relief Program,
and future grant programs for small businesses unable to take
on additional debt.
I look forward to hearing from our witnesses. Thank you.
Chairman Rubio. Thank you, Senator Cardin, and, by the way,
I can just say none of this would have been possible without a
partner like Senator Cardin, and everybody on the Committee and
so many others. And, a particular thanks to Senator Shaheen and
Collins who are not members of the Committee but were
intricately involved in the design of this program as well. It
was a very rewarding process to be a part of that and I want to
thank all of them for all the work they put into it. They were
phenomenal.
Our witnesses today, we have two here with us, Ms. Iman
McFarland, who is the Chief Operating Officer and second-
generation co-owner of the 21st Century Expo Group, the
Nation's only woman- and minority-owned general service
contractor in the events industry, and serving clients for more
than 28 years.
And Douglas Holtz-Eakin, who is the President of the
American Action Forum. He was the Chief Economist of the
President's Council of Economic Advisors from 2001 to 2002. He
was the Director of the Congressional Budget Office from 2003
to 2005.
Joining us remotely is Ms. Dafina Williams, the Senior Vice
President of Public Policy at the Opportunity Finance Network,
the National Association of Community Development and Financial
Institutions, and Thomas Zernick is the President of
CreditBench, the SBA lending division at First Home Bank in St.
Petersburg, Florida.
I want to thank all of our witnesses for being here with us
today, and I think we will just begin with the witnesses here.
Mr. Holtz-Eakin, we will start with you, and then we will
continue with Ms. McFarland, and then go to our witnesses that
are remote.
But thank you all for being a part of this important
hearing. It is very timely, not just to look back at the
previous round of assistance but as we are contemplating new
assistance how we can learn from the problems in the first
round and make it better. So thank you all for being here.
STATEMENT OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
FORUM, WASHINGTON, DC
Mr. Holtz-Eakin. Chairman Rubio, Ranking Member Cardin, and
members of the Committee, thank you for the privilege of being
here today. Let me make a few brief point and then I look
forward to answering your questions.
In thinking about evaluating the Paycheck Protection
Program, PPP, it is important to remember the economic
conditions into which it was introduced. When the coronavirus
pandemic became apparent in mid-March, American households
experienced an enormously sharp pullback in spending as they
stopped consuming services that involved personal contact. So
people did not go to restaurants, people did not get on
airplanes, they did not go to hotels, and in large swaths of
American business customers simply disappeared and there was an
enormous cash flow crunch in the U.S. economy.
In the face of that kind of a cash flow crunch, what can
you do? Well, businesses, first of all, sold everything they
could in order to raise cash, and we saw massive selloffs in
financial markets, which required the Federal Reserve to step
in and stabilize, which they did quite effectively. But in
those circumstances it is also tempting to simply lay everybody
off, and there was a need for intervention to stop those
layoffs, preserve employer-employee relationships, preserve the
infrastructure of the American economy through the pandemic as
it bridged to the other side, and in those circumstances, also
provide the paycheck for American households to continue to
live in the face of such an enormous downdraft.
It is hard sometimes to imagine just how bad those
conditions were. It turns out that in the second quarter of
2020, the U.S. economy contracted by 9 percent. In the worst
full year of the Great Depression, 1932, the U.S. economy
contracted by 12 percent. So we experienced something very
close to that in the second quarter of 2020.
In those circumstances, what the PPP did was simply
fantastic. It is--and I agree with the Chairman's assessment--
the single most effective fiscal policy ever undertaken by the
United States Government. It got over $500 billion out the door
and into small businesses in about four weeks. It preserved
employee relationships with their employers, thus preventing a
lot of economic scarring that would take a long time to recover
from. And it provided that $500 billion in liquidity, in cash
flow, to the workers and their employers in order to get
through the 22 months that the program was designed to cover.
Its enormous success really stands out in contrast to, for
example, the Main Street Lending program, which was intended to
help larger employers, and which effectively provided no
support whatsoever. And so in thinking about the PPP, I think
it is important to recognize that speed was of the essence, and
speed was in the program, the scale of the response had to be
enormous because the scale of the downturn was enormous, and,
you know, it had to really put a premium on speed and scale,
and it did that very, very well.
The Census Pulse data is really quite striking, that
reports that three-quarters of American small businesses
received a PPP loan. I think the success is just enormous.
We now find ourselves in a similar situation, where we need
a bridge to the other side of another surge in the coronavirus
pandemic, and another round of PPP, I think, is entirely
merited. And the good news is there is a lot of experience from
the first round, that would actually be brought to bear on a
second program, and it can be designed with a little more
targeted approach, because we are not experiencing the same
kind of broad cash flow crunch that we saw earlier in the year.
So in going forward, it would make sense to, first of all,
address those issues with the lenders. I think it is important
that lenders be given strict limits on their liability so that
they are held harmless from any misrepresentation by borrowers.
That was close but not quite done the first time around. I
think that would be a big improvement.
There is no need to cover publicly-traded companies. They
have access to capital markets. Capital markets are functioning
adequately, and so it can be targeted more carefully.
I do not think it is a failure of the PPP to have gotten
loans out to the larger employers. The whole point was to
preserve employees' paychecks. Large employers have more
employees. That was a success in that moment. But going forward
it could be targeted to smaller firms, under 300 employees and
the like. And, you know, I think having both less lender
liability and a broad array of lenders will ensure that the
funds are distributed more broadly in the U.S. economy, and
that would be a success going forward.
So I thank you for the opportunity to be here today. I am
quite encouraged by what was done last spring. I think it is
possible to do the same kind of good again in this moment, and
I look forward to answering your questions.
[The prepared statement of Mr. Holtz-Eakin follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Rubio. Thank you very much. Ms. McFarland?
STATEMENT OF IMAN McFARLAND, CHIEF OPERATING OFFICER/CO-OWNER,
21ST CENTURY EXPO GROUP, INC., CAPITOL HEIGHTS, MD
Ms. McFarland. Thank you, Chairman. Chairman Rubio, Ranking
Member Cardin, and distinguished members of the Committee,
thank you for the opportunity to testify before you this
morning. My name is Iman McFarland and I am the Chief Operating
Officer of 21st Century Expo Group, located in Prince George's
County, Maryland. I am here today not only representing myself
but also my business partners, who happen to be my mom and dad,
who are here with me today, but also my employees, my community
of Prince George's County, and other small business owners
around the country.
My parents started our family business, 21st Century Expo
Group, 30 years ago, in their basement, when I was only 4-
years-old. Today we are the only Black- and women-owned trade
show management firm in the entire country.
We began 2020 with 10 employees and plans to expand, but as
we lost the ability to generate event revenue in February, and
all of our contracts were canceled, we were unfortunately
forced to furlough those employees. Over the last 30 years,
21st Century has weathered the impacts of both the 9/11
terrorist attacks and the 2008 financial crisis, but 2020 was
the first year in our entire history that we had to close our
doors completely and lay off staff.
Thankfully for our business, and five million others around
the country, the Federal Government acted quickly to pass the
CARES Act in March, and stood up the Paycheck Protection
Program, and it also expanded the use cases of the Economic
Injury Disaster Loan. At 21st Century Expo Group we were
fortunate, fortunate to have a strong relationship with our
bank, fortunate to have up-to-date financial records, and
fortunate to quickly receive both PPP and EIDL funds, funds
that allowed us to stay afloat during the first half of this
year, when our revenue declined by a staggering 85 percent.
PPP funds went toward bringing back five employees, rent on
our warehouse, and providing health benefits for employees,
while our EIDL funds went toward expenses like overhead costs,
vendor payments, and our internet bills.
The bill's funds only lasted until October, and we knew we
had to explore new opportunities. So we did what any
entrepreneur does. We took stock of the assets we had and the
needs we could meet and looked to chart a new path forward. My
mom and I looked around Prince George's County and saw kids,
schools, teams, and trainers who were facing unprecedented
challenges and hardships, and then we looked at our 40,000-
square-foot warehouse and saw an opportunity to give back while
giving our business new life.
Thanks in part to our EIDL funds, we transitioned our
warehouse into an academic and athletic training center. Not
only are we helping the kids of PG County, we are providing
coaches and tutors a much-needed place to generate income for
themselves. We have been able to hire new administrative staff,
bring back warehouse managers, and employ other small
businesses to help clean and manage our warehouse.
The government funds we received not only ensured our trade
show company will continue and to be here when our industry
returns but it will also help us create a second enterprise
that provides employment in our community and needed services.
But we are not in the clear. We have gone to great lengths
to keep our business solvent. We have laid off our staff, we
have cut employee benefits, foregone paying ourselves, and
dipped into personal savings to cover business expenses.
And we are obviously not alone. I am a proud member of
Goldman Sachs' 10,000 Small Business Voices Program, and a
November survey of this community showed that 42 percent have
been forced to lay off employees or cut employee compensation;
52 percent have foregone paying themselves; 33 percent have
dipped into their own personal savings, and these statistics
are even more bleak for businesses with Black owners.
I am one small business and one voice, but I speak to the
challenges faced by many. Millions of small people throughout
the country need more help to survive. They need your help to
survive. If I could ask for three things. First, we need
additional PPP and EIDL funds. Second, we need to ensure that
PPP loans do not have negative tax implications for small
business owners. And third, commercial rent deferrals and other
rent assistance would be invaluable for event businesses like
mine, where facility rental alone is a major overhead cost.
I recognize that the response to this pandemic must first
be, first and foremost, about protecting lives, but it must
also focus on protecting livelihoods, including those of our
Nation's most vital small businesses. Thank you.
[The prepared statement of Ms. McFarland follows:]
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Chairman Rubio. Thank you so much. Ms. Williams.
STATEMENT OF DAFINA WILLIAMS, SENIOR VICE PRESIDENT, PUBLIC
POLICY, OPPORTUNITY FINANCE NETWORK, WASHINGTON, DC
Ms. Williams. Good morning, Chairman Rubio, Ranking Member
Cardin, and members of the Committee. I am pleased to testify
today about why community development financial institutions,
CDFIs, must be central to the Federal Government's strategy for
reaching very small and minority-owned businesses. These
businesses cannot afford for CDFIs to be an afterthought and
public policies addressing the economic crisis brought on by
COVID-19.
The Paycheck Protection Program experience demonstrated
that when CDFIs are empowered with supportive policies and
adequate capital, they outperform other lenders. PPP has been a
critical lifeline to save businesses and jobs. Opportunity
Finance Network supports an extension of this program.
Through the initial iteration of PPP, business owners,
lenders, and policymakers also learned some lessons. Who your
lender is matters. There are gaps in our financial system that
lock people out. Too many of our minority- owned, women-owned,
and rural businesses are unbanked and underbanked. If we want
Federal relief to reach these small businesses, we must reach
the lenders who understand and are working in these markets,
CDFIs. As specialized lenders that focus on underbanked
communities, CDFIs are uniquely poised to deliver Federal
relief to underestimated businesses. We reach communities that
other lenders do not. Our borrowers are 85 percent low income,
58 percent people of color, 48 percent women, and 26 percent
rural.
Thankfully, there has been bipartisan recognition that
leaving CDFIs out of PPP meant many CDFI customers were left
out too. OFN has greatly appreciated ongoing efforts from this
Committee, Congress, SBA, and Treasury to modify the program as
challenges arise, and these changes, including the $30 billion
carveout for community financial institutions in Round 2, and
the $10 billion CDFI set-aside, plus dedicated access to SBA's
platform for small lenders were effective.
CDFIs made more than 114,000 PPP loans, totaling more than
$7.5 billion. Our average loan size was about $65,000. For
example, Latino Economic Development Center participated in the
second round of PPP and deployed 109 loans totaling more than
$2.2 million to businesses in D.C., Maryland, Virginia, and
Puerto Rico. Their average loan size was about $20,000.
Orlando, Florida-based BBIF made 200 PPP loans totaling
more than $7 million, that retained more than 1,300 jobs. The
average loan size was about $36,000, and 86 percent of their
PPP loans went to ethnic minorities, including 67 percent to
Black business owners.
And there are stories like this from CDFIs across the
country, demonstrating that these small loans are critical to
saving thousands of jobs.
As CDFIs, our priority is one that I know is shared with
the members of this Committee, that PPP must help our Main
Street businesses that are the backbones of our communities
survive this pandemic.
OFN is pleased to see Congress poised to include another
round of PPP funding in the COVID relief bill. In the next
round, we would like to see another set-aside for mission
lenders, streamlined forgiveness for loans of $150,000 or less,
a minimum processing fee so that small loans are able to have
their costs covered for lenders, addressing the issues of tax
treatment and the deduction of EIDL advances that are stressing
borrowers.
For example, Universal Logistics, a women- and minority-
owned trucking company, based in Glen Burnie, Maryland,
received a $20,000 PPP loan from LEDC. However, because of the
deduction of the EIDL advance from her PPP forgiveness, she now
has an unexpected $9,000 loan to repay. Other CDFI clients that
expected fully forgiven loans are facing that same reality.
We are pleased to see many of these fixes in the framework
for the HEROS Small Business Lifeline Act and the bipartisan
Emergency COVID Relief Framework. With these fixes in place,
CDFIs stand ready to make a new round of PPP loans and deliver
other Federal relief to small businesses. But we need capital
and capacity to meet borrower needs. CDFIs need a new infusion
of equity capital, and we were pleased to see a bipartisan
framework for the COVID relief package include $12 billion for
CDFIs, including $2 billion for rapid response grants in the
industry.
This institutional-level capital will enhance our capacity
to support our most vulnerable businesses and communities, both
as part of PPP but beyond into the recovery. Focusing on
reaching unbanked and underbanked businesses through the
mission lenders that are best equipped to serve them will
ensure a more equitable recovery.
Thank you for the opportunity to testify today, and I look
forward to your questions.
[The prepared statement of Ms. Williams follows:]
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Chairman Rubio. Thank you. And finally, Mr. Zernick.
Mr. Zernick, make sure your audio is turned on, please.
STATEMENT OF THOMAS G. ZERNICK, PRESIDENT OF SBA LENDING, FIRST
HOME BANK, ST. PETERSBURG, FL
Mr. Zernick. Thank you, Mr. Chairman. Tens of thousands of
small businesses have permanently closed due to COVID-19, and
more are closing each day. In the Tampa Bay area, 22 percent of
small businesses operational in January are now gone, and
nationwide, 25 percent of small businesses have been shuttered.
Surviving businesses have lost 21 percent of revenues, on
average. So, by definition, small businesses have been
adversely affected by COVID-19.
The PPP, which provided two and a half months of payroll
and modest operating expenses was a lifesaver for many small
businesses. But that was nine months ago, and the pandemic is
far from over. PPP Round 1 has proven not to be enough.
As Congress deliberates the next relief package, I would
like to offer three recommendations. First, we need no-cost
fixes to help borrowers and lenders through the first round of
PPP and ensure participation in a second round. The CARES Act
had to be drafted and implemented at warp speed, but with
lessons learned we need to address the issues we have lived
through so PPP can work better. Specifically, Congress should
simplify the Round 1 forgiveness process to create an appetite
for Round 2.
Repeal the requirement to deduct EIDL advances from the
forgiveness amount so borrowers are not left with unanticipated
debt and lenders are not left with thousands of loans of
$10,000 or less.
Strengthen lender hold-harmless provisions to clarify
lenders' liability.
Allow reapplications for loans inadvertently repaid or
canceled, and provide a reinstatement process to adjust loan
size if there was an error, and broaden the eligible use of
proceeds.
These are just some, not all, of the no-cost fixes we need.
Individually, these fixes may seem small, but together they
would make the program substantially more palatable. And while
you consider these fixes, please remember, lenders are slogging
through 5.2 million forgiveness applications without clear
guidance, and given the onerous process, borrowers are
concerned they will face unexpected debt they cannot afford.
Unless Congress addresses these implementation issues, there
will be many lenders unwilling to participate in a Round 2.
Failing to make reasonable program changes would be a tragedy.
Next, we need long-term small business recovery initiatives
immediately. PPP provided emergency short-term relief for
America's workers, not long-term recovery for the small
businesses. While PPP is the most innovative approach to
supplementing unemployment insurance this country has seen, it
does not assure that small business will survive these
difficult times.
A serious recovery package needs to support the small
itself. Small businesses need long-term working capital
available through the 7(a) program. During the Great Recession,
I experienced the benefits of an increased SBA guarantee,
borrower and lender fee waivers, and an increased authorization
cap. These provisions, among others, would once again increase
the flow of capital to small businesses. Without 7(a) program
enhancements, the millions of employees we worked so hard to
keep on payroll, using PPP, may not have an employer to go back
to.
Finally, Congress needs to use existing funding to extend
the hugely successful Section 1112 payments. Now that most of
the 6-months of these payments are ending, banks like mine are
being inundated with payment deferral requests. This should not
be a surprise. Economic conditions for most borrowers have not
improved since March. Borrowers in the traditional SBA programs
must pass needs-based tests to be eligible for SBA loans, so by
definition, borrowers receiving Section 1112 payments are among
the most vulnerable small businesses in the country and exactly
the entities we should be helping.
Congress must include Section 1112 payment extensions and
other related technical fixes immediately, including making the
payments non-taxable. Otherwise, I fear that we will see more
borrower loan defaults, as they struggle to make payments. This
will cause significant stress on the SBA portfolios, rather
than taking advantage of the already-funded Section 1112
preventative relief.
In closing, my experience tells me that the best path
forward for the next relief package is one that does not merely
rely on a second round of PPP, but rather includes the full
range of my comprehensive recommendations. I am encouraged by
the proposals that take this holistic approach and include 7(a)
enhancements and Section 1112 extensions for long-term recovery
alongside PPP for short-term emergency relief.
Thanks for this opportunity to share my thoughts. I look
forward to your questions.
[The prepared statement of Zernick follows:]
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Chairman Rubio. Thank you all, and let me start with Mr.
Holtz-Eakin. I am going to ask you, in your testimony you note
the function that PPP served as an emergency injection of
liquidity into small businesses. What role do you think that
that played overall in the U.S. economy in April, and the
numbers I just cited earlier?
Mr. Holtz-Eakin. Mr. Chairman, it was a crucial support for
the U.S. economy. Between the middle of March and the month of
April we lost 22 million jobs in the United States, and the
downdraft was severe and it was enormously quick. The PPP put
$500 billion out into the small business sector during four
weeks of that period. And we saw employment rebound in May in a
way that we had not anticipated, and I think that the PPP was
crucial for that occurrence.
And so I think it should be judged as nothing but a
success, given the circumstances in which it was introduced.
Chairman Rubio. Ms. McFarland, you pointed out that one of
the things that helped you with PPP and EIDL is you had a prior
relationship with your lender, your bank, and up-to-date
financials, and so forth. So I am leading toward the question,
which is, in your opinion what is the biggest barrier for
women- and minority-owned small businesses when they are
applying for programs like this? We have heard it is the
technical aspects of the application, in some cases awareness
that it exists, and others.
One of the studies that just came out yesterday talked
about how while the distribution to distressed areas was
generally in line with their percentage there are some urban
area in the country that we had evidence of some failure, and
one begins to wonder whether it is the lack of banking or
lending infrastructure relationship in that area, or the lack
of access to technical assistance for applications and so
forth.
So I am kind of supposing, leaning. I do not know what your
answer is going to be but I am curious what your view is on
what, beyond your own business, what do you think is the
biggest barrier for others that are similarly situated in
accessing these programs?
Ms. McFarland. Sure. Thank you for the question. I
completely with----
Chairman Rubio. Is your microphone on, just so they can
hear you? There you go.
Ms. McFarland. Can you hear me?
Chairman Rubio. Yes.
Ms. McFarland. I completely agree with you, Chairman. I
think one of the biggest barriers is finding an appropriate
bank in the community of that business, to help them navigate
the intricacies of these loan applications programs. We were
fortunate enough to have an amazing partner. We had been with
our bank for over two years, but I do know that that is not the
case for most small businesses, and we do not take that for
granted.
Additionally, M&T Bank was in communication with us on
almost a daily basis, either via phone calls or emails, and so
I know, you know, we felt at ease navigating through the
application process we had a bank like that. And I understand
that most companies did not have access to that, which is a big
barrier when applying.
Chairman Rubio. Which leads me then to Ms. Williams, to
talk about the importance of CDFIs and so forth. Obviously it
is clear that you are supportive of a second round, as I think
most members of the Committee are setting aside for the
community lenders to further alleviate some of these
disparities.
I am curious, and perhaps if you have any recollection of
this or can contribute to it, at one point during the second
round the SBA made the decision that over, I believe it was a
24-hour or 12-hour period of time, beginning at like 7 p.m. in
the evening until 6 a.m. the following morning, the only
lenders who could access the system, meaning send in
applications, were lenders under a certain size or standard.
And their rationale was because the larger lenders had
already loaded up all the application formats and they were
just pressing Send, and it was overloading the system. So by
clearing that out, by stopping that from happening, it created
online capacity to process. In essence, it created an express
lane over a sustained period of time, a few hours, for the non-
large lenders to get their applications in. And my
understanding is that that was a very smart--I am not sure it
is something we need to legislate but it sounded like something
that worked.
Do you remember that happening, and apart from the dollars
set-aside, a time set-aside, the mechanics of actually pushing
through the application online and so forth became a real
problem for the system they had set up online. Do you recall
that part, and if not, even if you do not, I mean, is that
something that you think would make sense in terms of helping
CDFIs and others get their applications in?
Ms. Williams. Yes, that dedicated access for small lenders
was incredibly effective. CDFIs and their borrowers needed a
little bit more time to be able to appropriately prepare their
applications. They do not always have access to accountants or
tax professionals to be able to prepare the application
immediately. And so that first-come, first-served model really
disadvantaged some of these business owners that needed more
time to prepare.
On the lender side, when you are a smaller lender, which
might not have had an existing relationship with SBA and real
knowledge of how to access and leverage the E-Tran system,
there was a process where you had to sort of understand how to
get your loans through and access the system. And so that
dedicated window really opened up some space for small lenders
to be able to get their borrowers' applications through the
system without having to compete with Federal resource lenders
during that time period.
Chairman Rubio. And again, I am not sure that is something
we need to put in a bill per se, but it was certainly a process
that I know helped clear up the backlog, and I am hoping that
we can figure out a way to make sure that happens again.
Finally, Mr. Zernick, I am just curious. I mean, this would
not have worked without the community banks and the
nontraditional lenders, and so it just would not have, from a
capacity standpoint. There is no way we could have done this
with just the larger, major banks. We could not have done it
without them, but we certainly could not have done it only with
them. I can tell you that without regional and community banks
and nontraditional lenders there is no way we would have
reached the breadth and scope of small businesses that we did.
So we are concerned about anything in a second round of
assistance that would prevent banks from participating. In your
view, what issues, what requirements, what prescriptions, what
could prevent banks from participating in a second round of
PPP?
Mr. Zernick. Thank you, Chairman Rubio. Obviously we need
to fix the forgiveness process for the Round 1 of PPP. We have
had numerous, burdensome hurdles to go through with our clients
regarding how to calculate the covered period, how to calculate
the FTE calculation required. There are three separate
applications. They all come with separate instructions. We
simply need, in addition to more PPP, we need to fix the
forgiveness process in Round 1.
We do not need a blanket waiver. We simply need a
streamlined process for forgiveness so that banks like ours,
that have 9,000 loans to process forgiveness on, can focus on a
next round of PPP under Round 2.
So lenders need, right now we do not need to calculate the
forgiveness amount. We should not need to justify that the
documents provided by the borrowers support the forgiveness
amount. We simply should validate the documents have been
uploaded and that the application is complete and ready to
submit to the SBA. These are the things we could do in the
forgiveness piece of Round 1 that would free up our teams to be
able to process Round 2 in PPP.
Chairman Rubio. Thank you. Senator Cardin.
Senator Cardin. Let me thank all four of our witnesses. I
think this has been extremely helpful, giving us specific
recommendations on how to improve these programs and what is
needed.
From the testimony of Ms. McFarland, Ms. Williams, and Mr.
Zernick, it is obviously that you support PPP, another round,
but you believe we need to do more, that it has got to be more
comprehensive, we have got to deal with EIDL, we have got to
deal with improvements in the current programs, and Mr.
Zernick, you mentioned the 7(a) programs and other programs,
the fee waivers, things like that, that are critically
important for us to deal with. So I appreciate that.
I want to first go, if I could, to Ms. McFarland. It seems
to me what you are telling us is that PPP was a lifesaver for
you initially, but you also needed the EIDL help in order to
pay for those expenses that were not covered by PPP. Otherwise,
you may never have reached that point where you are today,
where you have been able to adjust, to try to keep your
business afloat as the economy is rebounding. Am I correct that
you needed both PPP and EIDL in order to get through the
initial period?
Ms. McFarland. Yes, absolutely. Like I said before, we had
to furlough all of our employees, all 10, and the PPP allowed
us to hire five employees back. We did extend two return offers
to two of our employees, but they decided to utilize the
unemployment benefits and they also were living with at-risk
family members. And the other three employees that we were not
able to extend return offers to were project managers, and
because we had not seen a project since February it was not
feasible for us to bring them back.
However, the warehouse staff that we were able to bring
back allowed us to win a sizable PPE distribution contract in
April, whereby we were housing and distributing over a million
pieces of PPE to over 100 community health centers.
So having our employees back was amazing, and then we sat
down and we were trying to determine what we could do to
generate revenue, and we still knew that we needed additional
capital. So the EIDL loan went to our overhead and our working
capital and utilities, like our internet bill. And because
those funds were freed, we then were able to utilize those
funds to transition our facilities into an athletic and
academic training center.
Senator Cardin. Thank you. Ms. Williams, one of your
recommendations--so we are trying to figure out how is the best
way to get resources into the underbanked or underserved
minority communities--and one of your recommendations is that
there should not be an offset from what is forgiven by the EIDL
advance of funds that were received. Currently they offset the
loan forgiveness by the amount of the EIDL advance. Am I
correct that you believe there should not be an offset, that
that is just creating an additional burden on small businesses,
and they need help?
Ms. Williams. That is correct. We have heard from our CDFI
lenders that borrowers were essentially unaware of this
provision when they sought out their PPP loans, and as they
start to seek out, you know, apply for forgiveness, it is
coming as quite a shock that when they thought they were
receiving both an EIDL grant that they would not have to pay
back and a PPP loan that was fully forgivable, that now they
are actually faced with a loan payment that they were not
anticipating.
And then, on the lender side, I think they are also faced
with having to hold and service a loan that they also did not
anticipate, that they expected was going to be able to be
forgiven and would not have to remain on their books. So it is
creating challenges for both borrowers and lenders.
Senator Cardin. As we talk to some of the lenders, it is
just a natural bias to try to get larger loans rather than
smaller loans, because of the processing costs, et cetera, it
just makes sense. One of your observations was the processing
fee on the smaller loans. If a small business, if a very small
business has to rely upon a commercial loan as part of the PPP
program in order to get access to the help, if the processing
fee does not match the cost of the lender it is going to be
much more challenging to get that type of activity,
particularly again in underbanked communities.
Am I reading that recommendation that you think the
processing thing has to match the cost here and not be capped
at an amount that may be reasonable, percentagewise, for a
larger loan but not for a smaller loan?
Ms. Williams. That is correct. For small loans lenders are
finding that the cost that they are incurring, both on the
front end for preparing and processing the applications is very
staff- and resource-intensive work, especially when you are
dealing with the populations that CDFIs tend to need additional
support in preparing documentation and getting those loans
ready.
And on the forgiveness end, there also is an unforeseen and
additional cost that lenders are encountering that together are
making it so that some lenders are actually losing money on
making these smaller-dollar PPP loans. And for CDFIs that
really want to be able to provide these resources to their
communities, you know, this is a really challenging position to
be in because they cannot actually cover the full cost of being
able to provide those loans. So a flat fee that is reasonable,
that really will allow lenders to be able to realize the full
cost of making those small-dollar loans will actually encourage
that small-dollar lending from more lenders.
Senator Cardin. And I really appreciate the role that CDFIs
play and thank you for your leadership on that. And I want to
acknowledge, we have had bipartisan support in empowering CDFIs
in this process. I want to thank Senator Rubio for his help.
Obviously, Senator Warner has been one of the real champions on
this and has been leading the fight in regards to the capital
issue that you are referring to. And we certainly had
cooperation from Secretary Mnuchin as we tried to deal with
these issues.
I just really wanted to put that on the table because I
think we recognized that needed to be done. And we were
disappointed that the SBA did not follow our initial request to
develop ways that we made sure that minority and underserved
communities were served.
Mr. Zernick, one point. Your suggestions in regards to the
7(a) program, because I agree with you on this. If I
understand, you believe we need to improve the current tools
that are available. 7(a) loans are vitally important. It is the
largest program we have under the SBA prior to the PPP program.
And you are suggesting that the fee waivers and other issues
that were involved in that should be part of this process, to
make sure that we respond properly for COVID-19?
Mr. Zernick. Absolutely, Senator Cardin. I really think we
need to create a business vaccine. We are doing it now to save
humans. We need a business vaccine that will save our business
communities, and that vaccine needs to be a cocktail that is
made up of another round of PPP, plus our no-cost fixes. It has
to include a long-term working capital solution by using the
7(a) enhancements of an increased SBA guarantee.
We need help lending into this pandemic through the 7(a)
program, we need the fee waivers for our clients, and we need
an increased authorization cap. We need to be able to prepare
to help businesses launch and relaunch and restart their
businesses going forward.
And lastly, the 4,200 SBA clients at First Home Bank need
Senator Coons' 1112 payment extension. It was a tremendous
help, and thank you, Senator Coons. But now it is time for more
of this. Our businesses often cannot make their payments. We
are inundated with deferral requests. Delinquencies are
increasing. We need to protect our portfolio and our small
business community, and that business vaccine, while it
includes Chairman Rubio's PPP program with the no-cost fixes,
we need that 7(a) enhancement and we need Senator Coons' 1112
payment extensions. Thank you, Senator Cardin.
Senator Cardin. Thank you. I will point out, I strongly
agree with you on Senator Coons' proposals. There is actually
money that remained in that program, enough to cover moving
forward. So it is just a matter of repurposing the money that
was already in that program.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you. Senator Risch.
Senator Risch. Thank you, Mr. Chairman. First of all, I
want to join the others in kudos to you for having led this
fight. It was tremendously successful. The other important
thing that America does not know, and probably never will know
because it does not get reported, is this was a bipartisan
effort, a for real, honest-to-goodness bipartisan effort. The
Chairman deserves much credit for that, being able to bring the
two sides together.
We get lots and lots of stories about arguing and fighting
up here and not being able to get anything done, and PPP was
certainly a great exception to that. And I also want to thank
the Chairman for allowing all of us to have input into this. We
all had our fingerprints on this, to some degree, though it
certainly was your effort and deserves your name on it.
For people like myself who do not necessarily worship at
the altar of government solutions to problems, I have to tell
you I was astonished, first of all, by the fact that this
program came together as quickly and as well as it did, and
then I was even more astonished that it actually worked out in
the field.
If it had not been so ugly it would be amusing the way the
media ran around the country looking for failures in this
program, and hence they found them, and as you said, Mr.
Chairman, it is not perfect. There is no government program
that is perfect and there are certainly things that could be
done better, and under situations the government just cannot
fix. The media was very skillful in going around and writing or
putting on stories on TV and the media about this. Those of us
who have worked this know that this was a tremendous success.
I think, too, another person that deserves real kudos here,
and I think when they write the history of this thing he will
get his own chapter in the book, and that is Secretary of the
Treasury Mnuchin. I have to tell you, I was absolutely amazed.
We wound up with glitches starting right away, as you do with
any program, and every time we did we would call over to
Treasury and talk to Steve Mnuchin, not to a bureaucrat, not to
an assistant, but we talked to the Secretary of Treasury. They
were not necessarily big things, but he paid very close
attention to them, and at the conclusion he, unlike what you
usually get in dealing with an agency, said, ``Well, you know,
I think we can fix that.'' And he went to work in good faith
and resolved virtually every problem I was associated with, and
I have to think that every Member of Congress had similar kind
of a situation.
Mr. Zernick, you will be interested to hear that--you spoke
quite a bit about the forgiveness program. To me, the
forgiveness program was the poster child for the good work that
Secretary Mnuchin did, by the time we got to him to complain
about it, and it became obvious very soon that we had left way,
way, way too much up to the bureaucrats to design a program for
forgiveness. The first thing we saw was about a one-inch sheet
of papers with questions on it for the forgiveness. By the time
we got to Mnuchin, he was already on the third iteration of
that, having given directions to the bureaucrats to change
that.
So we continue to work on that. I think your suggestions
are well taken. We understand it is on both sides, not only on
the lender but on the borrower, and that is getting better, I
can tell you.
Look, this has been a real success. I never thought I would
be able to sit here and look at how well this has actually
operated out in the field. I think everyone is in agreement,
again on a bipartisan basis, we need another round of this. I
am sure that everybody on the Committee has the same view of
this that I do, and we just shake our head as leadership and
the body as a whole goes through these machinations in trying
to get to another COVID bill, when we are in agreement on this.
I mean, if we threw this bill out on the floor it would get
unanimous support on both sides of the aisle and in both
houses, and yet we cannot move because we have these other
moving parts. There are about 18 or 20 moving parts in here,
and just because we have disagreement on some of them it is
disturbing and disheartening that we cannot move this forward
when we are all in agreement on it.
In any event, hope springs eternal, and we will proceed
with that.
I want to ask one question before I yield the floor here,
and that is I think, from all the testimony we have heard
today, and what we have heard over the period of time, is that
EIDL has not worked nearly as well as PPP has, and so we are
interested in seeing, in the next round, that we do better with
EIDL. There are a number of things that need to be addressed.
One of the interesting questions I have is the situation,
the fact where people have borrowed both from PPP and taken
money from EIDL, both of them. Can somebody give me an idea of
how widespread this is? What percent of borrowers, or
applicants, applied to both EIDL and PPP and received funds
from both? Can anybody give me an answer on that?
Chairman Rubio. I am sure from the staff level we could
find that answer from the SBA if we do not have it handy.
Senator Risch. How about a general sense? Can anybody tell
me, is that widespread or is that a narrow lane of people that
are caught up in that? I understand the problem. I just want to
know how wide the problem is.
Chairman Rubio. That applied for both.
Senator Risch. It was not rare.
Chairman Rubio. I am not sure we have the exact percentage
but it certainly was not--I mean, I think--and maybe one of our
two lenders that have been involved in the program can tell us
how common it was for them to see people that were in both
camps, but without giving us a raw number.
Senator Risch. Can one of you--do you dare take a stab at
that, as to how widespread? Is it over half? Under half? Is it
a fourth? Is it 10 percent?
Nobody wants to run with that.
Mr. Zernick. Senator, this is Tom Zernick. I can tell you
that as we process forgiveness today we are probably seeing 10
to 20 percent of the forgiveness applications including an EIDL
advance. So it is less than 50 percent, but again, those are
all advances that are now going to be booked on our balance
sheet as loans that these borrowers have to pay back, that they
thought were grants. So again, anything we can do to get those
paid off, get those forgiven, would be tremendously helpful to
small businesses.
Senator Risch. I get that, and I understand it. I guess
what I am driving at here is I am looking for a price tag, and
until we get that nailed down it is kind of hard to make a
decision on that. But I guess the first one is what percent
did, and then secondly we can maybe monetize that and see what
the price tag would be to do that.
Chairman Rubio. Well, I am certain we can get that number
from the SBA, and we will make sure we get that. We will call
them today.
Senator Risch. All right, thank you. Thank you, Mr.
Chairman.
Senator Cardin. Mr. Chairman, this is Ben Cardin. Could I
just respond to Senator Risch just very briefly, if I might,
because I want to make sure we get this point clarified.
To me, the major problem with the EIDL program was there
was not enough funds put into it, because in administering it
they capped the loan at $150,000, even though there was $2
million authorized by Congress went into individual loans, and
the grant program was supposed to be $10,000 and they capped it
at $1,000 per employee, and it averaged between $4,000 and
$5,000.
Now we have colleagues on both sides of the aisle that have
objected to that type of administration, but that seemed to be
the major problem that we heard of in regards to the
administration of the EIDL program. And thank you, Mr.
Chairman, for allowing me to clarify that.
Senator Risch. Can I respond briefly, Mr. Chairman?
Chairman Rubio. Yes.
Senator Risch. Ben, I hear what you are saying and I agree
with that. But it was not just underfunding. I mean, when the
inspector general went in there was considerably more fraud in
the EIDL program than there was in the PPP program, and I
always hate to say that because that becomes the headlines,
instead of the success of the program, where you have a blemish
like this that you can fix, and should fix. That is something
that we should focus on. And do not get me wrong--I do not
question your assessment that EIDL is underfunded. But there
are some other issues there too that need to be addressed.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you. Senator Shaheen.
Senator Shaheen. Well, thank you, Mr. Chairman. I will also
leave my mask on in the interest of all of the people who may
need to go home for the holidays.
I want to echo Senator Cardin's comments about your
leadership on this Committee, Senator Rubio. I have very much
appreciated the creativity with which you have approached your
position as Chair and, of course, your leadership as we work to
get the PPP program done, and I was very honored to be part of
that group, to work with you and Senator Cardin and Senator
Collins to help design that program. And hopefully we can get
another round. I think all of us agree it is critical to get
that out.
I also want to join with everyone who has talked about the
success of the PPP program and really good work, despite some
of the difficulties, that SBA did, and lenders did across the
country, in getting funding out to small businesses who needed
it. It has been a big success and hopefully we can get another
round that will allow us to make some of the corrections that
we have heard people suggest today.
I want to start with you, Mr. Holtz-Eakin, because, as a
macroeconomist and somebody who recognizes that because you
have worked in the Congressional Budget Office understands the
challenges in Congress. Can you talk about what you think the
impact will be if we are not able to get additional help for
our small businesses and broader help in the economy in the way
that we did with the CARES package back in March? What are we
going to see if we fail to do that?
Mr. Holtz-Eakin. I think we will see tremendous damage to
the labor market, the disruption of employee-employer
relationships. People then have to find new jobs, perhaps in
different sectors of the economy. That is a slow and costly
process for people. So that is the paramount concern.
It also undercuts other efforts that Congress is
attempting. So losing all those businesses is a big disruption
of the supply side of the economy. In the absence of that
functioning supply side, checks to low-income households do not
stimulate the economy, additional measures that Congress might
look at on the spending side will not stimulate the economy.
And so it is a crucial part of moving forward with the
recovery.
Senator Shaheen. And we heard Mr. Zernick say that 25
percent of small businesses have closed since the start of the
pandemic. Have you seen any estimates about how many additional
small businesses will close if they do not get help?
Mr. Holtz-Eakin. I have not seen any such estimates, but we
know that the core problem, which is spending on services,
often provided by small businesses that involved personal
contact, has not recovered. I mean, that simply has not come
back. The initial decline cost us a quarter of small
businesses. To go through another surge and have a comparable
pullback I think is a real danger.
Senator Shaheen. Thank you. Ms. McFarland, you talked about
the help that you received from the PPP loan and the EIDL both
loan and grant. Can you talk with more specificity about which
aspect of each worked for you and how they worked together, or
did not, to address your needs?
Ms. McFarland. Sure. Well, PPP and EIDL were a crucial
lifeline to maintain our business functions. Without it, our
doors would simply still be closed today. The PPP allowed us to
rehire five employees. It allowed us to pay for rent. It also
allowed us to provide health care benefits to those employees,
while EIDL went towards our overhead, some working capital.
But the EIDL advance was something that we found difficult
to understand when we are now understanding that it will be
deducted from our loan forgiveness. But both were incredibly
crucial to the sustainability of our business, and now, because
of these funds, we are able to employ new small businesses to
operate and clean our facilities, and we are providing a
semblance of normalcy to some of the kids in our community. We
have seen 2,200 kids come through our doors, COVID-safe, of
course. But to see these kids' faces light up, and we would
only be able to see that because of the funds that we received
from both PPP and EIDL.
Senator Shaheen. That is great. If I could ask one more
question, Mr. Chairman, and let me also say, in answer to
Senator Risch, we have heard from a number of businesses in New
Hampshire who have also been very shocked by the fact that they
have to deduct their EIDL advance from their PPP, and the
hardship that it places on them. So I think we would share the
concern that we ought to look at addressing that.
Senator Risch. I think we all share in that information we
have gotten from our small businesses.
Senator Shaheen. Mr. Zernick, you have extensive experience
in SBA lending, and I wonder if you have seen the new forms
that you may have been collecting from borrowers seeking
forgiveness of their PPP loans. One of the things that we have
heard from people is about this new form that is called ``Loan
Necessity Questionnaire.'' And it asks borrowers to complete,
and lenders to collect responses to a detailed series of
questions about PPP loans over $2 million.
Now I appreciate the need to get that information, but
there is real concern from a number of these businesses,
particularly we have heard in New Hampshire from the Joslin
Diabetes Center, from Lamprey Health, from Bi-State Primary
Care Association, all of whom are dealing with medical cases.
When they submitted this additional paperwork they are
concerned about how this information is going to be used. Have
you heard those concerns as you have met with small business
people, and do you have any sense, based on your experience, of
how this information might be used?
Mr. Zernick. Yes. Thank you, Senator. The Loan Necessity
Questionnaire will impact 41 loans of the 9,000 loans our bank
did, so we did not do a lot of loans over $2 million. But I can
guarantee you that this was not disclosed up front, and my fear
is that with the start of this questionnaire there could be a
trickle-down effect, where SCA and others continue to
investigate and do a deeper dive into the validity and the
necessity for these businesses to acquire the PPP loan.
So while we want to help our small businesses complete that
questionnaire, again, I feel it is unnecessary outreach, and
again, it is going to send red flags across the PPP who, for
legitimate reasons, had larger payrolls and were truly eligible
for the loans over $2 million.
SBA has already agreed to review all the loans over $2
million. To me, that should be sufficient oversight.
Senator Shaheen. Well, thank you. I share that concern, and
that is certainly what we have heard from the businesses who
have called our office.
Thank you, Mr. Chairman. I hope we can look into this and
try and get more information.
Chairman Rubio. Thank you. Okay. Is Senator Scott on the
web? He is not? Okay. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman, and sorry, we
are also having a hearing in Transportation and Commerce on how
to get the vaccine distributed, so I am running back and forth,
two very, very, very important hearings. I hope everybody is
absorbing all this information because we have so much work to
do.
Chairman Rubio. I would argue interrelated, right?
Senator Cantwell. Very interrelated. In fact, I think I
will just start with that.
I do want to ask about broadcast and the newspapers, but,
Mr. Holtz-Eakin, you have mentioned this issue of municipality
liquidity program and why did they turn back the money, because
we could be using it. I am hearing from my cities and counties
and districts. We just talked to the major distributors
downstairs, with FedEx and UPS, and they are like, ``Yeah, we
are going to get it there,'' but I am like, ``Well, what
happens once it gets there? You still have to have an operation
on the ground to distribute the vaccine, and you will have some
hard-to-serve communities, like in my case Indian country,
which is very big and vast. Who is going to be there to
distribute the vaccine?''
So don't we need to be using those municipal dollars to
help our cities and counties and public health people get the
distribution system? I do not want to see another Puerto Rico,
where we get it to the docks but we cannot get it to the
location.
And then, Ms. Williams, I wanted to ask you, you know, we
have been working hard on this broadcast and newspaper, because
broadcasters lost 40 percent of their advertising revenue
before 2018, and then they lost another 40 percent of their
advertising revenue due to COVID. We issued a report showing
how essential it is for public health information that we have
broadcasters and newspapers to do that, so we definitely
support a PPP program that helps treat those organizations.
Just because you are an affiliate does not mean you have got a
big boss that is helping you with lots of money. Talk to any
affiliate and they will tell you, they are usually getting
screwed over by the entity, controlled, the profits ripped out.
All sorts of things are happening. Being an affiliate is not
such a great thing for the affiliate.
So this means that African American radio stations that are
part of Urban One, like Baltimore, and Spanish-speaking
stations like Playa 98.1 in Fort Myers, they do not get relief.
And, to me, we should be allowing for the distribution of
information, particularly during this crisis.
We had Mr. Busby, the president of the U.S. Black Chamber,
here, Black-owned newspapers and radio stations, who basically
said, ``Yeah, we need this help, because we are the source for
trust in a community.'' So we want to see relief. Just because
people are part of a larger ownership does not mean we cannot
direct help to the individual affiliates. So if we could
address those two issues I would be so appreciative. Thank you.
Mr. Eakin?
Mr. Holtz-Eakin. So the design of the PPP was essentially a
decision to provide grants to small businesses in the form of
these forgivable loans, and so the question in helping
municipalities and larger businesses really was, do you want to
continue with a grant formulation or do you want to move to a
lending solution? The decision was made to have these
facilities be lending facilities, the Municipal Liquidity
Facility and the Main Street Lending Program. Neither was
particularly successful.
The economic equivalent of a grant program for
municipalities, particularly in distribution of the COVID-19
vaccines, is to go back to a grant program and do it through
appropriations. And given the importance of this to the health
of the Nation and the functioning of the economy, I do not
think there should be any hesitation in doing that by Congress.
Senator Shaheen. Thank you. Thank you.
Ms. Williams, about the affiliates and helping--look, we
did a report in the Commerce Committee on the minority side,
but basically local news is the most trusted news source, and
in these communities where you have, again, diversity, they are
also the most trusted news source. So how do we get them help?
Ms. Williams. Thank you, Senator Cantwell. I 100 percent
agree that local radio and newspapers are key in reaching
minority businesses. They are, as you said, trusted and
reliable sources of information. And CDFIs actually use them to
reach their potential clients, and they can provide, you know,
culturally and language-competent information. They are also
really helpful for small CDFIs with limiting marketing budgets
to be able to reach these potential clients.
So we agree that they are critical to the flow of
information, to making sure that small business owners are
aware of the resources that are available to them.
Senator Shaheen. So I am going to take a wild one here.
People say never ask a witness a question you do not know what
they are going to say, but Mr. Holtz-Eakin, I am going to
double down on you today.
This is my point. The press is helping us get perfect
information. The competition of the press helps us get perfect
information. Markets need perfect information. So do we not
have to figure out how we are going to save a broader news
information source in competition? Do we not need to do
something as we are sorting out these legal issues on
antitrust?
Mr. Holtz-Eakin. I think the virtues of competition cannot
be overstated, and that is true in this business as well.
Preserving that competition is an enormous part of the
portfolio of this Committee, because it is new entrants,
smaller competitors, who, in all industries, provide the sort
of innovation and competitive impulse. They give us better
results and outcomes.
Senator Shaheen. Thank you. And about 75 percent of U.S.
employment.
So thank you, Mr. Chairman. Thank you.
Chairman Rubio. Thank you. Senator Coons. I thought you
were on the Web. Now you are here. Omnipresent.
Senator Coons. Would you like me to yield to my colleague
from Iowa? I am happy to. Would you like me to proceed or would
you like me to yield?
Well, thank you, Mr. Chairman. Thank you to our witnesses.
Thank you, in particular, to Senators Rubio and Cardin for
having led this Committee in such a remarkable way. As a number
of our witnesses, who have been doing a terrific job of being
the voices of small business and of the lending community, have
conveyed, this is, in some ways, the underappreciated, unsung
hero of pandemic response. In a strong bipartisan way, members
like Senators Shaheen and Cardin, Senator Collins, and Chairman
Rubio have worked tirelessly to put together and then deliver
on a package which has made an enormous difference.
There is a long road to recovery for small business and for
the employees of small businesses all over the country. I hear
from folks, literally daily. I got several texts this morning
from restaurant owners, from folks who work at restaurants,
from our Chamber, and from folks who represent businesses large
and small in my State, asking when will Congress do another
round of PPP. And I am grateful for all who have worked on the
EIDL, on the Debt Relief Program, in particular, David Brown
and my team, who has really helped lead that. Thank you, Mr.
Zernick, for recognizing the way in which the SBA Debt Relief
Initiative really has made a lasting difference, and I think we
should extend that.
But I just wanted to make sure that we drill down on just a
few of these issues.
Small business owners across my State, from Warren Station,
a family-owned business in Fenwick Island, almost literally the
southeast point of the State, to Eat Clean, which is a full-
service, relatively new, startup juice bar I recently visited
in Wilmington, have seen on the ground the reality of what the
dramatic drop in employment, in profitability, in opportunity
has meant for small business employees and for small business
owners during the course of this pandemic.
Ms. Williams, if I might, both I wanted to thank you for
the way that the Opportunity Finance Network has been an
engaged and effective advocate, particularly on behalf of those
who make access to credit more possible, more real through
CDFIs and minority-serving institutions. Two frequent concerns
from very small business owners related to the complexity of
applying for forgiveness and the tax consequences. I know these
have been covered by other members, but these are the sorts of
issues I hear day in and day out. Tell me about the importance
of these concerns for the borrowers that Opportunity Finance
members serve, and what you have heard so far today in this
hearing about how we can address this, and quickly, in the
bills that have been proposed recently.
Ms. Williams. Thank you, Senator Coons. We have heard
extensively about how borrowers are concerned about the
complexity associated with applying for forgiveness, and for
lenders, quite frankly, who are continually getting new
guidance coming from SBA and Treasury. The rules are changing.
And there has been a little bit of hesitation, I think on the
part of some CDFIs to start moving forward with their borrowers
into the forgiveness process, because there is an anticipation
that the rules could still change and Congress might make a
bunch of additional changes in another stimulus bill.
So I think that uncertainty is creating a lot of
hesitation, and I think it also may impacted demand from small
businesses, quite frankly, going forward, if they cannot
understand exactly how their loans are going to be forgiven if
they are facing a lot of unforeseen and unanticipated costs
associated with their PPP loans that they did not expect to
have. That is going to discourage borrowers who maybe sat out
the first round, or couldn't get access, from trying to access
PPP and also for borrowers who might be looking into a second
draw.
The tax implications are also of great concern to some of
the borrowers that are CDFIs are encountering, and I think that
it is crucial that in the next relief bill that Congress
address these issues in order to make sure that both lenders
and borrowers understand the full implications and costs
associated with the program and are able to enter into these
PPP loans with that full understanding.
Senator Coons. And Ms. Williams, how can we best grow the
capacity of the CDFI industry and the number of CDFIs able and
available to meet the needs of underserved communities and
underbanked communities?
Ms. Williams. The most important thing that Congress can do
is strengthen the institutions and lenders that are already
working in our most underserved communities, and Congress can
do that by immediately providing direct appropriations for the
CDFI fund for rapid response grants. They provide critical
equity capital that CDFIs then use to leverage low-cost debt
from our bank and private sector partners, and this allows us
to not only be able to make PPP loans but also to provide
additional products that borrowers need, like working capital,
but also providing things like loan forbearance and deferrals
or other emergency relief programs to help borrowers really
meet their needs.
And, quite frankly, you know, there are 1,100 certified
CDFIs working in urban, rural, and native communities across
the country. We are ready to deliver this capital. We have the
expertise. We are in communities. We are on the ground. We know
how to mobilize. And so deploying those rapid response grants
to the CDFI community is a way to make sure that these Federal
resources are able to reach our most vulnerable businesses
quickly and effectively.
Senator Coons. I am excited about the bill that is right
before us, that has been proposed by a bipartisan working
group, that would deliver at least $300 billion in aid. There
has long been bipartisan support for a prioritized PPP or a P4,
to serve the hardest-hit small employers with carveouts for
small and underserved communities. It has also got some
significant provisions about small business grants, addressing
some of the expensing and tax liabilities, some of the overlap
between EIDL and PPP that has been addressed.
But I also want to--I hope we have time in future hearings
to talk about the ways in which we ensure an equitable recovery
going forward. Senator Scott and I just introduced the Next
Generation Entrepreneur Corps Act, which would create a
fellowship program with a stipend and mentorship and access to
capital, to hundreds of new entrepreneurs.
The relief bill that is in front of us is the one I know my
folks in Delaware want to see us move, so let's not miss this
opportunity to make a lasting difference for the communities in
need all over our country. But we also need to look forward to
how we make this an equitable recovery.
Thank you very much, Mr. Chairman, for your leadership of
this Committee, and thank you to the witnesses today.
Chairman Rubio. Thank you. Senator Ernst?
Senator Ernst. Yes. Thank you, Mr. Chairman, and thank you,
as well, to all of our witnesses that are appearing here in
person as well as virtually. And we all understand the last
nine months have been. It has been an extraordinarily difficult
time for our small businesses all across the United States. But
through all of this, one of the few bright spots has been the
Paycheck Protection Program, which, of course, we refer to as
PPP. It has allowed businesses to keep their employees and
survive the shutdowns and the economic slowdown.
In my home state of Iowa, the PPP provided over 61,000
small businesses in loans totaling over $5.1 billion of relief,
and it did save hundreds of thousands of jobs. And while the
PPP, which was created through bipartisan efforts on this
Committee, has proven to be widely successful, it has very
clear to all of us that an additional round of assistance is
needed for small businesses that continue to be impacted by
COVID-19.
And just to share a story from Iowa, I did recently hear
from a movie theater owner in Iowa who has been forced to take
out multiple loans against their 103-year-old founder's life
insurance policy just to get by. And it is these folks who
really, really do need the assistance now. And that is why I am
glad, Mr. Chairman, and to this Committee, that we are taking
the time to identify ways that we can build upon PPP as we
continue to work on an additional round of COVID relief.
For the panel, I do have a couple of questions. As our
businesses do continue to feel the impact of COVID-19, it is
becoming clear that some businesses, like restaurants, will
need more than a PPP loan to survive. A recent survey found
that 41 percent of Iowa restaurant operators say it is unlikely
that their restaurant will still be in business six months from
now, and that is really heartbreaking, I think, for so many of
us.
Can you speak to the importance of immediately passing
assistance for industries like restaurants, movie theaters, and
maybe others, that, because of the circumstances have not been
able to open back up? Can you just briefly speak to that and
maybe share some thoughts on what might be necessary, and Mr.
Holtz-Eakin, if we could start with you, please.
Mr. Holtz-Eakin. Thank you, Senator. The challenge is how
to operate the economy in the face of the virus, and there are
some industries where PPE, testing, social distancing allow you
to continue to operate, but we are finding with the surge in
cases that in restaurants that is probably not going to be able
to succeed. And in those circumstances, only to preserve these
industries, essentially to wrap them in financial protection
and carry them through until the virus recedes. That is what
the PPP program did in the spring. A second round could do it
again, going forward.
Senator Ernst. Ms. McFarland, do you have some thoughts?
Ms. McFarland. Absolutely. Similar to the restaurant and
theater business, live event venues and producers have also
been devastated by this. We always love to have tens of
thousands of people together in one space, and right now we
just are not able to do that. With the course of the virus and
the schedule of the vaccines we are just not sure when we will
be able to revitalize our core business. And so we are, myself
and other small businesses, are in great need of additional
funding in order for us to ensure that we can make it to that
time.
Senator Ernst. Thank you. Any of the panelists that are
joining us virtually, if you have any thoughts?
Ms. Williams. I would only add that the failure to support
these businesses will have a devastating impact on the
surrounding economy, so when businesses close it is not just
the business owner who, of course, loses their livelihood, but
employees lose their jobs. If the business owner has put their
home up for collateral, they might be at risk of losing their
home. The neighborhood loses access to a product or service.
So there are really a lot of cascading impacts that result
from the closure of businesses, and so I think it is important
that we think about how we protect these businesses to make
sure we are not encouraging these negative economic impacts.
Senator Ernst. Thank you, Ms. Williams. And if I could
continue with you, please, because you are speaking a little
bit to the frustrations and the impacts to the surrounding
businesses as well. We have heard from an increasing number of
PPP participants about their frustration and the fact that
business expenses paid for using PPP funds are taxable,
according to the IRS. I have had many small business owners
bring this directly to me. And I know we have spoken about this
earlier in the testimony, but, Ms. Williams, in your specific
testimony you note that this has become an unexpected expense
for many of these businesses. And I do worry that this will be
very devastating and have a huge impact on Iowa businesses.
Can you discuss the importance of reversing this guidance
and ensuring that these business expenses are deductible?
Ms. Williams. Yes, absolutely. I think it is an
unanticipated negative consequence of PPP loans where, you
know, business owners who thought they were receiving a fully
forgivable loan are now potentially facing a large tax bill
when they file their taxes next spring, at a time when they can
least afford to pay for it. I think that it is something that
Congress should immediately address, because, again, this is
not anything that the lenders or the borrowers had an
understanding of when they entered into the agreement for the
PPP loan, and it has the potential to have a significant
financial impact on businesses that are already struggling.
Senator Ernst. Yes, I agree completely. It is something
that does need to be addressed.
Mr. Holtz-Eakin, in your testimony you noted that the
strengths of PPP outweigh the weaknesses in the program and
that there are areas where we need to see improvement before
another round of funding is passed. You suggest that the single
most effective reform we could make to PPP is to change the
focus from payroll to revenue, which you, and I tend to believe
as well, that that would be the most reflective metric of the
challenges that our small businesses are facing. Can you expand
a little bit on that thought?
Mr. Holtz-Eakin. As I said in my opening remarks, the
driving economic force that was prevailing at the time of PPP's
introduction was this enormous cash flow crunch across large
swaths of the economy, so there were no customers and there was
no revenue coming in. The ideal replacement would be to replace
the revenue in its entirety and that would cover all the costs,
and that would preserve those businesses.
That is a lot more expensive. That would have been a
trillion-dollar program, easily, last spring, and it will be
even more expensive going forward. And I recognize, you know,
there are challenges in meeting that, but that is the logic
which to sort of not pick and choose among expenses but replace
the business model when they cannot operate because of the
virus.
Senator Ernst. And certainly we want to make sure that as
many of the jobs that were supported by PPP are protected. That
is very, very important. But we do recognize that perhaps some
changes need to be made as we are moving forward.
Mr. Chairman, I do want to thank you and others on this
Committee that have worked so diligently on this program. I
cannot tell you how many times I hear from Iowa businesses how
important this has been in protecting their employees and their
livelihoods. And I look forward to working on some of these
reforms and moving forward with additional relief for our small
businesses. So thank you very much. I yield back.
Chairman Rubio. Thank you, and thank you for all of your
input, all of the members, but in particular all of the input
you gave us on the unique needs of your State. It was
instrumental, so thank you.
OK. Let's go online here. Senator Booker, are you ready?
Senator Booker. I am. Thanks so much, Chairman. And I just
want to thank you, the Chair and the Ranking Member, for just
holding this important hearing and all the work that we have
been able to do together. I really want to thank the panelists
as well for joining us.
As we speak, we are negotiating this COVID package, and
more relief is most certainly long overdue, but I am very, very
concerned that this current package will not fully address the
needs of the hardest hit small businesses and minority-owned
businesses. We have already discussed a lot of the structural
challenges of the PPP program, and really what small businesses
have faced in challenges with getting the resources they need
to stay alive, to survive. Many of them do not have the
relationships with mainstream banking and that has been a
problem.
And so I am thrilled, as I have talked to a lot of the
people who are on the front line negotiating this package, that
we will have more resources for CDFIs, credit unions, small
community banks, MDIs, and for the Minority Business
Development Agency. We know that many small businesses are
still, though, not yet in CDFI networks. We need to change it.
And many small business owners simply are not really interested
in taking on more debt.
And so maybe I would just like to just ask quickly, to the
whole panel, for anyone who might want to take this, but to me
a piece of this equation has to be the State and local relief
funds which have an unparalleled reach in the communities, on
communities of color, low-income communities. And the funds
need to be flexible in terms of financing options, and must
include grants.
And so I would love to hear from the panel on do you agree
with me that when you are shutting down businesses or limiting
their hours or other things that are important for us to get
out of this health crisis, I just really believe flexible funds
and grants are really important to fill the gap. And I would
love to hear any feedback or thoughts on that.
Mr. Zernick. Senator Booker, this is Tom Zernick, and thank
you for your comments. I wanted to mention that in my testimony
I mentioned we really need to expand the eligible use proceeds
under a Round 2 of PPP. While payroll is important, businesses
need to know they can cover all of their operating costs to
stay open, and I would encourage all of you, as you look to the
new COVID relief package next week that we not only address the
PPP program and making the fixes, the no-cost fixes that we
talked about, but part of this has to be providing long-term
capital to businesses that want to relaunch.
Today, we are looking at 7(a) loans. We are looking at
dented financial statements. We are looking at companies whose
profit-and-loss statements are showing tremendous losses. And
while they project profitability in the next 12 months, those
are very difficult credit decisions for us to make, and that is
why we need, in addition to PPP, we need the enhanced SBA
guarantee, taking it to 90 percent, and waiving the fees for
these small businesses, and also increasing our authorization
cap, so we have access to funds to support all these businesses
that you are talking about.
And as far as minority lending goes, I am proud to
announce, just this week, First Home Bank launched a $50
million minority loan initiative. Ms. Williams, I am going to
be contacting you, because I think we can help many of your
clients. But we will open our doors for PPP and 7(a) to all
minorities, not only in the Tampa Bay area, where we are at,
but across the country.
So, Senator Booker, we are interested in expanding use of
proceeds. We need the resources, including an enhanced 7(a), we
need Senator Coons' 1112 payment extension, and certainly more
PPP today with the no-cost fixes I have described in my
testimony.
Senator Booker. Thank you very much.
Ms. McFarland, I understand that you, in addition to
Federal assistance, your business received aid from Maryland
and Prince George's County's State and local relief fund. I
have got a bipartisan proposal called the Relief For Main
Street Act, that would send $50 billion to states, cities, and
counties to seed and scale funds like that, that are connected
to communities, know where the need is.
And I am just wondering if you could talk a little bit
about that experience of having a more locally-based fund that
was able to help get your resources.
Ms. McFarland. Absolutely. The State and local funding
initiatives are crucial to our community and small businesses
around the country. We were fortunate to receive funding from
both the State and the county level. They were not as
restrictive so they allowed us to invest in the actual flooring
to house our basketball facility and allow kids to train there.
In addition, our local communities often know us best, so
providing them with resources enables them to support us and
deploy resources in effective and efficient ways. For example,
in response to COVID-19, Employ Prince George's and several
partners launched the Prince George's County COVID-19 Hourly
Employee Relief Fund, which provides $200 cash cards to PG
County residents who were recently laid off due to the
pandemic.
At the State level, my State set up the Maryland Small
Business COVID Emergency Relief Fund, which was a $75 million
fund that offers $50,000 loans to assist Maryland for-profit
small businesses that have faced disruptive operations during
COVID, with 0 percent interest due for the first 12 months and
2 percent for the remaining 36 months. But the fund stopped
accepting applications in early April, so we are still in need
of those fundings for the local and State levels. Thank you.
Senator Booker. Thank you. I want to be respectful. I think
I am at my time. But I do want to say, Chairman, we have made a
lot of progress on this Committee about removing the collateral
consequences for people with prior criminal convictions. We did
not eliminate them, though, and there are still some, what I
believe are really unfair exclusions for people with past
criminal convictions within a year, that have nothing to do
with their business or business enterprise, nothing to do with
sort of maybe concerns about their financial reliability or
what have you.
And I would still love to work with folks here to try to
remove those final restrictions as we go to another round, God
willing, as we go to another round of PPP and potentially EIDL
loans as well.
Chairman Rubio. And I think it will be interesting to
continue to work on that. Are those new glasses? Is that new
look?
Senator Booker. You know, man, this is what you call I am
getting old, my brother. They are called readers for agedly-
impaired.
Chairman Rubio. I had trouble today for the first time
seeing the name tags from the distance here, so I may be
looking to buy those. We will match up.
Senator Booker. Us Gen Xers, man, we are getting there,
slowly and surely. We are going to need it more.
Chairman Rubio. I am going to have to use what Cardin uses.
Look at how wide and Senatorial they are.
Senator Booker. I suggest, Chairman, that you shave your
head before----
[Laughter.]
Chairman Rubio. Is that the look? Okay.
Senator Booker. Yes.
Chairman Rubio. All right. Why not. It is 2020--what else
could happen?
Stay safe. All right.
We have Senator Hirono and then Senator Rosen.
Senator Hirono. Thank you, Mr. Chairman, and I thank the
witnesses. I am glad that we are focusing on how we can improve
the PPP program and other programs that are specifically
targeted to help small businesses.
I just heard Mr. Zernick mention that he would support SBA
loan guarantee up to 90 percent, which I think right now, Mr.
Zernick, is at like 70 percent or 75 percent, and that you
would like an increase of your authorization cap.
Ms. Williams, I believe that you represent a network of
small lenders. Would you also support these two suggestions
that Mr. Zernick made?
Ms. Williams. Yes, absolutely. We do support raising the
guarantee on the 7(a) program, and I would also like to say
that we also support the extension of the Section 1112 CARES
Act debt relief payments. Like Mr. Zernick said, those were
incredibly helpful for both borrowers and lenders, to provide a
little breathing room during this crisis, where borrowers did
not have to make those payments but lenders were still able to
receive that income from the SBA. So those have been
tremendously helpful.
Senator Hirono. I think some of these provisions are in
Senator Cardin's HEROES Small Business Lifeline Act. Ms.
Williams, have you read that proposal, that bill?
Ms. Williams. Yes.
Senator Hirono. Mr. Zernick I wonder whether you support
the provisions of this bill, because I think that it does
really help the people that you represent. Mr. Zernick?
Mr. Zernick. Yes, absolutely.
Senator Hirono. You will support this bill?
Mr. Zernick. Yes, I absolutely support that, Senator
Hirono, and I saw it firsthand in the Great Recession of 2009,
when President Obama's Recovery Act elevated the guarantee to
90 percent. It also increased the authorization cap and it
waived the lender and borrower fees. We lent our way through
recovery through 7(a) loans. Commercial lending stopped, like
it is now, and borrowers simply had no access to capital, and
that is the benefit, the power of SBA.
So I strongly encourage the COVID relief bill that gets
reviewed next week include not only the PPP, with our no-cost
fixes, include Senator Coons' 1112 payments, but also include
an enhanced guarantee, gets the cap rate and the authorization
we need, and waive the fees for our borrowers.
Senator Hirono. Thank you very much. I think we are still
focusing on getting Republican support for the kinds of items
that you just talked about in the relief negotiations.
I have been very much focused on helping those businesses
with fewer than 10 employees. So I would call these smaller
businesses within the framework of small businesses, so
businesses with 10 or fewer employees. And we need to make sure
that these smaller businesses, they do not have the accountants
and the lawyers to help them navigate through all of the
requirements for getting a PPP or EIDL or any of those kinds of
loans, not to mention loan forgiveness.
So can any of the witnesses elaborate on the particular
challenges that smaller businesses, as I have described, have
experienced with PPP, and what can we do specifically to make
sure that these smaller businesses are able to access these
programs? This would be for any of the witnesses.
Mr. Zernick. Senator Hirono, I can tell you that I was
getting my hair cut this weekend in preparation for this
hearing today, and my beautician happened to get a small PPP
loan. And I said, ``How is it going, Kim, on your forgiveness
process?'' and she said, ``Quite honestly, the application was
so complex I had to hire an accountant, and I just do not have
the money to pay for an accountant to help me compile the
information needed to process her forgiveness.'' That was very
concerning to me, Senator.
So I think that as we look at lending money in the smaller
loan space here, we have to make it non-complex. These people
do not have CFOs. We have to keep it simple, keep the
calculations simple. And again, this program can work. In fact,
of the 9,000 loans we did at First Home Bank in PPP, 6,800 of
them were less than 10 employees. We were doing loans for $500.
So again, we have to focus on these truly small businesses, and
that is really what Main Street is about.
Senator Hirono. So there must be some specific things we
can do with regard to how Treasury and SBA and others put out
their guidance, because if people cannot understand, make it
out, and you have to actually hire people to help them, that
does not make much sense.
So going forward I would really like to have the witnesses
who have experience with this, if you have very specific ways
that you can change the kind of language that is used in the
guidance, the kind of requirements please let us know.
And, Mr. Chairman, I hope that we can focus on having the
administration be much more transparent and communicative in
how they are dealing with hundreds and hundreds of thousands of
small businesses right now who are trying to get loan
forgiveness.
I think my time is up. Thank you, Mr. Chairman, and again,
I thank the witnesses.
Chairman Rubio. Thank you. Senator Rosen.
Senator Rosen. Well, thank you, Mr. Chairman, I really want
to give you a special shout-out for your leadership over the
past couple of years. Small businesses are just really in a
better position because of it. We have worked on a lot of
things that have really helped my State, and I appreciate
working with you and your staff always. I also want to thank
Ranking Member Cardin and Senator Shaheen for their continued
mentorship and leadership as well. They really have been so
helpful. Ninety-nine percent of businesses in Nevada are small
business. This Committee really has helped us get the resources
that we need at home, particularly in the pandemic.
But, you know, we are hearing today about the small
businesses and coronavirus has put millions out of work,
millions of people out of work. Of course, I am fighting like
everyone else for a second round of PPP for our struggling
small businesses, direct support to restaurants, live
entertainment, help for our hospitality and tourism industry,
of course, very important in Nevada. It is the backbone of our
economy.
It is why I just introduced, along with Senator Cornyn,
legislation to provide direct relief to all of our small
businesses, the EIDL for Small Businesses Act. This bipartisan
legislation would lift the SBA's cap on both EIDL loans and the
EIDL advance grants that we have been talking about. So it
would provide all eligible small businesses with loans up to $2
million, and the full $10,000 grants regardless of size, and it
would replenish the EIDL and the EIDL advance accounts by $180
billion. And as everyone has been discussing, EIDL and PPP have
really worked together to take care of our businesses. We need
more flexibility with the PPP, and I hope that we are going to
continue to do that.
But Ms. McFarland, I know that your business, you received
EIDL funding early on, before the SBA put on these arbitrary
caps that we are trying to lift. So can you just speak briefly,
if your business had not received the full EIDL loan that you
were eligible for, $490,000, and instead only received
$150,000, how would it have affected your business if you had
these caps placed on you?
Ms. McFarland. I would be sitting here today telling a much
darker story had we been capped at that $150K. Because we did
not have that cap we were able to produce a dream that my
parents and I put together to not only allow our business to
survive but allow our community to also thrive. Those funds
were crucial in the rehiring of our staff, the paying of our
rent. Our rent alone is $36,000, and we had a gracious landlord
that allowed us to reduce our rent during the summer. That
extension ended around October. And so those funds were also
able to cover those expenses as well.
But all of those funds were exhausted at the end of
October, and so I implore Congress to provide an influx of
funding as soon as possible so that we can continue to be of
service to our community and our employees.
Senator Rosen. Thank you. I want to follow-up a little bit
on that, because we need to be sure, when we support all of our
businesses, that consumer confidence, people feel safe going
back indoors, to a restaurant, to a venue, to a hotel, casino,
wherever it is, movie theater, whatever it is you are doing.
And so I want to be sure that we provide businesses with
funding for not just the PPE technologies but other
technologies that might make our indoor spaces more safe, like
increased ventilation, tax credits for that, upgrading your
HVAC and some of those things.
So have you incorporated any systems like that, or how
would that help you if we were able to give you support to
upgrade your ventilation system so people might feel more
confident about the air they are breathing indoors?
Ms. McFarland. Absolutely. Our main priority is the safety
and health of our customers, the kids that come through our
doors, our employees, my parents. And so we have already taken
the sacrifice to invest in expensive technology and equipment
to ensure the safety of the participants that come through our
facility. We have hired another small business to come in and
clean our facility 10 hours a day. They clean and sanitize
between uses of the basketball facility.
We have also updated our HVAC system, which was a large
expense, but we knew we had to commit to that, because we are
committing to our community wholeheartedly. So having funding
to help us continue to invest in those safety precautions would
be incredible.
Senator Rosen. Thank you. I appreciate everything you are
doing and hopefully they are going to provide some form of help
to allow businesses to upgrade, to make all of the spaces safe
going forward.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you. Senator Hawley.
Senator Hawley. Thank you, Mr. Chairman. Thank you for
holding this hearing. Thanks to the witnesses for being here.
I want to start by acknowledging that the PPP program has
been a vital lifeline to small businesses in my State of
Missouri. It has saved probably countless jobs. I mean,
hopefully we will know the number at some point, and it will
be, I am sure, a very high number indeed. But it has been a
vital, vital program, and it has enjoyed broad bipartisan
support.
However, I think it is worth knowing, we have to note, that
despite the supposedly broad bipartisan support, we still have
not been able to get the program renewed. We still have not
been able to get consensus, to actually bring to the floor,
have a debate, and vote on a bill that would supply additional
funding to renew this program at a vital time. And we see just
from today's unemployment numbers that unemployment claims are
once again on the rise. This can only be described as a failure
of the Senate and of this Congress to take action at this vital
time. So I want to underscore again that it is time to give
this program another lease on life, to make sure that we get
small businesses the help that they need.
I also want to raise one other issue, one other problem
with the program that we have seen in my State, at least, and
that is the changing terms on the loan issuance at the front
end and then also the loan forgiveness. In particular, now the
SBA has recently announced that it is going to mandate that
borrowers that receive loans of more than $2 million complete a
detailed Loan Necessity Questionnaire that describes their
operations and financial conditions during the pandemic.
Now I just want to raise one set of concerns with this and
with that questionnaire as it has been written, as it relates
to churches. Now I want to be clear--I am all for making sure
that for-profit organizations, like the Lakers, for instance,
that I think applied for initially and tried to get a PPP
loan--I mean, give me a break. For-profit institutions
absolutely--first of all, no institution should be getting the
loans that do not need them. Second, for-profit institutions
should be subjected to rigorous scrutiny here, and perhaps many
nonprofits as well.
My concern with the way the questionnaire is written is as
it applies to churches, churches now are being asked to
disclose all manner of information under this draft
questionnaire that they had no ability to anticipate when they
applied for the loan. And can I just say, it was very difficult
for quite a few churches in my home State to get loans
initially because the SBA wrongly informed local lenders, for
the first approximately week of this program, that churches
were not eligible.
So after all of that difficulty in applying for the loans,
now churches are told, ``Oh, wait a minute. Actually, we are
changing the terms and the forgiveness program, and we want
lots more information, in fact, different information than we
told you initially we would ask for, and if you do not give it
to us, maybe we just will not forgive your loan after all.''
I do submit to you, Mr. Chairman, that that is simply not
fair as it relates to these organizations, these nonprofits
that are, by definition, of course, religious institutions,
nonprofits.
And so I have written to the SBA about this. I want to
express my concerns about that questionnaire as it applies to
religious nonprofits, to churches on the record, and I hope
this is still a draft questionnaire and it has not yet been
sent out. But I just want to make it clear that I have major
concerns with how this will be applied and how it will affect
the religious institutions who, frankly, have had a more
difficult time under this program than they should have.
Mr. Zernick, in the time that I have remaining here let me
just ask you, start at least, with a question about how this
program, in your experience processing loans under this
program, has gone for urban and rural areas. My state, again,
the State of Missouri, is actually a majority rural and ex-
urban. The rural areas predominate. I imagine that your
institutions have processed loans for small businesses in both,
in both urban and rural areas. Can you give us a sense of what
your experience has been in assisting borrowers in the two
different regions, and have rural borrowers been able to get
access to the program successfully?
Mr. Zernick. Sure, Senator. Let me start by saying last
year First Home Bank was a top 10 SBA lender in the country. We
are a preferred lender. We lend actually in all 50 states,
including your fine State. We lend in the rural markets. We
lend in the large metropolitan statistical areas. We do not
have any geography restrictions. When we did the PPP program,
we opened our doors to businesses across the country. And while
about a third of our loans were done in our home state here in
Florida, two-thirds of our loans were done across America,
including the rural communities.
So we are very proud of that, and as we position ourselves
for Round 2 PPP, we will continue to open our doors to First
Home Bank customers and non-First Home Bank customers, and I
assure you, we will be lending in the rural communities as
well, like we did in Round 1.
Senator Hawley. Ms. Williams, can I just give you an
opportunity briefly to comment, and ask you if you have any
perspective on this?
Ms. Williams. Absolutely. There are many CDFIs that are
focused on meeting the credit needs of their rural communities,
and PPP was no exception to that. So there are some lenders
who, you know, of course served their existing customer base
with PPP loans first but then opened their doors to other small
businesses and nonprofits who needed access to capital.
And I think the virtual nature of how we are operating
during the pandemic actually made it a little bit easier to
reach some of these rural customers through online means, to
help them apply for PPP loans, than we might have seen if it
was a more sort of--based on a physical, in-person process. So
CDFIs are always looking for ways to expand their footprint, to
provide more access to capital in our rural communities.
Senator Hawley. Very good. Thank you. Thank you, Mr.
Chairman. I will have some additional questions for the other
witnesses for the record, but my time has expired. Thanks, Mr.
Chairman.
Chairman Rubio. Thank you. Do we have anyone else on?
Senator Cardin, did you have any follow-up questions?
Senator Cardin. I just really want to thank this panel, and
I think this has been one of our most informative hearings. You
have really given us a lot of really good suggestions, moving
forward. I think it is very timely, because we do hope that we
are going to be able to act on a COVID package before we
adjourn for the holidays. And I think we have gotten some
valuable help through all four of the panelists, so thank you
very much for your input, and I can assure you that we took
notes and we are going to use this information moving forward,
to try to do the right thing for small businesses.
Chairman Rubio. Great. Thank you. We were waiting for
Senator Young but he is not back on the WebEx. He is on?
Senator Young, are you there?
Let me give him a few seconds. I do not want to hold the
witnesses up any longer, but he was on earlier.
There he is.
Senator Young. My apologies. Thank you, Chairman. We had
some technical challenges. Can you hear me okay?
Chairman Rubio. We can hear you perfectly.
Senator Young. All right. Well, I thank the witnesses so
much for being before the Committee today, and I commend
Chairman Rubio for his leadership on small business issues
throughout this pandemic. The Debt Protection Program has been
highly successful helping small businesses, and by extension,
their employees weather this pandemic. I am glad we are here
today to discuss extending the program and also to assess ways
we might improve it.
According to the 2020 Indiana Manufacturing Survey, 44
percent of respondents cited the PPP as the primary reason for
their survive. Still, nine months after many of the government-
mandated closures first went into place, we are seeing small to
mid-sized businesses struggling to make ends meet, placing more
jobs at risk.
As one example, Tyler Truss Systems in Pendleton, Indiana,
has been a leading truss manufacturer to the live events
industry. They received a PPP loan in May that enabled them to
keep their 72 employees on the payroll. But as the pandemic has
continued and the live events industry remains largely
shuttered, Tyler Truss has seen a significant decline in sales,
with an 87 percent drop in the third quarter of this year. The
company is now down to less than 20 employees, and without
additional relief they will continue to struggle.
For several months I have been pushing for additional small
business relief, including my RESTART Act with Senator Michael
Bennet, and I would like to thank Chairman Rubio for working
with me and my staff on including some of the principles from
RESTART, like the revenue decline threshold and expansion of
forgivable expenses, in the PPP second draw proposal. Given the
progress in negotiations these past few weeks, I hope we can
come together and pass more relief in short order.
With millions of businesses still facing financial
uncertainty, my RESTART Act would address the concerns heard
from across the country, where businesses were restricted from
relief programs, including businesses in manufacturing,
hospitality, travel, recreation, and entertainment. The RESTART
proposal would target our limited resources to the hardest-hit
businesses, including those over 500 employees, by offering
partial loan forgiveness based on revenue decline.
Additionally, it would provide flexible loans to help
employers with a broad set of operating expenses, instead of a
focus on payroll costs. This is especially important for those
who cannot maintain full payrolls due to significant and
sustained loss in revenues.
I should note that the RESTART Act currently has 59
bipartisan co-sponsors in the United States Senate.
For Mr. Holtz-Eakin, in your testimony you indicated one of
the most effective reforms would be to change PPP's focus from
payroll to revenue replacement, similar to what my RESTART Act
would do. Can you kindly elaborate on the importance of this
possible reform and its benefit for a recovering economy?
Mr. Holtz-Eakin. Certainly, Senator. As I noted earlier,
the economic problem that the PPP addressed was large cash flow
crunch, generated by the virus itself, and the fear people had
to engage in commerce and thus risk infection or transmission
of the disease. So when the customers disappeared, the revenue
disappeared, and the mechanical replacement of the revenue
would address that business model problem.
The difficulty you face is that it is much more expensive
and targeting a much smaller part of the cost base of the
business, but economically it is far more effective.
Senator Young. Thank you so much. I have one additional
question for you, if the Chairman will indulge me. It pertains
to seasonal employment.
We have a business in Indiana that I would like to cite as
an example: Holiday World and Splashin' Safari. It is fourth-
generation, well-known, family-owned theme park located in the
southern part of my state. And historically, Holiday World has
earned 99 percent of its revenue between the months of May and
October.
However, like most seasonal businesses, Holiday World was
unable to open until June, and ended the season early, in
September. I am told that Holiday World experienced a 66
percent year-over-year revenue loss in 2020.
Unfortunately, the amusement park did not qualify for an
original PPP loan because it exceeded the full-time employee
threshold. However, I am hopeful that PPP second draw program
will incorporate a new seasonal employee definition that takes
into account the unique fluctuations for these types of
businesses.
Again, for Mr. Holtz-Eakin, are there any additional PPP
improvements you think Congress should consider to ensure small
businesses receive the relief they need, especially any changes
related to seasonal businesses?
Mr. Holtz-Eakin. Senator, I have not given any specific
thought to seasonal businesses, but I think the rule of thumb
should be to spread it over the full year and see if it
qualifies for the program, and my expectation is that it would,
under those circumstances. So that is a modification we might
think about, going forward.
Senator Young. Very good. Thank you so much to all of our
witnesses, and to Mr. Holtz-Eakin for answering my questions,
and I yield back to the Chairman.
Chairman Rubio. All right. Well, I want to thank all of the
witnesses for participating here today, all the members who
attended this hybrid hearing, and I just appreciate the time
you have given us as well. I know it has been in excess of the
two hours, but I hope you sensed from the questions and the
members' interest how important this is to everybody.
Just as a technical note here for a business item on the
Committee, the hearing record will remain open for one week
instead of the usual two because of the end of the year and so
forth. So if any members have any statements or questions for
the record we ask that they submit it by Thursday, December
17th, which is a week from today, at 5 p.m.
So with that thank you to everybody, and with that the
hearing is adjourned.
[Whereupon, at 12:16 p.m., the hearing was adjourned.]
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