[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                    WHAT COMES NEXT? PPP FORGIVENESS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 1, 2021

                               __________


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 117-030
             Available via the GPO Website: www.govinfo.gov
             
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-478                     WASHINGTON : 2021                     
          
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                          JARED GOLDEN, Maine
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                         MARIE NEWMAN, Illinois
                       CAROLYN BOURDEAUX, Georgia
                         TROY CARTER, Louisiana
                          JUDY CHU, California
                       DWIGHT EVANS, Pennsylvania
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                          ANDY KIM, New Jersey
                         ANGIE CRAIG, Minnesota
              BLAINE LUETKEMEYER, Missouri, Ranking Member
                         ROGER WILLIAMS, Texas
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                        CLAUDIA TENNEY, New York
                       ANDREW GARBARINO, New York
                         YOUNG KIM, California
                         BETH VAN DUYNE, Texas
                         BYRON DONALDS, Florida
                         MARIA SALAZAR, Florida
                      SCOTT FITZGERALD, Wisconsin

                 Melissa Jung, Majority Staff Director
            Ellen Harrington, Majority Deputy Staff Director
                     David Planning, Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
                                                                   
Hon. Nydia Velazquez.............................................     1
Hon. Blaine Luetkemeyer..........................................     2

                               WITNESSES

Ms. Tracy C. Ward, Director of the SBA 504 Loan Program, Self-
  Help Ventures Fund, Durham, NC.................................     5
Ms. Leslie Payne, Assistant Vice President of Commercial Lending, 
  Affinity Federal Credit Union, Basking Ridge, NJ, testifying on 
  behalf of the National Association of Federally Insured Credit 
  Unions.........................................................     7
Ms. Marla Bilonick, President and Chief Executive Officer, 
  National Association for Latino Community Asset Builders, 
  Washington, DC.................................................     9
Mr. Robert Fisher, President and Chief Executive Officer, Tioga 
  State Bank, Chairman, Independent Community Bankers of America 
  (ICBA), Spencer, NY............................................    10

                                APPENDIX

Prepared Statements:
    Ms. Tracy C. Ward, Director of the SBA 504 Loan Program, 
      Self-Help Ventures Fund, Durham, NC........................    43
    Ms. Leslie Payne, Assistant Vice President of Commercial 
      Lending, Affinity Federal Credit Union, Basking Ridge, NJ, 
      testifying on behalf of the National Association of 
      Federally Insured Credit Unions............................    61
    Ms. Marla Bilonick, President and Chief Executive Officer, 
      National Association for Latino Community Asset Builders, 
      Washington, DC.............................................    73
    Mr. Robert Fisher, President and Chief Executive Officer, 
      Tioga State Bank, Chairman, Independent Community Bankers 
      of America (ICBA), Spencer, NY.............................    78
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Accion Opportunity Fund......................................    85
    CAMEO - California Association for Micro Enterprise 
      Opportunity................................................    88
    CBA - Consumer Bankers Association...........................    90
    CDC Small Business Finance (CDCSBF)..........................    92
    Chairtable Nonprofit Letter..................................    94
    JCN - Job Creators Network...................................    97

 
                    WHAT COMES NEXT? PPP FORGIVENESS

                              ----------                              


                      WEDNESDAY, SEPTEMBER 1, 2021

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., via 
Zoom, Hon. Nydia M. Velazquez [chairwoman of the Committee] 
presiding.
    Present: Representatives Velazquez, Mfume, Phillips, 
Newman, Bourdeaux, Carter, Chu, Evans, Delgado, Houlahan, Kim 
of New Jersey, Craig, Luetkemeyer, Williams, Hagedorn, Stauber, 
Meuser, Tenney, Garbarino, Kim of California, Van Duyne, 
Donalds, Salazar, and Fitzgerald.
    Chairwoman VELAZQUEZ. Good morning. I call this hearing to 
order.
    Without objection, the Chair is authorized to declare a 
recess at any time.
    Let me begin by saying that standing House and Committee 
rules and practice will continue to apply during remote 
proceedings. All Members are reminded that they are expected to 
adhere to the standing rules, including decorum, when they are 
participating in any remote event.
    With that said, the technology we are utilizing today 
requires us to make some small modifications to ensure that the 
Members can fully participate in these proceedings. House 
regulations require Members to be visible through a video 
connection throughout the proceeding, so please keep your 
cameras on. If you have to participate in another proceeding, 
please exit and log back in later.
    In the event a Member encounters technical issues that 
prevent them from being recognized for their questioning, I 
will move to the next available Member of the same party and 
will recognize that Member at the next appropriate time slot, 
provided they have returned to the proceeding.
    Should a Member's time be interrupted by technical issues, 
I will recognize that Member at the next appropriate spot for 
the remainder of their time once their issues have been 
resolved.
    In the event a witness loses connectivity during testimony 
or questioning, I will preserve their time as staff address the 
technical issue. I may need to recess the proceedings to 
provide time for the witness to reconnect.
    Finally, remember to remain muted until you are recognized 
to minimize background noise. In accordance with the rules, 
staff have been advised to mute participants only in the event 
there is inadvertent background noise. Should a Member wish to 
be recognized, they must unmute themselves and seek recognition 
at the proper time.
    Seventeen months ago, during the early days of the COVID 
crisis, this committee and our counterparts in the Senate 
worked together to create emergency relief programs to assist 
small businesses. At that time hundreds of thousands of small 
firms across the country were closing their doors to protect 
their customers and their employees.
    Recognizing the dire nature of this situation, Congress 
created the Paycheck Protection Program. The PPP was an 
unprecedented government effort that sought to distribute 
hundreds of billions of dollars to entrepreneurs so they could 
keep their lights on and pay their employees.
    Over the course of the past year, Congress replenished the 
funds multiple times and made critical improvements to make the 
program more equitable for the smallest of small businesses and 
the underserved. More than $800 billion in critical PPP support 
was provided to small businesses during their time of need.
    PPP was never perfect, but thanks to the hard work of SBA 
employees and necessary reforms made by Congress, the program 
has helped saves millions of businesses from permanent closure. 
With conditions improving from the loss of the pandemic, it is 
vital that this committee turn to what may be the most 
important part of the program, the federal government's promise 
that this loan can be forgiven and converted into grants.
    PPP guidelines stipulated that SBA should forgive loans if 
small businesses spent funds on meeting payroll costs and other 
related expenses.
    SBA has already received 5.6 million loans for business 
requests and made over 5.2 million forgiveness payments. This 
means that approximately 46 percent of all PPP loans have 
received payments. This statistic represents progress, but also 
shows that there is a long way to go.
    Unexpected debt can hinder a small employer's recovery and 
cloud its path to future growth, so we must examine the 
obstacles preventing recipients from loan forgiveness and work 
to obviate them.
    I look forward to discussing how the SBA is working to make 
PPP forgiveness as simple as possible and examining solutions 
to maximize total loan forgiveness, especially for small dollar 
borrowers.
    I would now like to yield to the Ranking Member, Mr. 
Luetkemeyer, for his opening statement.
    Mr. LUETKEMEYER. Thank you, Madam Chair, and thank you for 
calling this very important hearing on Paycheck Protection 
Program, loan forgiveness, and the process.
    With the program's application window now closed, Members 
of Congress must examine the back end process that focuses on 
forgiveness to insure the program concludes appropriately, 
prudently, and smoothly for small businesses.
    Prior to the pandemic, small businesses were displaying 
optimism, confidence about their economic future. Through a 
smart tax environment driven by the 2017 Tax Cuts and Job Act 
and former President Trump's deregulatory actions. Such as 
cutting two regulations for every new one, these small 
businesses were investing in their companies, their employees, 
and their communities. Unfortunately, COVID-19 and overwhelming 
State and local shutdown mandates devastated the nation's 
smallest firms.
    From being closed entirely to altered capacity 
restrictions, these measures force small businesses into 
survival mode. Not surprisingly, many small businesses adapted 
and performed to the best of their ability under dire 
circumstances. That is what they do. Federal government 
assistance, like the PP, provided an avenue toward recovery and 
focused efforts on the nation's more than 60 million small 
business workers and employees.
    The PPP proved to be successful due to the efforts of 
private sector lenders who partnered with the Small Business 
Administration and the Department of Treasury to deliver funds 
to small businesses with speed and efficiency. As the program 
continues to shift towards forgiveness.
    Today's hearing will show a completely different 
perspective for lenders who participated in the program. If a 
small business adhered to the rules set out in legislation and 
the guidance produced by SBA and the Treasury Department, 
forgiveness should be attainable.
    Congress examined this process in 2020 and created a 
streamlined forgiveness process for all loans below $150,000 in 
a December COVID package. The SBA has also taken steps to 
simplify the process to that end. As I have been examining 
SBA's new direct forgiveness process, it has come to my 
attention that lenders have received multiple messages which 
quite conceivable could be considered a threat from the SBA on 
potential for enhanced lender audits based on their 
participation within the direct forgiveness process or if they 
had not offered 2021 PPP borrows an opportunity to move through 
loan forgiveness.
    One thing is clear. There are multiple legitimate and 
prudent reasons why lenders haven't joined the SBA's new direct 
forgiveness portal, including the fact that some lenders have 
had systems and portals up and running for months. And I cannot 
stress enough this next reason, which is many lenders would 
like to assist their small business borrowers through the 
completion of this program.
    I will not stand by and let lenders who are punished for 
working closely with their small business borrowers, the SBA, 
their dismal performance and attempt at direct lending through 
the EIDL program to provide a warning to everybody that the SBA 
is ill-suited to perform many of these tasks. I will continue 
to watch these developments closely.
    At today's hearing I look forward to hearing more about the 
relationship between SBA and private sector lenders. Has there 
been an open line of communication? And where should 
improvements be made going forward?
    Additionally, I am also concerned about further changes to 
the forgiveness process that can open the program to increased 
levels of waste, fraud, and abuse. Granting blanket forgiveness 
has the potential to remove critical safeguards that are in 
place to ensure that American taxpayer dollars are protected.
    PPP loan forgiveness oversight is even more important 
considering recent reports indicating that certain fintech 
lenders have been connected to many of the program's most 
problematic loans. These are significant issues that I plan to 
continue to examine closely. As Members of Congress assist the 
small business economic recovery, we must not ignore the 
barriers being enacted that will prevent small business growth 
in the future.
    At a time when most small businesses are simply trying to 
stay afloat, President Biden and congressional Democrats are 
pushing tax increases on both the corporate and individual 
levels, the elimination of step-up basis on inheritance, and a 
slew of other harmful changes. These tax changes have 
implications for all small businesses and farms, and main 
street USA should not be forced to pay for the Democrats' 
outrageous and unnecessary spending agenda.
    Our nation's small businesses are already facing worker 
shortages and skyrocketing inflation. We should be creating an 
environment that allows small businesses to create jobs, 
expand, and grow, not perpetuating an environment that requires 
them to scale back.
    I want to thank all of the witnesses for joining us today, 
and I look forward to our discussion.
    Madam Chair, with that, I yield back.
    Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. The 
gentleman yields back.
    I would like to take a moment to explain how this hearing 
will proceed. Each witness will have 5 minutes to provide a 
statement and each committee Member will have 5 minutes for 
questions. Please ensure that your microphone is on when you 
begin speaking and that you return to mute when finished.
    With that, I would like to introduce our witnesses.
    Our first witness is Ms. Tracy Ward, the director of the 
Self-Help Ventures Fund 504 loan program, who has led the way 
for her CDFI in helping very small borrowers access to the PPP 
program.
    In 2020 and 2021, Self-Help made just under 2,800 PPP loans 
totaling $253 million in COVID-19 relief funding. 65 percent of 
their PPP borrowers were small businesses and nonprofits led by 
people of color. Self-Help is affiliated with the Center for 
Responsible Lending, a national nonprofit for research on 
policy organization dedicated to protecting home ownership and 
family wealth by working to eliminate abusive financial 
practices.
    Thank you for joining us today, Ms. Ward.
    Our second witness is Ms. Leslie Payne of Affinity Federal 
Credit Union in Basking Ridge, New Jersey. Ms. Payne is the 
credit union's Assistant Vice President for commercial lending 
and has been personally involved in the credit union's PPP 
lending. Her credit union has updated to the SBA direct 
forgiveness platform, so we look forward to hearing about her 
Members' experience. Today she is testifying on behalf of the 
National Association of Federally Insured Credit Unions.
    Thank you for joining us today, Ms. Payne.
    Our third witness is Ms. Marla Bilonick, the President and 
CEO of the National Association of Latino Community Asset 
Builders or NALCAB. She also serves as CEO of NALCAB's 
subsidiary asset management company, Escalera Community 
Investment. NALCAB is a nationwide network of over 130 mission-
driven organizations that are encore institutions in 
predominantly Latino communities.
    Ms. Bilonick brings over 20 years of expertise in small 
business development and community-based financial services 
with an emphasis on the U.S. Latino population.
    Ms. Bilonick testified before the committee last Congress 
on issues related to underserved business development.
    It is my pleasure to welcome her back to the committee.
    The Ranking Member, Mr. Luetkemeyer, will now introduce our 
final witness.
    Mr. LUETKEMEYER. Thank you, Madam Chair.
    Our next witness is Mr. Robert Fisher. Mr. Fisher is the 
president and chief executive officer of Tioga State Bank 
located in Spencer, New York.
    In addition to his leadership role at the century-old Tioga 
State Bank, Mr. Fisher is currently the Chairman of the 
Independent Community Bankers Association of America, also 
known as ICBA. Additionally, he is a Member of ICBA's Federal 
Delegate Board and its policy development and nominating 
committees, not to mention Mr. Fisher is a fifth generation 
community banker. He is also a graduate of the University of 
Notre Dame and a United States Air Force veteran.
    Mr. Fisher, I want to thank you for taking time away from 
running your bank to join us today, and I want to thank you for 
your service to our nation.
    I also want to thank the other witnesses for joining us and 
look forward to your questions. Thank you for doing all you can 
while we are in this pandemic era here, a unique time that we 
have been involved in this. Your testimony today is going to be 
very important to us to be able to understand some of the 
issues that you face and that we need to be addressing.
    Thank you very much.
    And with that, Madam Chair, I yield back.
    Chairwoman VELAZQUEZ. Thank you all for being here today.
    Ms. Ward, you are recognized for 5 minutes.

 STATEMENTS OF MS. TRACY C. WARD, DIRECTOR OF THE SBA 504 LOAN 
PROGRAM, SELF-HELP VENTURES FUND; LESLIE PAYNE, ASSISTANT VICE 
PRESIDENT OF COMMERCIAL LENDING, AFFINITY FEDERAL CREDIT UNION, 
  ON BEHALF OF THE NATIONAL ASSOCIATION OF FEDERALLY-INSURED 
 CREDIT UNIONS; MARLA BILONICK, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, NATIONAL ASSOCIATION FOR LATINO COMMUNITY ASSET 
    BUILDERS-NALCAB; AND ROBERT FISHER, PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, TIOGA STATE BANK, CHAIRMAN, INDEPENDENT 
              COMMUNITY BANKERS OF AMERICA (ICBA)

                   STATEMENT OF TRACY C. WARD

    Ms. WARD. Thank you, Chairwoman Velazquez, Ranking Member 
Luetkemeyer, and Members of the committee. My name is Tracy 
Ward, and I represent Self-Help, a Community Development 
Financial Institution, and a PPP lender. Thank you for the 
opportunity to provide testimony today.
    At the start of the pandemic, Congress came together to 
create the Paycheck Protection Program, delivering urgently 
needed funds to small businesses to limit mass layoffs and 
business closures. Congress designed PPP as a forgivable loan 
with the explicit promise that funds spent properly would not 
have to be repaid. Today we are asking for several fixes to PPP 
forgiveness to ensure that promise can be kept.
    SBA implementation of this unprecedented program was 
remarkably fast, but it came with a complex and constantly 
changing set of rules, and Congress placed the burden of 
understanding these rules on small business borrowers, quite a 
challenge for small businesses in survival mode scrambling to 
access limited funds. As a result, many of the smallest 
businesses are not getting that promised forgiveness--even when 
they have spent every penny properly.
    For example, an independent contractor in Illinois received 
a much-needed PPP loan of just under $20,000. Two days before 
he applied, SBA issued a new rule effective immediately that 
limited the way businesses like his could document the request, 
so now his loan is not forgivable, even though he completed his 
application in good faith and spent the funds properly. This 
Black-owned microbusiness instead of being able to recover is 
being held back by an unexpected $20,000 debt trap.
    Congress and SBA have recognized and addressed some of the 
unintended challenges faced by the smallest businesses in 
accessing PPP loans. One significant change was an adjustment 
earlier this year in the loan amount calculation for most 
microbusinesses, sole proprietors, independent contractors, and 
self-employed individuals, the smallest of the small; but that 
change was not applied retroactively, denying thousands of 
businesses adequate relief.
    One such business is a Black-owned child care in North 
Carolina, which received only $2,750 in PPP funding. Had this 
change been retroactive, she would have been eligible for an 
additional $14,000 to support her operations. And despite 
Congress making this exact same change retroactive for small 
farmers and ranchers, other microbusinesses, like this child 
care, were left out.
    It is important to remember that these challenges are 
exacerbated for small businesses of color, which are 
overwhelming microbusinesses that entered the pandemic credit 
starved and with limited access to mainstream banking services 
due to structural limitations that have been well documented by 
our affiliate, the Center for Responsible Lending, and by 
others.
    We propose several clear fixes to the forgiveness rules to 
ensure fairness and to avoid inadvertently causing further harm 
to the smallest businesses who are the least able to sustain 
it.
    One, eliminate ``gotcha'' denials of loan forgiveness due 
to sudden changes in rules that were imposed without notice.
    Two, rescind SBA's January 15, 2021 rule denying 
forgiveness to borrowers who made good faith errors.
    Three, require lenders to opt in to SBA's direct 
forgiveness portal if they are unduly slow processing 
forgiveness or if they are unresponsive to their borrowers. The 
portal should expand the options for forgiveness, not limit it.
    Four, alleviate unnecessary paperwork burdens for the 
smallest businesses by automatically forgiving loans of $25,000 
or less. These microbusinesses overwhelmingly should qualify 
for full forgiveness based on program rules.
    Finally, improve and refocus SBA's loan review process to 
ensure that fraudulent activity is prosecuted and that 
businesses who applied in good faith are not harmed by 
uncertainty and delay.
    In this ongoing crisis, small businesses deserve 
responsible follow-through on PPP's promise so they can get 
back to running their businesses and employing their 
communities. Without changes, the forgiveness stage of PPP will 
exacerbate preexisting inequities, and for many of the smallest 
businesses, will turn Congress' promise into a bait and switch.
    Thank you for addressing this important issue, and I look 
forward to your questions.
    Chairwoman VELAZQUEZ. Thank you, Ms. Ward.
    Ms. Payne, you are recognized for 5 minutes.

                   STATEMENT OF LESLIE PAYNE

    Ms. PAYNE. Good afternoon, Chairwoman Velazquez, Ranking 
Member Luetkemeyer, and Members of the committee. My name is 
Leslie Payne, and I am testifying today on behalf NAFCU. I am 
the AVP of commercial lending at Affinity Federal Credit Union.
    Over the last 18 months, I have been tasked with the 
implementation and day-to-day management of the PPP initiative 
at Affinity. I am proud of the work that we have done to help 
our Members through these challenging times, and I thank you 
for the opportunity to appear before you today to discuss the 
PPP forgiveness process.
    Credit unions have gone above and beyond to ensure small 
businesses in their communities are taken care of during the 
pandemic. Though Affinity was already an SBA lender, many 
credit unions signed on as PPP lenders despite not having done 
SBA lending before.
    An analysis of the SBA's PPP data shows that credit unions 
made loans in amounts much lower than the national average, and 
credit union PPP loans went to the smallest of small 
businesses.
    Affinity provided 1,058 PPP loans in the first round of the 
program, totalling approximately $58 million in lending. We 
provided an additional 603 loans in the second round for 
approximately $38 million. Our overall average PPP loan was 
approximately $56,000, with over 90 percent of loans $150,000 
or under. Our smallest PPP loan was approximately $700, while 
our largest was approximately $1.7 million. Borrowers have come 
to rely on their credit units to assist them through every 
phase of the PPP process, including forgiveness. The initial 
complexity of the PPP forgiveness process posed challenges for 
many small businesses who may not have the staff or the 
expertise for such a complex application.
    We were pleased to see Congress enact a simplified 
forgiveness process for loans under $150,000. However, credit 
unions continue to grapple with simultaneously processing loan 
forgiveness applications while meeting the routine needs of 
their small business Members. Many credit unions, such as 
Affinity, have invested money to create a solution for Members 
to complete online applications and upload supporting 
documentation or work with a third-party vendor to streamline 
the overall process.
    A primary source of frustration for credit unions on 
forgiveness has been the SBA's ongoing requests for additional 
documentation for applications under review even for small 
dollar loans. Still, almost 80 percent of our PPP loans at 
Affinity have been forgiven. For Affinity's forgiveness 
applications overall, it has taken on average 9 days from 
application submission to SBA approval. For forgiveness 
applications that have been placed under review, it has taken 
an average of 47 days.
    SBA's recent introduction of the revenue reduction score is 
a welcome change will help expedite the forgiveness process. 
The SBA also recently launched the Direct Borrower Forgiveness 
Portal. At Affinity, despite the time and money invested in 
implementing solutions to process forgiveness applications in-
house over the last year, we are one of many credit unions that 
have opted into the portal. Although the process streamlines 
the borrower's experience, it does not necessarily streamline 
the process for all lenders as many will have to monitor the 
SBA system and update their commercial lending platforms 
manually. However, the portal offers smaller credit unions that 
have not had the ability to leverage a third party vendor or 
lack the means to develop a streamlined in-house process, a 
simple solution to process forgiveness applications.
    Despite many opting into the portal, credit unions 
generally feel it would have been more beneficial at the onset 
of the forgiveness process. Some credit unions are choosing to 
not opt into the program because they feel the systems they 
have created are more consumer friendly. Moreover, integrating 
the new portal is operationally burdensome.
    There are also concerns that the SBA will not answer 
borrowers' questions in a timely or complete fashion. It was 
very difficult to get answers in a timely manner last year, and 
some credit unions fear that borrowers will use the portal and 
then come back to their lender with questions, but the lender 
has no control over the system and will not be able to assist 
the borrower.
    At Affinity we have had some frustrations with the process, 
such as the SBA communicating directly with borrowers without 
alerting lenders, and the SBA not alerting Members that 
borrowers apply directly for forgiveness.
    Two ways that Congress can take to improve the forgiveness 
process would be, one, increasing the loan size for the use of 
the portal and revenue reduction score and, two, urging the SBA 
to follow up on its commitment to focus its review on larger 
and higher risk loans. Adopting this approach to forgiveness 
reviews will conserve the SBA's resources and allow the agency 
to more efficiently allocate their finite resources to those 
PPP loans that warrant additional review.
    In conclusion, we are proud of how we have been able to 
help our small business Members stay afloat and retain 
employees through the PPP. At Affinity, like at all credit 
unions, our priority is our Members. Our team has been and 
remains committed to guide our Members through the PPP 
experience successfully.
    I again thank you for the opportunity to appear before you 
today, and I welcome any questions that you may have.
    Chairwoman VELAZQUEZ. Thank you, Ms. Payne.
    Ms. Bilonick, you are now recognized for 5 minutes.

                  STATEMENT OF MARLA BILONICK

    Ms. BILONICK. Thank you.
    Good afternoon, Chairwoman Velazquez, Ranking Member 
Luetkemeyer, and Members of the committee. My name is Marla 
Bilonick, and I am the president and CEO of the National 
Association of Latino Community Asset Builders, otherwise known 
as NALCAB. It is my sincere honor to be addressing you today 
about Paycheck Protection Program forgiveness and speaking on 
behalf of NALCAB, our Member organizations, and the small 
businesses that they represent.
    NALCAB is the hub of a national network of over 140 
mission-driven organizations that are anchor institutions in 
geographically and ethnically diverse Latino communities across 
the nation.
    Our vision is to dramatically scale the flow of public and 
private sector capital that responsibly meets the asset-
building needs and opportunities in the communities we serve. 
As a grant maker and U.S. Treasury certified CDFI lender, 
NALCAB strengthens and coordinates the capacity of the NALCAB 
network to deploy capital.
    We know that the strength of the U.S. economy relies on the 
fast-growing Latino communities' hard work, entrepreneurial 
experience, spending power, and leadership. While the Latino 
community in the United States is often heralded for starting 
small businesses at rates higher than other ethnic groups, the 
adverse economic effects of the pandemic have 
disproportionately impacted Latino business owners.
    Stanford's Latino Entrepreneurial Institute surveyed 7,000 
small business owners and cites that 86 percent of Latino-owned 
businesses suffered immediate negative financial impacts from 
the pandemic. At the same time, Latino business owners were 
successful at securing PPP loans at only half the rate of their 
White counterparts and only 3 percent of Latino-owned 
businesses received their full funding request.
    NALCAB was called upon to provide capital to several 
Members to facilitate their PPP lending. As a CDFI in our own 
right, we ultimately loaned our Members close to $12 million 
for PPP loans which resulted in them making 640 loans to small 
businesses in their communities.
    NALCAB Member CDFIs, including heavy hitters like Accion 
Opportunity Fund, Self-Help, LiftFunds, and CDC Small Business 
Finance, were able to provide business clients with PPP loans 
when banks could not or would not.
    In fact, NALCAB Member and CDFI, Prestamos CDFI was the 
third highest PPP lender in the nation, including traditional 
commercial banks. Prestamos made close to 500,000 PPP loans 
averaging around $15,000 each, for a total of close to $8 
billion in PPP lending. JP Morgan Chase and Bank of America 
topped the ranking with over $12 billion and over $9 billion 
respectively.
    As of August 2021, roughly half of PPP borrowers had 
submitted forgiveness applications with the other half 
outstanding. Advances have been made to streamline PPP 
forgiveness, including the July launch of the Direct 
Forgiveness Portal which is an immediate and simplified 
clearinghouse for forgiveness applications attached to loans of 
$150,000 and below.
    Discussions with CDFI Members of NALCAB point to the portal 
now being the primary channel available in seeking loan 
forgiveness for their small business clients. Between April and 
August, the forgiveness applications process practically 
doubled from the national number reported in April. This may be 
partially attributed to the Direct Forgiveness Portal.
    Number three ranked PPP lender and NALCAB Member Prestamos 
CDFI reports that they are directing clients almost exclusively 
to the SBA PPP forgiveness portal and have found that to be a 
straightforward avenue for achieving forgiveness. However, they 
noted that they fear that some clients are missing out on loan 
forgiveness due to lack of awareness of the process and/or lack 
of access to technology to connect to the portal.
    The additional CDFI Members we spoke with from coast to 
coast all reported the portal was now their primary channel for 
client forgiveness, even in the cases where they had developed 
their own technology ahead of the portal.
    While only a sliver of NALCAB PPP lenders made loans over 
five figures, we are supportive of stretching simplified 
forgiveness process for loans up to $350,000. This would 
further ease the burden on even more small businesses that are 
doing their best to power through recovery. In addition, it 
would lighten the administrative load of lenders that have 
supported those businesses through their PPP journey. We agree 
that PPP loans of $350 thousand and above are in a different 
class and justify higher scrutiny.
    Loans that were made in the initial stages of the Paycheck 
Protection Program in 2020, when there was some confusion 
regarding calculations around loan sizing, have resulted in 
good faith error that generated some PPP loans that exceeded 
borrowers' correct maximum amount. In January of 2021, the 
SBA's procedural notice informed PPP lenders of said excess 
loan amount errors. Particularly in cases of smaller amounts, 
small loan amounts, this seems like undue efforts to squeeze 
dollars out of the very borrowers that the PPP program was 
designed for, borrowers that most certainly used every cent of 
their PPP loan to ensure their businesses stayed afloat and to 
keep their employees on payroll.
    I don't believe I have time to go into my recommendations, 
but they were outlined in the content of the testimony.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. BILONICK. Thank you very much for your time.
    Chairwoman VELAZQUEZ. Thank you, Ms. Bilonick.
    Mr. Fisher, you are now recognized for 5 minutes.

                   STATEMENT OF ROBERT FISHER

    Mr. FISHER. Chairwoman Velazquez, Ranking Member 
Luetkemeyer, and Members of the committee. I am Bob Fisher, 
president and CEO of Tioga State Bank, a $550 million community 
bank in Spencer, New York, and Chairman of the Independent 
Community Bankers Association of America. So thank you for the 
opportunity to testify at today's hearing.
    The PPP was a natural fit for the business model of 
community banks. We are small business lending specialists with 
local knowledge and deep roots of the communities that we 
serve.
    My bank's PPP lending is typical of a community bank. We 
made a total of 929 loans for $64.8 million, saving roughly 
10,000 jobs. Our average loan was just under $70,000, and Tioga 
State Bank's 40-year history as an SBA 7(a) lender helped us to 
navigate sometimes challenging SBA channels on behalf of our 
borrowers.
    Our largest PPP loan, $2.7 million, was to a southern tier 
independent center. They are a large not-for-profit in 
Binghamton, New York, dedicated to helping people with 
disabilities remain independent. The loan helped prevent staff 
layoffs and allowed the center to continue to provide critical 
services in our community.
    Other community banks have similar stories and results. In 
aggregate, community banks made nearly 60 percent of the PPP 
loans which supported nearly 50 million jobs. What's more, 
community banks made over 80 percent of PPP loans to minority-
owned and women-owned small businesses and nearly 70 percent of 
the PPP loans to veteran-owned small businesses. I am proud 
that my industry stepped up to support the survival of these 
diverse businesses in a time of crisis.
    We are well into the forgiveness phase of the program, and 
this process must be as simple as possible for borrowers so 
that they can focus on operating their businesses in a still 
uncertain environment. We are grateful to this committee and 
Congress at large for its role in making statutory changes and 
advocating for a streamlined process.
    As you know, the SBA has created the Direct Borrower 
Forgiveness Portal for PPP loans of 150,000 or less. My bank 
has a strong record of processing forgiveness applications and 
has chosen not to use the portal. Like many community banks, 
our true value proposition is relationship lending. We believe 
we owe it to our borrowers to ensure a smooth process from 
origination until full forgiveness. If there are technical or 
communication problems with the SBA--and this has, frankly, 
been a major concern--we want to use our expertise and 
relationship with the agency to resolve them. This is good 
business practice and best for our borrowers. We are working 
expeditiously and are as eager as our borrowers to obtain full 
forgiveness.
    ICBA insists that SBA respect lenders' choice to not use 
the portal. Instead. The SBA has threatened to audit these 
lenders. What's more, the SBA suggests that lenders are 
deliberately delaying forgiveness to spread out fee income. 
That practice would be unacceptable and would cut against the 
grain of community bank relationship lending. I can assure you 
that no community bank that I know of is engaging in it.
    Our strong record of PPP lending in a time of crisis must 
not be diminished by these accusations. My bank and other 
community banks choose to preserve our borrower relationships 
and not be cut out of the process by a direct SBA program. More 
broadly, bank underwriting and servicing is what makes SBA 
lending programs so effective and must not be displaced by 
direct programs.
    As we conclude the PPP, reports of fraud and abuse have 
surfaced in the media. These problems must be reduced to the 
greatest extent possible not only in the PPP but in all SBA 
programs. My bank has experienced no PPP fraud and 100 percent 
forgiveness. Like other community banks, we own the 
consequences of our lending decisions and underwrite with great 
care. However, certain lenders with little experience in 
underwriting or with the SBA crowded into PPP. Safeguards were 
lowered in response to the crisis and, not surprisingly, these 
lenders may be subject to higher incidents of fraud.
    As normal state returns, the SBA should proceed with great 
caution as it considers changes to existing programs. Tioga 
State Bank and many community banks highly value a robust and 
sustainable 7(a) program. Fraud puts all SBA programs at risk.
    Thank you again for convening today's hearing and for the 
opportunity to offer my perspective, and I am happy to answer 
any questions you may have.
    Thank you.
    Chairwoman VELAZQUEZ. Thank you, Mr. Fisher. Thanks to all 
of the witnesses for being here today and for your work and 
engagement on the PPP.
    I will begin by recognizing myself for 5 minutes.
    Ms. Payne, less than one-quarter of all PPP lenders have 
updated to the SBA direct forgiveness platform. Even though 
your credit union invested in its own platform, you also 
updated to the SBA platform.
    Can you share with us any feedback your borrowers have had 
on the SBA platform?
    Ms. PAYNE. Yes. Thank you for the question.
    We have opted in, and largely we opted in, we have a system 
in place that has been working quite well. We jumped on the 
forgiveness quite early in the process and put things in place 
that we needed to do. We made our investments and such. We 
opted in because we want to give our borrowers every 
opportunity for forgiveness, so we have offered that.
    To date, since the portal has opened, the Direct 
Forgiveness Portal has opened, we have seen approximately 12 
percent of our borrowers go to the direct portal. So the 
majority of our Members are still coming to us to directly go 
to our portal for forgiveness.
    But what we have heard from our Members is that, from their 
perspective, that the portal has been user friendly. From the 
lenders' perspective, this creates more manual process for us. 
As we do have our own process in place, we have to proactively 
go into the SBA portal and check the website, and then manually 
we are inputting data in the beginning of the process as well 
as at the end of the process.
    So another concern that we have is in the early stages--we 
are still in the early stages, and there are still some 
unknowns with regard to the confusion and communication that 
our borrowers will get from the SBA and when they will get that 
communication.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. Ward, we have heard from borrowers that they are 
responsible for paying, with interest, excess loan amounts 
caused by PPP miscalculation from a lack of rules and clarity 
early in the program.
    Should this excess loan amount be forgiven if loan proceeds 
were spent on forgivable purposes?
    Ms. WARD. We believe they should. We have seen many 
borrowers that are facing issues where they applied, based on 
the current rules in place as they understood them; but because 
the rules were complicated: some businesses were able to 
include owner healthcare costs, some were not. Some could 
document payroll showing 941s, others had different methods 
that could be more complicated.
    So we are seeing borrowers that are caught in this issue of 
having applied in good faith for a loan that they then used to 
keep their business operating, to keep their staff employed, 
and now at forgiveness, because the rule may have changed 
within days of when, they applied, they are not going to be 
able to get full forgiveness and they are caught in that.
    Chairwoman VELAZQUEZ. How is your institution handling 
these good faith errors?
    Ms. WARD. So we are working with our borrowers when we find 
situations like this--I will say, luckily, we are not finding 
many situations like this within our own PPP borrowers. We had 
processes in place and worked closely--as Mr. Fisher said, 
community banks are very--have a relationship and work hard 
with our borrowers to try and make sure that they understand 
the loan they are getting and how to get this forgiveness.
    Chairwoman VELAZQUEZ. Okay.
    Ms. WARD. We are hearing and seeing news reports about 
especially small lenders, small borrowers who are caught in 
this and are not going to be able to get forgiveness. We have 
been able--on a couple of cases where we have borrowers in this 
situation at Self-Help, we are working with them to try and 
identify are there other potential documents they have that 
might help us get them to full forgiveness.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. Payne, any comments on the PPP miscalculations?
    Ms. PAYNE. Yes. I think we have experienced several loans. 
With the initial PPP guidance, it was continuously evolving. 
Both the Members and lenders were trying to get their arms 
around the guidance and the rules, a very stressful and chaotic 
time.
    I think that each loan should be looked at on its own 
merits. If there was an error and it was made in good faith but 
the use of the funds was permitted, then I believe that these 
loans should be considered for full forgiveness.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. Bilonick, would you support increasing the qualifying 
loan amount to $350,000 to help SBA deliver forgiveness more 
efficiently and enable more small businesses to focus on their 
recovery?
    Ms. BILONICK. Absolutely. I think anything that will reduce 
the burden on both the borrowers and the lenders is a positive 
and should be supported. This would bring the percent over 90 
percent of PPP loans, and I think it is a sound recommendation.
    Chairwoman VELAZQUEZ. Thank you.
    My time has now expired. The Ranking Member, Mr. 
Luetkemeyer, is now recognized for 5 minutes.
    Mr. LUETKEMEYER. Thank you, Madam Chair.
    And just to comment first, you know, whenever you see that 
basically one in six loans are made by fintechs and 9 out of 10 
of those we are looking at as fraudulent and most of those 
loans are under $350,000, and the OG report--IG report said 
that half the loans under $350,000 are probably where your 
theft, identity theft and fraud are, for us to not look at 
those is, like, the administration leaving $85 billion worth of 
military equipment behind in Afghanistan for no reason 
whatsoever.
    This is nuts for us not to go after people who have 
intentionally gamed the system and are making away with dollars 
that the taxpayers have paid in and half the program would not 
be looked at. This is--I think it is a very, very wrong way to 
approach this.
    Mr. Fisher, you talked about in your testimony something 
that is very, very concerning to me with regards to the SBA and 
their threat to audit entities, banks, credit unions, other 
entities that may do PPP loans if they don't participate in the 
portal.
    What is your experience with this? What have you heard 
about this? Can you elaborate on it? I know you said in your 
testimony--I'm reading it as well. Would you like to elaborate 
just a little bit on that, please?
    Mr. FISHER. Sure. We received communication from SBA on 
Monday that there was potential for audit if you did not 
participate in the portal, the forgiveness portal. And from day 
one, we decided we wanted to be that interface between our 
customer and the SBA because it is, it is a very confusing, 
complicated process. And we feel that we have got the 
expertise. The customer doesn't.
    So we want to, you know, control that relationship and help 
our customer navigate through this whole forgiveness process, 
and we don't feel we should be--we have worked forgiveness very 
hard. In fact, we only have five loans from the first round 
that are still waiting for forgiveness, and it is not for a 
lack of effort on our part. We have been reaching out to those 
borrowers to get them to seek to apply for the forgiveness.
    Mr. LUETKEMEYER. So it is a choice on your part how you 
want to approach forgiveness, and the SBA is trying to threaten 
you into making the choice, their choice, basically. Is that 
right?
    Mr. FISHER. That is how it feels, yes.
    Mr. LUETKEMEYER. Well, I would urge you if you find banks 
that have received this threat and then receive an audit as a 
result of that, please contact me and my office. We want to 
follow up on this. We want to hold SBA accountable for 
outrageous statements like this. This cannot go unchallenged. 
This cannot be allowed to happen. So, please, work with us if 
you see this happening within the banking community that you 
work and your association works with.
    Thank you so much for that.
    You know, you made some great statements here, Mr. Fisher, 
as you were going through discussing the banks making the 
loans. You know, the banks have something called know your 
customer, and in doing that, I think we have found that----
    And as I mentioned earlier, the fintechs don't have that 
sort of firewall and, as a result, they are the ones that are 
causing a lot of problems here, although there is not a lot of 
problems with PPP compared to, like, the EIDL program which has 
got almost a third of it which is the most fraudulent stuff.
    But the underwriting that you are able to provide and the 
know your customer seems to be a real key in being able to 
minimize the fraud, minimize the abuse, and also set you up for 
being able to get forgiveness for your customers because you 
have done it right. Would you agree?
    Mr. FISHER. I totally agree. I mean, that is--we know our 
community. We know our customers. And I think that is what made 
the process work for community banks and why we were able to do 
60 percent of the PPP lending.
    Mr. LUETKEMEYER. It is concerning to me that, you know, as 
we continue to go through this process here and we are looking 
at--and I don't believe to bring the EIDL program into the PPP 
discussion here unnecessarily, but I think it lends--the PPP 
program here, by having had the banks do the underwriting, be 
able to do the hard work of know your customer and prepare the 
loans to be able to be approved by SBA, showed that that is a 
template I think for being able to do things the right way and 
minimize fraud and abuse.
    When you look at SBA's direct lending program, which is the 
EIDL program, and how fraught it is with fraud, it really sets 
up the contrast of does SBA really need to be in the direct 
lending business.
    So would you like to address that question?
    Mr. FISHER. We have always felt that, you know, with the 
7(a) program and 504 programs that community banks--you know, 
we have that relationship with our borrowers, and I think it 
really has reduced fraud. As I said, we experienced zero fraud 
in our PPP lending, and I think that just shows how 
relationship banking works and how utilizing community banks to 
be the interface with small business is so effective.
    Mr. LUETKEMEYER. Thank you very much for your testimony, 
Mr. Fisher. We certainly appreciate your thoughts and 
observations today.
    Thank you.
    With that, Madam Chair, I yield back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    I now recognize the gentleman from Maryland, Mr. Kweisi 
Mfume.
    Mr. MFUME. Thank you, Madam Chair. Thank you for calling 
this hearing.
    Ms. Payne, I would like to just start with you, if I might. 
From your own perspective, what were some of the considerations 
that went into you offering your own PPP forgiveness platform 
as opposed to the SBA's?
    Ms. PAYNE. Well, the first consideration was that there was 
no platform that the SBA was offering or putting out there. The 
forgiveness process was technically to start almost 
immediately. We took our first forgiveness application in 
September of 2020. So we needed to put something in place, and 
we did. We bought a software program, we trained our staff, and 
we pulled other resources. We wanted to be responsive. This was 
a temporary loan to help these businesses get through a very 
chaotic and traumatic time, and they needed to know that this 
was going to be forgiven, not that they had additional debt.
    So so many wanted to get forgiven as soon as they could, so 
we responded to our Members' needs, and that is what we did. We 
initiated our own platform, and we invested the time and 
resources and money to do that to be responsive.
    Mr. MFUME. So most of your credit union Members have used 
your platform rather than the SBA's platform. I would ask you, 
how would you evaluate the borrower outcomes? Are they 
comparable? Are there things that jump out at you that are 
cause for alarm?
    Ms. PAYNE. No. We have not had too much cause for alarm. 
The process, I will admit, early on was slow as we were 
learning it, and we did not necessarily anticipate the number 
of loans going under review. When we started, they were taking 
10 percent of our loans and putting them under review, and that 
creates very much the back-and-forth problem, and it is time-
consuming for our Members and it is stressful.
    They don't know why they are under review, and we can't--
you know, we don't know if it is random or otherwise. But in 
that sense, that process started slowly; but once we got up and 
running and really hit stride, we haven't seen any major 
issues. It is just when we go under loan review, it can be very 
time-consuming; but we have per my testimony, we have submitted 
80 percent of our portfolio has gone through the review 
process.
    Not all are 100 percent forgiven, but there are some that 
have some partial forgiveness; but overall we have had very 
good success rate on behalf of our Members.
    Mr. MFUME. Mr. Fisher, if I could turn to you for just a 
moment. You occupy a rather unique perch both as president of 
Tioga and as Chairman of the Independent Community Bankers of 
America. So far only about a quarter of all PPP lenders have 
opted in to SBA's direct forgiveness platform.
    Do you think, sir--or what do you think could have been 
done differently to have made that platform more appealing to 
persons? And if you had your druthers--let's hope we never go 
through this again; but if we were to go through something like 
this again, what would you recommend?
    Mr. FISHER. I think--you know, I think the issue is most 
banks had their forgiveness plan in place. We have already 
developed systems. We have a methodology of how we put 
customers through forgiveness, so SBA rolling this out late in 
the game has made it problematic.
    So I think had they wanted this portal to be used, I think 
I would have rolled it out when forgiveness started. It is kind 
of late in the game to throw in another ancillary system when 
we already have it pretty down for our customers.
    Mr. MFUME. Okay.
    Thank you, Madam Chair. I have no other questions. I yield 
back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. WILLIAMS. Thank you, Madam Chair.
    And before I get started, I want us, all of us across this 
country, to remember those 13 families that are--we are all 
praying for the loss of those young men and women and also 
remember those people who are still stranded in Afghanistan 
this morning.
    I am a small business owner, have been for 51 years. My 
whole life has been done dealing with credit unions and 
community banks, and I can tell you that the main street 
America does it a heck of a lot better than the federal 
government. And I want to say thanks to all of the lenders for 
getting this program out, and it is interesting that all of a 
sudden the SBA wants to get involved in the program here of 
late with portals, and so forth, and now we have to have a 
hearing. So just, again, the government does it better--or the 
private sector does it much better than government.
    When I talk to borrowers and lenders back in Texas, I 
constantly hear about communication issues with the SBA. Last 
week a lender told me there are some loans that have been 
submitted for forgiveness as far back as January, and we are 
hearing that this morning, that have yet to receive an update 
after 8 months.
    When the bank calls the PPP hotline for updates, it no 
longer is even in service, and the SBA can't continue to leave 
small business owners and community banks in the dark when they 
are taking all necessary steps to recover from the pandemic, 
these small business owners.
    So, Mr. Fisher, thank you for your service and what you are 
doing. I want to say, can you discuss your interactions with 
the SBA and describe how responsive they have been to your 
inquiries?
    Mr. FISHER. Communication throughout the process has been 
difficult, especially early on in the process. We have got some 
great connections with our local SBA office, and those folks 
are greatly helpful, but they are also limited in some of the 
knowledge that they have and, obviously, this was a new 
program, constant guidance changes, and things like that. So it 
was--communication was very problematic throughout the process 
and continues to be somewhat problematic in certain areas.
    I know of a local bank that I just heard a story yesterday 
that they had opted out of the forgiveness portal, yet their 
customers all received notices from SBA saying that they could 
apply through the portal, which was not active for the bank 
because they hadn't opted into the program, which caused chaos 
with their customer service center, so----
    Mr. WILLIAMS. Well, we are hearing stories like this all 
over, and I can tell you firsthand, it is tough to communicate 
with them.
    Lenders were given two options for PPP loan forgiveness: 
Either opt into direct forgiveness with the SBA or opt out and 
continue to process loans themselves. We are hearing about that 
that today. Most commonly bankers did not opt into direct PPP 
forgiveness for two main reasons. Lenders had already created 
an internal process, which we know that, or contracted this 
work out to a third party when they saw how important the 
forgiveness aspect of PPP would be in the future.
    In addition, as we have heard today, many banks were 
reluctant to opt in because the SBA had not been the most 
reliable partner in the past, and that is an understatement. 
And, unfortunately, on Monday morning, as we have heard, the 
SBA sent a notice to all lenders that they would be under more 
intense scrutiny for their loans if they did not participate in 
the Direct Forgiveness Portal, and here they are coming in late 
and messing everything up.
    So making this change so late in the process has caused 
confusion and even more headaches for the banks who make PPP so 
successful.
    So, Mr. Fisher, you have touched on this, but I think we 
need to talk about it even more. Can you discuss the risks you 
may face due to the recent announcement from the SBA and why 
you choose and chose to opt out of the direct PPP forgiveness 
in the first place?
    Mr. FISHER. Obviously, as I said before, they threatened 
potential audits, although they sent a follow-up email that 
maybe said that we wouldn't be audited, but I am not sure, you 
know, which letter to believe. But I think the reason we opted 
out is because we are relationship lenders. I mean, we want to 
be that interface between the lender and SBA because of--it is 
a complicated process, and we want to make sure that our 
customers are getting the correct information, that they don't 
have to learn the entire process. We know it.
    We have been through it. We have worked with SBA for 40 
years, so we want to be that interface, that relationship that 
we have with both the SBA and our customer. We want to enhance 
that.
    Mr. WILLIAMS. Well, a heavy-handed government is never 
good, and we are seeing that here firsthand.
    Just quickly, Mr. Fisher, can you elaborate on the 
importance of relationship banking for PPP forgiveness and how 
more government involvement may draw out this process?
    Mr. FISHER. I just think relationship banking, that is the 
role--that is the key for community bank, how we interact with 
our customers, and I think it really cuts down on fraud. As I 
said previously, you know, we have had zero fraud. Most of the 
banks that I know have had zero fraud. So I think fraud and 
just having those relationships is critical.
    Mr. WILLIAMS. Well, thank you for that, and the government 
cannot say that. So thank you for what you are doing.
    And I take my time and I yield it back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    I now recognize the congress lady from Georgia, Ms. 
Bourdeaux.
    I would just like to also say to Mr. Fisher, when we had 
the first tranche of money that went out and in the first 2 
weeks it was all gone, the data that we didn't get from the 
administration then showed that many small businesses in 
underserved communities and real small businesses were not able 
to access any PPP money because they didn't have preexisting 
relationships with banks.
    The big banks didn't lend to those small businesses. It 
wasn't until we intervened and we demanded from the Secretary 
of the Treasury to set aside money for mission-based lenders, 
that those data, those numbers didn't change.
    The same is true now with the great work that the SBA is 
doing in informing small businesses what they need to do in 
order to fill out the forms and take every step to be able to--
for their loans to be forgiven.
    Ms. Bourdeaux, you are recognized for 5 minutes. Thank you.
    Ms. BOURDEAUX. Thank you, Chairwoman Velazquez, and I have 
a similar line of questioning to some of the points that you 
raised. And thank you, Ranking Member Luetkemeyer, for holding 
this hearing.
    This access to PPP loan forgiveness is something I have 
been very concerned about since the moment I was sworn into 
Congress. In particular, we have heard a lot about 
discrepancies in loan forgiveness among underserved small 
businesses, particularly minority-owned businesses, in my 
community. And we did some informal surveys of who had gotten 
loan forgiveness and who hadn't and found that minority-owned 
businesses didn't know to ask, you know, didn't know how to 
follow up.
    And I think the testimony of Ms. Bilonick raises some of 
these kind of unanticipated problems that often occur with some 
of these very entrepreneurial, very vibrant businesses that 
just don't have that traditional relationship with a lender.
    This is one of the reasons I worked with the committee to 
submit additional views to the American Rescue Plan, 
encouraging the Small Business Administration to work to ensure 
equitable administration of emergency assistance, including PPP 
loan forgiveness.
    The SBA I think took a very important step towards ensuring 
greater access to loan forgiveness by opening their portal to 
provide forgiveness to loans less than $150,000. Unfortunately, 
as has been discussed in this hearing, you know, there is a lot 
of--you know, this is also creating some tradeoffs.
    But just to start off, Ms. Bilonick, can you just talk a 
little bit more--you raised some of the, kind of I wouldn't 
know, that I didn't know kind of issues that come up with some 
of the businesses in the Hispanic community. I have a very 
large Hispanic community. You know, when they are trying to 
approach working towards PPP loan forgiveness, what are some of 
the barriers that they face that we may not anticipate.
    Ms. BILONICK. Absolutely. So I think one issue is just--and 
I don't think it is exclusive to the Latino community. I think 
for most individuals who applied, the process of forgiveness 
was kind of just a big question mark, so I don't think that 
anyone is opposed to relationship banking. In fact, I would say 
all CDFIs are heavily involved in relationship banking. That is 
the bread and butter of the CDFI industry. So I did take some 
exception to those comments.
    I think also I wanted to just raise that I think the 
community-based lenders and the mission-based lenders have 
opted into the portal because, unlike higher resource financial 
institutions, the portal that the SBA is providing is actually 
an improvement over whatever sort of internal either portal or 
other system, maybe even the less sophisticated systems, that 
was being used internally.
    So they are directing their clients almost exclusively to 
the portal because it is more straightforward, clearer, you 
know, just better overall versus what they could put together 
in-house.
    But, yes, these challenges are real. I think--you know, 
just to add one more thing, just the access to technology, I 
mean, in order to access the portal, you have to have a means 
of accessing it.
    One other thing that our CDFI Members reported was that it 
is very challenging to follow up with multiple clients. You 
know, I mentioned one of our Members made 500,000 PPP loans, so 
to individually follow up with each one of those borrowers 
would be impossible, and so if people change their phone 
numbers, close their business, or anything, you know, that is 
sort of really challenging to try and reach them and then 
connect them, you know, into the forgiveness process, period, 
let alone the portal.
    Ms. BOURDEAUX. I thought that was an interesting point 
about I think of the housekeepers, and the landscapers, and 
just a ton of this kind of very vibrant entrepreneurial economy 
that we have, but often are not in, sort of, the traditional 
path in these relationships.
    What can we do better in order to make sure that a lot of 
these small businesses know about the forgiveness program and, 
you know, are able to access this?
    Ms. BILONICK. Well, one thing I want to say prior to being 
in this role, I actually was the head of a CDFI that is based 
in Washington, D.C. So during the pandemic, I was in that role. 
And I think what was critical to the success of either rolling 
out programs or following through with them, as is happening 
right now in the forgiveness process, was the direct line of 
communication between the SBA and the lender.
    And, so, I think you see that most in the district offices 
where there is kind of a more direct relationship to the 
community. But I would just actually suggest that that 
continue, or, perhaps, that more resources be put behind that 
so that there is someone to call up when you have a question, 
and you are in a community-based organization it is just kind 
of a lot of red tape and paperwork that you may not be 
accustomed to working with.
    So, I think having that direct tie to the SBA, and from my 
experience in New York and D.C., the SBA district offices are 
really knowledgeable and approachable. And I just think that is 
sort of a great way to connect into the overall mission of the 
SBA.
    Ms. BOURDEAUX. Thank you so much.
    Ms. BILONICK. Thank you.
    Ms. BOURDEAUX. We work very closely with our SBA and SBDCs 
and groups like that to reach out to the broader community.
    Thanks so much. And I yield back.
    Chairwoman VELAZQUEZ. The gentlelady yields back.
    Now we recognize the gentleman from Minnesota, Mr. 
Hagedorn, for 5 minutes.
    Mr. HAGEDORN. Thank you, Madam Chair.
    I would like to follow up on the presentation made by our 
Ranking Member Luetkemeyer, and also Congressman Williams of 
Texas. First of all, I think we are very fortunate to have 
someone like Congressman Luetkemeyer who understands the 
community banking business and that sector so well. And he has 
made some good points, that there isn't a lot of fraud, if any, 
with most of the community banks. And the banks that have made 
these loans, they know their customers, they are attentive to 
their customers, they are concerned about their communities and 
small businesses. This is a pretty good model of maybe 
something we stumbled into, but looking at, perhaps, utilizing 
this for other SBA loans could minimize the fraud that we have 
seen and help the taxpayers and help businesses.
    Second of all, Congressman Williams comes in and says, 
look, he has been in business for 50 years. He has interacted 
with both bankers in the private sector and then the SBA and 
others in government. There is a clear difference. I mean, one 
is attentive, one is trying to keep customers, one is trying to 
get business, and the other one is, well, if they get to it, 
they get to it. I mean, that is the way bureaucracies operate. 
The record of the SBA throughout this whole process was all 
good in some areas, but not so good in others. And I will tell 
you that the businesses and the banks that we talk to in this 
district, who have problems with SBA, they end up in our 
office. They end up with us calling SBA trying to get some 
resolution, trying to get people moving. And that really 
shouldn't be happening. The SBA should be handling these 
issues.
    Now I will give you my perspective, I was a congressional 
relations officer at Treasury for 18 years. I have seen the 
bureaucracy a little bit. And I think this move by the SBA to 
try to gain some control back of the PPP program when it was 
actually run very well through the banks might be some, you 
know, and effort to retain their turf. They see the writing on 
the wall that if we turn over the EIDL loans and others to the 
banks where we can minimize fraud and do better for our 
customers, they are going to lose some of their power. So I 
think that this may be not so much to help everybody, but just 
as a bureaucracy, looking out for itself.
    Now I would add, Madam Chair, I just want to do a couple of 
housekeeping items with you. When do you expect that we are 
going to get Secretary of Treasury Yellen to fulfill her duties 
and testify before our committee in person?
    Chairwoman VELAZQUEZ. We are working to get her to come as 
well as the Administrator to discuss the PPP forgiveness, but 
we are working on the reconciliation package right now. So, my 
guess is right after that, we are going to have the 
administration come in.
    Mr. HAGEDORN. Well, to your credit, I know you have said in 
the past and you joined with our Ranking Member that you had 
wished she had testified a little earlier. And, so, I 
appreciate you are going to continue to try to encourage her to 
come before us, so we can have a hearing.
    And secondly, and I know how important it is to forgive 
these loans and make sure small businesses can move on. Most of 
them have received these moneys and have utilized them, and 
have helped. But there are some small businesses still out 
there that this committee has an obligation to help. And they 
would, for instance, would be in the restaurant arena with the 
Restaurant Revitalization Fund. When the moneys were expended 
for that, almost $28.5 billion, they went to the people on a 
priority list that many of us viewed as discriminatory. And the 
people who are not on the priority list are sitting out there, 
well over 100,000 restaurant owners and they haven't received 
any money. And Congress hasn't done anything to follow that up 
to this point.
    Chairwoman VELAZQUEZ. I----
    Mr. HAGEDORN. Well, if I could just say, I don't think that 
is fair, because people who are in the business are being 
helped, and other people who may be in trouble and needing help 
and going out of business are waiting. And I know the Ranking 
Member has a bill, I have cosponsored it, use reconstituted 
money, $60 billion. I think let's work together, please, and 
get the money to our restaurant owners. They really need it at 
this time.
    Chairwoman VELAZQUEZ. I wish--I hear you and many others 
express concerns about the fact that many underserved 
businesses and the very, very small businesses didn't get any 
access to PPP, even though they tried the hardest. I wish that 
you were out there compelling the big banks to provide access 
to those PPP. And, so----
    Mr. HAGEDORN. I agree with you, Madam Chair. No, I agree 
with you. I am not a big fan of the big banks. And I think the 
one thing that has come out of the PPP program with underserved 
folks is they do now have a banking relationship with community 
banks and others. And they are in better position long-term in 
order to help their small businesses and to be successful. So 
for that, I think we should be----
    Chairwoman VELAZQUEZ.--that the numbers were there for the 
world to see.
    Mr. HAGEDORN. Okay. All right.
    Thank you, Madam Chair. I yield back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentlelady from California, Ms. Chu, 
for 5 minutes.
    Ms. CHU. Yes. Ms. Ward, you state in your testimony that 
three quarters of the PPP loans issued in 2020 included no 
demographic information. This is something I pushed hard to 
correct, and even most recently, sent a letter to the Biden 
administration asking them to look into racial disparities in 
PPP. And the lack of information caused the L.A. Times to 
publish a report where they looked at Census tracts in LA. And 
they found out that businesses in majority White neighborhoods 
received loans at twice the rate that majority Latino Census 
tracts received 1.5 times the rate of businesses in majority 
Black areas, and 1.2 times the rate in Asian areas.
    So, now we are in the forgiveness phase. So can you 
elaborate on why this kind of data transparency is necessary? 
And do you have recommendations on how to correct the data gap 
in the forgiveness process? If we don't have this kind of data, 
what do you feel businesses would stand to suffer?
    Ms. WARD. Thank you. I think SBA has taken steps to do a 
better job having lenders collect demographic data. And I think 
that is really critical and important, because then we can see 
what communities are being served by these programs, and where 
we as lenders, SBA, Congress, need to do more to make sure that 
these dollars are distributed fairly and forgiven fairly.
    I will say because of the crisis and the short time period 
to get a limited amount of funds, SBA was building this plane 
while it was already in the air. And there were constant 
changes, constant improvements made, constant clarifications, 
and that made it really hard for borrowers to keep up. But by 
and large, what we saw was an organization, an agency trying to 
get this product out as quickly as possible. I think they had 
this entirely new loan program available to small businesses 
within about 2 weeks of Congress passing this. That's 
unprecedented. So I really want to applaud SBA. With their 
resources, this became an overwhelming challenge. I am very 
happy to see that they have now been able to develop their own 
direct forgiveness portal, because there were lots of, 
especially the community lenders, and smaller lenders, CDFIs 
that did not have the resources to develop their own. And for 
those, SBA's direct portal is a significant improvement 
allowing a lot more borrowers quicker access to forgiveness.
    For lenders that had already created their portals like 
Self Help, like some of the other lenders here today, limiting 
borrowers options to get forgiven is not the right way to go. 
So while I applaud SBA for creating direct forgiveness, I think 
that will help get more of these loans through the forgiveness 
process, lenders that are doing a good job should be able to 
keep working with their borrowers.
    Ms. CHU. So Ms. Ward, but I was asking about demographic 
information. And so, you know, how can we correct this? And 
with the forgiveness portal, can we actually get that 
demographic information?
    Ms. WARD. Yes, I apologize. I didn't mean to get off track 
with your question.
    SBA has made changes to collect demographic information 
with the forgiveness process. So that is part of the 
information that SBA is trying to collect now on the 
forgiveness side that, in the early days and the loan 
application initially, those questions weren't asked and that 
makes it very hard to see where these funds were going.
    Ms. CHU. Let me ask about sole proprietors, and micro 
businesses and the unique challenges that they face. I want to 
make sure that they get the full benefit of the programs, since 
so many were devastated. Can you speak how the SBA direct 
forgiveness portal would benefit the sole proprietors 
specifically? Is the portal more accessible for them than the 
ones operated by their lenders or not? And which of your 
recommendations in your written testimony would be most helpful 
for those sole proprietors or these micro businesses to access 
forgiveness and relief?
    Ms. WARD. Well, I think in cases where sole proprietors 
have a lender that already has a portal or is already doing is 
good job processing forgiveness, that is probably their best 
place to keep going with the process. As you noted for sole 
proprietors, independent contractors, self-employed, the rules 
were pretty complex. And if you are a micro business, you are 
your accounting department, you are your legal team, you are 
your marketing team, and you are trying to run your business. 
So having your lender--if your lender is working with you, 
helping you understand these complex rules, as you are entering 
your forgiveness information--we think that is better.
    Now SBA's direct portal SBA does have people manning and 
FAQs. But the nitty-gritty and details, especially for the 
smallest borrowers, we still think that is pretty complicated. 
And I still think the lender should be helping their borrower 
as they enter it, so there is not a lot of back and forth 
afterwards. We just think that is a smoother process, and 
hopefully, we will speed forgiveness for these smallest 
borrowers, too.
    Ms. CHU. Thank you.
    I yield back.
    Chairwoman VELAZQUEZ. The gentlelady yields back.
    Now we recognize the gentleman from Minnesota, Mr. Stauber.
    Mr. STAUBER. Thank you, Madam Chair. And thank you, Ranking 
Member Luetkemeyer, for holding this hearing. It is very 
important. And I will just say that one of the--I have really, 
really strong concerns about the leadership at the SBA under 
Administrator Guzman. I can tell you that when our small 
businesses get information stating that they should or better 
opt in, otherwise they are going to be subject to audits, et 
cetera, that is the heavy hand of the government that I will 
fight against tooth and nail. I know many of us on both sides 
of the aisle, that is not how we treat our small businesses 
that just coming out of COVID, just struggling to make it. And, 
so, I will just say that first, we can't rule, or have SBA and 
this administrator rule with a heavy hand.
    And I wanted to say, earlier we talked about the PPP and 
some banking, my comment is our local lending institutions did 
a tremendous job with very little information upon the 
distribution of the PPP loans. With very little information, 
they did it in a quick way. But I just want to publicly thank 
our lending institutions that helped so many businesses stay 
afloat and helped people keep their doors open during the COVID 
crisis.
    I will also say that Administrator Guzman who was in our 
great State of Minnesota at an event, and her partisanship 
showed very well. Myself and Congressman Hagedorn, we are both 
Members of this committee, weren't invited by her or any of her 
staff. And I will say that my staff, both in the district and 
in Washington, D.C. have been very, very concerned with the 
lack of effort and the lack of response that Administrator 
Guzman and her staff have given to us when we have requested 
information. Either they are late, slow or no response. And 
that is just simply unacceptable and the partisanship on her 
end must stop. Her actions speak loud and clear. I should say 
her partisan actions speak loud and clear.
    So my question, Mr. Fisher, what has communication from the 
SBA been like for the lenders? Has guidance been clear, 
especially as it relates to forgiveness? And have you had 
difficulty getting answers to any of your questions? Mr. 
Fisher.
    Mr. FISHER. It has been problematic throughout the whole 
process. And I don't want to--I mean, SBA did a good job 
building the system, as Ms. Ward said on the fly. We were 
basically flying from New York to L.A. building the plane as we 
were going. So I congratulate SBA on their efforts to put this 
all together.
    But it has been problematic getting answers from SBA. And 
that is why we have always felt it is important to be that 
buffer between the customer and SBA, because we can--we have 
relationships with people at SBA. And even having those 
relationships, it has been difficult to get clarity and answers 
on complicated questions.
    Mr. STAUBER. Thank you very much for that answer.
    And are you concerned with new SBA direct forgiveness 
portal? And if you are, when would you instead like to see 
moving forward? And how might Congress help?
    Mr. FISHER. I am not concerned with the portal. I think as 
far as having that portal, I think it is a great option for 
maybe some banks or other institutions that don't have a 
forgiveness method. But I think, don't force people's hand into 
utilizing the portal. I think having those relationships with 
the borrowers is really, I think--you know, we create that 
buffer and we can help with those complicated questions. And I 
think even Ms. Ward alluded to the fact that some of our 
smaller borrowers--I mean, our smallest loan was $430, but some 
of those are some of the more complicated questions that arise. 
And so, if we can help answer those questions based on 
relationships we have had for 40 years, that is what we try and 
do.
    Mr. STAUBER. Mr. Fisher, I appreciate those answers. And 
you are one of the institutions that helped keep our small 
businesses afloat. You know, as well as I do, 16, 17 months ago 
you didn't have the answers, and we didn't either, and so we 
were working through it. And our lending institutions across 
this nation deserve so much credit for helping us out, and 
helping get that capital where it was needed in a short period 
of time.
    So with that, as we move forward here, I think that we 
ought to make sure that--we always talk about the economic 
drivers in our communities are our small businesses. And we 
need to take care of our small businesses. As Mr. Fisher said, 
that--know the customer, that relationship building is 
extremely important to--having been in small business for 31 
years, I understand that relationship with the banking and the 
bankers and the institutions are incredibly important.
    So with that, Madam Chair, I will yield back. Thank you.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentleman from Pennsylvania, Mr. 
Evans, for 5 minutes.
    Mr. EVANS. Thank you, Madam Chair.
    I understand--Ms. Ward, I understand your CDC works with 
many borrowers who may require extra assistance when applying 
for PPP loans. What kind of challenges are these borrowers 
facing during the forgiveness stage?
    Ms. WARD. Thank you. The biggest challenges we are seeing 
for our borrowers during forgiveness are borrowers who 
misunderstood the rules because they were changing rapidly at 
the time, and made good faith errors in calculating their loan 
amount. Borrowers were responsible for calculating their own 
loan amount and determining their own eligibility. And, so, we 
are seeing businesses that are--you know, they have spent these 
funds on their business with the understanding that this would 
be a grant. They made choices as to how they would keep 
employees staffed and paid based on the understanding that this 
was going to be a grant. You know, some tell us they wouldn't 
have taken it if they had known they would have to pay it back, 
because the last thing they need in an economic crisis is 
additional debt.
    So, we really strongly feel that these smallest businesses 
especially that are suffering from good faith errors, that they 
be allowed the forgiveness that was intended, that they relied 
on. We also think for businesses in this size range, these 
micro-businesses, loans up to about $25,000, by and large, 
especially for one-person businesses--they would qualify for 
full forgiveness. And having them go through the paperwork 
burden of applying for a separate application for a business 
that small is a significant burden, and we think automatic 
forgiveness for those loans would be appropriate. We absolutely 
do not think that SBA should stop investigating fraud, and 
doing automatic forgiveness would not remove SBA's ability to 
investigate red flags, and fraud, and go after anyone who has 
lied about having a business or created false documents to try 
and bump up their loan amount, those should be prosecuted. But 
giving automatic forgiveness and taking this extra burden off 
the smallest businesses would not prevent SBA from 
investigating those cases.
    Mr. EVANS. Let me follow up. What options exist for 
borrowers who PPP lending is not being responsive to 
forgiveness requests? What options would you say?
    Ms. WARD. So I think SBA should absolutely be monitoring 
lenders to make sure that they are processing forgiveness 
applications within a reasonable timeframe. Borrowers should 
not be left--the worst thing in the world for a small business 
is uncertainty. And if they are stuck not being able to apply 
for months on end, or they are under review for months on end 
at SBA, that uncertainty is keeping those borrowers from 
knowing whether they will be forgiven, whether they have funds 
that they can spend to invest in new employees, to expand in 
their communities. If they don't know yet if they are going to 
be forgiven, they cannot make those investments.
    It is critical that SBA focus its review on the larger and 
higher-risk issues when they are doing their manual reviews. 
Work on those so that those, too, can be processed more 
quickly, so that borrowers that applied in good faith are not 
penalized.
    For the smaller loans, the SBA has a series now of red 
flags, things that flag fraud for them that can help them go 
back and look at those small loans that need SBA review.
    Mr. EVANS. I thank you.
    I yield back, Madam Chair. Thank you very much for this 
hearing and this opportunity, Madam Chair.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentleman from Pennsylvania, Mr. 
Meuser.
    Mr. MEUSER. Thank you, Madam Chair Velazquez, and thank 
you, Ranking Member Luetkemeyer, that you to our testifiers.
    So, certainly, the PPP, I think we virtually all agree, 
saved livelihoods. It worked out well, certainly from my 
district throughout Pennsylvania, and the SBA staff in 
Pennsylvania was very helpful along the way. As a matter of 
fact, taking calls at 7:00 a.m. and sometimes 11:00 p.m. for a 
number of months there. And the SBA should be an advocate, I 
think, almost by definition, for small business. So the PPP was 
successful because it was created by the Trump administration 
Treasury Department, but was driven and administrated by the 
private sector, with the support of the SBA. So, you know, 
public-private partnership, if you will. And it certainly 
worked out well.
    Now, the EIDL loans, and I know that is a challenging 
subject to bring up was a very different story, and was, in 
fact, run exclusively by the SBA. So the SBA is serving as an 
advocate for small business. Wouldn't, then, the SBA have 
checked with the community banks beforehand before sending out 
such a letter? And basically mandating and strongly encouraging 
the use of this direct forgiveness portal?
    Mr. Fisher, were you or any of the community bank 
associations advised or asked for their input on the 
requirement to use a direct forgiveness portal?
    Mr. FISHER. No, we were not advised that this was going to 
be mandatory or pushed down on the banks. I mean, forgiveness 
has been going on since September of last year.
    Mr. MEUSER. Right, yeah. And this email was just received 
just this Monday morning, correct?
    Mr. FISHER. Correct.
    Mr. MEUSER. And did they explain at all why it was so 
important, that even though as we discussed, minimal fraud and 
problems, why this portal would be would be so necessary? Did 
they go over that with you?
    Mr. FISHER. They have not, no.
    Mr. MEUSER. And the letter, the email that came out for the 
direct forgiveness stating that many banks--it seemed that it 
was many, were managing their accounting and financials through 
2022 as part of a better accounting plan for themselves. Is 
that something that has been discussed, or you think is a 
widespread issue?
    Mr. FISHER. Not with the community banks that I know. We 
all want to get those loans off of our books and get the loans 
forgiven for our customers. That has been our plan since day 1. 
This was always deemed a short-term solution to help or small 
businesses customers and help our communities survive.
    Mr. MEUSER. Right. And all of my community banks throughout 
my district, same thing. I mean, the needs of their customers 
certainly outweigh some, perhaps, improvement of accounting for 
2022.
    So, back to this email. You know, just looking at it here, 
the audits, as you quoted, SBA warned avoid, that wasn't in the 
letter, but avoid lender audits--to avoid lender audits, we 
encourage the direct forgiveness portal being utilized. Maybe I 
am paraphrasing. It wasn't really written like a small business 
advocate. What was your thought? What were you and your 
colleague's thoughts when you received that language?
    Mr. FISHER. We hoped to have all of our loans forgiven from 
both rounds before the end of the year. So personally, I am not 
overly concerned about being audited. They are not going to 
find anything if they come in. But, I mean, nobody wants to get 
audited by the SBA. So I mean, it didn't sit well with me, 
especially because we had been working so hard on forgiveness 
for our customers.
    Mr. MEUSER. Yeah. Okay. No, I would agree if I think if I 
was sitting in your seat.
    I just think it is clear that the portal for direct 
forgiveness must remain an option with no perceived or implied 
penalties whatsoever, and certainly, we need to maintain a high 
level of integrity with the program.
    With that, Madam Chair, I yield back. Thank you.
    Chairwoman VELAZQUEZ. The gentlemen yields back.
    I don't think there are any other Members. Yes.
    Ms. HOULAHAN. Madam Chair, I am here, Rep Houlahan.
    Voice. Represent Tenney as well.
    Chairwoman VELAZQUEZ. Yes. I can see you.
    I recognize the gentlelady from Pennsylvania, Ms. Houlahan 
for 5 minutes for questions.
    Ms. HOULAHAN. Thank you, Madam Chair. And thank you very 
much to all of you for joining us today.
    I have just a couple of really quick questions, and my 
first one is to Ms. Ward. I understand that in your written 
testimony, you shared that there is a need to alleviate 
unnecessary paperwork burdens for the smallest of businesses. 
And you shared that the need should be expanded to simplify 
forgiveness applications for loans all the way up to and 
including 350K. Would you be able to speak a little bit more in 
this forum in depth about that, and why we might need to expand 
the simplified forgiveness applications for PPP from what 
exists now at 150K to 350K?
    Ms. WARD. Thank you. I think anything we can do to simplify 
the process for more small businesses is useful and helpful. I 
think expanding that up to 350 poses minimal additional risk to 
program funds, those loans are still reviewable, but it lessens 
the burden of submitting documentation, makes it more efficient 
because then all of that documentation does not have to be 
reviewed, and gone through, and back and forth with the lender 
and the borrower before it is even submitted to SBA. SBA 
maintains still the right on all loans to ask for underlying 
documentation if they choose. But bumping that up, we think, 
would just make this process easier for more businesses. We 
think that is appropriate. Automatic--sorry, go ahead.
    Ms. HOULAHAN. Do you have an appreciation, or an estimate, 
for how many of the total number of loans would then represent 
with 350K and below?
    Ms. WARD. I think--I shouldn't speak to one, because I 
probably don't have the right number in my head--I think if you 
go up to the 350,000 level, you are getting over 90 percent of 
our PPP loans that have been made through that more streamlined 
process. And that allows SBA's resources and lenders' resources 
to focus on the larger and higher-risk loans and make sure that 
those documentation, supporting invoices, supporting payroll 
documentation, is reviewed to protect these loans.
    Ms. HOULAHAN. Thank you so much, Ms. Ward.
    My final question was for Ms. Bilonick. I was also hoping 
that you would be able to elaborate and articulate on how the 
SBA can continue to improve the forgiveness process for those 
underserved borrowers, those specifically who may not have 
attorneys or accountants on staff to help them through that 
process. What else can the SBA be doing to be able to improve 
that process for them?
    Ms. BILONICK. Well, if I could give my wish, I would say 
that if there could be support for those organizations that are 
working with the small businesses and funneling them through 
the portal, I think most CDFIs and other small businesses using 
nonprofits in the communities that my organization represents, 
they are not just giving folks sort of, Here is the website for 
the portal. They are really walking through and providing hand-
in-hand support to the borrowers to, you know, understand what 
is being asked, understand--you know, upload documents, all of 
that.
    So it is really not a hands-free kind of situation. So I 
think wherever resources could be put to support that extra 
labor, I think everyone has rolled up their sleeves during the 
pandemic to just do whatever it is that is necessary, but a lot 
of this work is not accounted for. And, you know, it is just 
kind of being provided without resources to back it up. So if 
there were anything like that.
    And then just to repeat my prior point, you know, the 
district offices being a lifeline for community-based 
organizations to ask questions, to funnel any doubts, it is 
just very, very helpful to have that direct person that is 
answering a phone, rather than looking at FAQs, because each 
loan is so particular. I think all of our lenders on the call 
would agree. And, so, it is really challenging to have 
straightforward rules that apply to every deal.
    And then, just really quickly, I just wanted to respond to 
the thing about the 350--raising it up to 350 would bring it up 
to 94.2 percent of all the PPP loans. So it is just an increase 
an increase, a bump-up of 7.7 percent.
    Ms. HOULAHAN. Thank you. I really approach that that.
    And with that, I yield back. Madam Chair.
    Chairwoman VELAZQUEZ. Thank you.
    The gentlelady yields back.
    Now we recognize the gentlelady from New York, Ms. Tenney, 
for 5 minutes for questions.
    Ms. TENNEY. Thank you, Madam Chair. And also thank you to 
Ranking Member Luetkemeyer. I just really appreciate your 
holding this important hearing on PPP. It has been a lifesaver 
for my community. A small business community is what drives the 
economy in my region. And we are so grateful that we were able 
to have that program, and how effectively it was done through 
our small community banks and credit unions. And I know that 
working with our credit unions and banks, as a former bank 
attorney, and also as a small business owner, how critically 
important it was for us to have access to these unfortunately 
dwindling number of community banks and credit unions that we 
can build our relationships with. And that is why I am very 
concerned about the letter that was received, somewhat 
threatening letter from SBA, to--the email, I should say, from 
SBA to lenders to avoid lender audits, encouraging them to move 
into the direct forgiveness program, instead of working through 
their own institution, where they have originated the loan, 
where they have actually had the community bank. They have had 
the community relationship with these particular lenders in a 
business community where they know what the risks are, they 
know what the community needs. And they also understand the 
businesses in the community.
    And my first question I would like to direct to Mr. Fisher. 
And I am so grateful that he is on, you know, a frequent guest 
and great expert on this issue. Also, our president of the 
Independent Community Bankers Association, so congratulations 
for that distinction as well. But, I know you have been asked 
this, but I want you to give us a little bit more of the real 
implications of this coercive letter, or email, that you 
received from SBA about encouraging your business customers and 
your businesses to move over to the SBA portal, as opposed to 
using your bank and your system as the forgiveness site, 
because I am concerned about some of the privacy concerns and 
the liability of the bank in giving up that information. Could 
you maybe address that, Mr. Fisher?
    Mr. FISHER. Yeah, I am not sure about the liability issue, 
but as far as just, you know, we have systems in place. We are 
actively working with all of our PPP customers pursuing 
forgiveness. We work with them. And back to one of the previous 
questions, you know, I think the easiest way to have customers, 
if they are having difficulty with PPP forgiveness, go to a 
community bank. We will gladly help you walk through the 
process. Even if it is not our loan, we will help figure it out 
for you so----
    But being coerced to have to work it through a direct 
forgiveness portal with the SBA, I think that is problematic. I 
mean, they are not going to get the same level of service that 
they will get coming to my bank. I know that we know the 
customer. We live here. We work here. We work with them. And 
so, it is concerning that we are kind of being coerced to go 
down that path of sending our customers directly to SBA without 
having that interface that they can work through us and a get 
the solution through us.
    Ms. TENNEY. Yeah. And as fellow New Yorkers, I am always 
concerned about when the government is interfering in these 
relationships that banks have. And you describe so eloquently 
the importance of character lending and community banking 
relationships. And those have been vital to many in our 
community who rely on those dwindling number of community 
banks. But you provide such a great resource to so many, 
whether it is a farmer, or another kind of small business 
owner, restaurant, some of the not for-profit that you 
described that you were doing PPP loans with. Those businesses 
are vital. And you, as a Member of the community, understand 
that. It is not like they call an 1-800 line. And for a 
bureaucracy in Washington to interfere in that process, that 
concerns me. And I think the efficiency that you pointed out 
earlier in the PPP program of using our community lenders is 
really--is worthy of commendation. That is a good move. And 
also, less reliance on the bureaucrats in Washington, and more 
reliance on people that are closer to our community. I really 
appreciate those comments that you made. And I would also like 
to echo the comments of my colleague, Mr. Stauber, on--my staff 
and many of our constituents have come to us concerned about 
the problems they have had with SBA. So to me the fact that we 
have wonderful institutions, like community banks, community 
credit unions, that serve customers so directly, I think that 
is a huge win. And I just think it is a mistake that they are 
using any kind of coercive tactic.
    So I want to thank you for that. And thank you for also 
indicating that in your testimony, that you have zero fraud and 
100 percent forgiveness rate and you are working through every 
one of these. So that is really important to know about the 
accountability aspect of this as well.
    I don't know how much time I have left, but I wanted to 
just get a quick question to Ms. Payne about the credit union 
aspect of this, and some of the direct consequences, or some of 
the experiences you have had on the credit union side. If you 
can quickly tell me that, because I think I am running out of 
time.
    Ms. PAYNE. Well, I would like to, then, quickly maybe, 
share a direct quote from one of our Members who was recently 
forgiven. And this is from an email. ``Hopefully, you are able 
to hear our screams of delight. Thank you so much. This is an 
enormous relief. Please let everyone there know how important 
this is to us. Affinity's communication systems responsiveness 
and empathy during really trying times was second to none. You 
guys rock.''
    That is a relationship. And that is the critical piece 
here.
    Ms. TENNEY. Yeah. Thank you so much. That is fantastic.
    And I don't mean to disrespect there are many great people 
that work for SBA, but who are on the ground with customers and 
you are relationship building, you depend on these people and 
they depend on you. And I think that the last thing we need is 
Washington bureaucrats to interfere with that. And I do think 
that this is a lit bit of mission creep for the SBA to move 
away from their job of helping small businesses to get into a 
banking relationship, and interfering in that important 
relationship with our small businesses community. And I have 
heard the same. I think this is a great program. And to end it, 
interfering in that ability to forgive these loans, which was 
intended as a grant program, as Mr. Fisher referred to in his 
testimony, it would be a mistake. And I think that going down 
the path of accountability, particularly with people like the 
small business--small community banks, small community credit 
unions, you have something at stake, you have skin in the game. 
And I think that is why you are so good at doing this. And that 
is why I think the program was so successful.
    I want to thank all of the witnesses and everyone. This is 
really important. I hope you will continue it work hard on 
these issues and help our small business community. We are 
really grateful to you.
    And thank you very much, Madam Chair, and Ranking Member 
Luetkemeyer. I yield back.
    Chairwoman VELAZQUEZ. The gentlelady yields back.
    Now we now recognizes the gentleman from Minnesota, Mr. 
Phillips, for 5 minutes.
    Mr. PHILLIPS. Thank you, Madam Chair. And greetings to my 
colleagues and to our witnesses. Gratitude for you all being 
with us.
    My question is about the bank fees relative to the PPP 
program. And the Washington Center for Equitable Growth 
indicated that banks reaped about $18 billion in fees that were 
associated with processing PPP loan applications. And I would 
like to hear from you, whichever of our witnesses want to 
begin, to help describe the bank fee structure that was 
implemented through PPP to provide the incentives to issue the 
loans, and whether you think that in part, at least, it 
explains why some of the largest lenders were reluctant to push 
forgiveness through using the SBA's direct forgiveness portal? 
Any thoughts from any of our witnesses on that subject?
    Ms. WARD. I am happy to take the first slab to try and 
answer that. So first, I would say, I am not aware, and would 
be surprised to see that there are lenders trying to delay the 
process for purposes of when their fees are booked. I have not 
heard that and that would surprise me. If that is happening, 
SBA should be applying significant pressure on those lenders. 
That would just be unacceptable.
    The fee structure that was put in place, really, initially, 
I think Congress made an effort to ensure that even the 
smallest businesses had access to PPP, but because Congress 
structured it with a larger percentage fee on the smallest 
loans. Unfortunately, even a larger percentage fee on a $5,000 
loan does not give the lender the reimbursement for the 
resources they used to do that loan. So lenders that were able 
to do large PPP loans were able to generate large enough fees 
to offset their costs.
    Lenders like community lenders, CDFIs, a lot of the lenders 
that worked primarily with the smallest businesses and micro 
businesses, probably did not receive enough fee income to cover 
their costs, depending on the volume that they did. Self-Help 
among CDFIs is a little unique in that we were able to work 
with over 70 percent of our loans were to those smallest 
borrowers, under $50,000. Our median loan size was just with 
over $20,000. But we also, because we were helping some of the 
nonprofits serving the community, we were helping some larger 
employers keep their employees on staff. We were able to do 
some of those larger loans to help offset costs.
    But we had real concerns about the fee structure for 
community lenders and CDFIs that were working almost 
exclusively on those tiny loans, and Congress did address that 
when it brought out the 2021 PPP----
    Mr. PHILLIPS. Right.
    Ms. WARD.--by putting in a minimum fee amount for those 
lenders so they could cover costs.
    Mr. PHILLIPS. I appreciate that.
    Ms. Payne, Ms. Bilonick, any perspectives on the same 
question you want to share?
    Ms. PAYNE. I would like to add that going into this in the 
environment that we were in with the pandemic, I don't know 
that, for us, it was really member-based. We needed to help our 
Members. The fee structure was basically secondary. We needed 
to get through this, and we needed to get through it together, 
and this is what we needed to do for our member base.
    Mr. PHILLIPS. I appreciate that.
    Before my time expires, I know that a number of borrowers 
were contacted by their bank saying that they received more 
than their allowable funding, and are responsible to pay it 
back, of course, despite having, in many cases, used the money 
for forgivable expenses. So at what stage do you think it would 
have been appropriate for that to be communicated to borrowers 
and by whom? Do you think it is the lender's job or the SBA? 
Any thoughts on that subject?
    Ms. PAYNE. I can jump in to try to answer that. I don't 
know with the ever-evolving guidance and such what might have 
been a good time. It is hard to say.
    Mr. PHILLIPS. Yeah.
    Ms. PAYNE. But I do think from the beginning, the message 
to these borrowers was, if you use it the right way, you will 
be forgiven. And I think that is the message that, you know, 
that so many of us heard as the borrowers did.
    Mr. PHILLIPS. Right.
    Ms. PAYNE. This was temporary.
    I think it depends for us, we are happy to give that 
message when it does happen, if there was partial forgiveness 
or something otherwise. We are happy to give that because we 
have the relationship and can fully explain it to our borrowers 
so that they understand, and then hopefully help them with any 
other needs that they may have going forward with that.
    Mr. PHILLIPS. Hear, hear.
    With that, I yield back. And I thank you all again for 
being with us today.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentleman from New York, Mr. 
Garbarino, for 5 minutes.
    Mr. GARBARINO. Thank you, Chairwoman. And thank you to the 
Ranking Member for having this hearing as well. Thank you to 
the witnesses that are here today. I have appreciated your 
testimony so far.
    I want to start with Mr. Fisher, because it is sort of a 
follow up to what him and Ms. Tenney were talking about and how 
you have been dealing with customers looking for forgiveness 
and your Members have dealt with them all the way up through 
the processing application and whatnot. Have you come across 
any small business customers that have not opted to seek 
forgiveness?
    Mr. FISHER. We have had some customers that are slow to 
seek forgiveness. But, you know, no, they all want to get 
forgiven. It is just, some are quicker to try and apply for it 
than others.
    Mr. GARBARINO. Is that the same instance for you, too, as 
well, Ms. Payne, with your Members?
    Ms. PAYNE. We have seen some, not many at all. Several of 
our borrowers have opted not to apply for forgiveness. The only 
input that we have heard from them is that they felt that they 
did not spend the money fully in line with the PPP guidance, 
and that is all I can really say on that.
    Mr. GARBARINO. They don't think they qualify for 
forgiveness? Okay. All right. Thank you.
    Mr. Fisher, back to you. How much staff have you dedicated 
to PPP, as well as how much staff do you have dedicated working 
on PPP forgiveness?
    Mr. FISHER. Initially it was kind of all hands on deck. We 
probably--I mean, I have 100 FTEs at the bank, a little less 
than that. But we probably had 20 people that were working 
around the clock, weekends, trying to get PPP applications into 
the SBA. The forgiveness phase we have automated some of that. 
So we are really using about three people, two to three people 
to handle the forgiveness phase. And it has been very efficient 
and pretty effective for us.
    Mr. GARBARINO. And Ms. Payne, your organization?
    Ms. PAYNE. It is going to sound very similar. It was all 
hands on deck as well. And we actually brought on three 
temporary employees to help us through the PPP forgiveness 
process. And it has been working very well for us. And we have 
automated our platform as well.
    Mr. GARBARINO. Okay. And finally, I guess what--PPP was big 
in getting funding out the door when it was first going. That 
was a big question to employers, how they are going to keep 
open and PPP was a big help. For many of the witnesses, Ms. 
Payne, Mr. Fisher, anyone, what are you hearing specifically 
now? Now that the PPP programs--what concerns are you hearing 
from small businesses now?
    Mr. FISHER. I think the big concern right now is what is 
going to happen with this next wave, if it is going to lead to 
shutdowns. We are seeing mask mandates for schools and things 
like that. So I still think there is a lot of uncertainty with 
business, which is always problematic, so.
    Mr. GARBARINO. Uncertainty over the regulations on how to 
handle it if there is another--I don't think there will be, but 
if there is another shutdown?
    Mr. FISHER. Correct. Yeah.
    Ms. BILONICK. I was just going to add that from our 
perspective there is lot concern around workforce. So there is 
just not available workforce for a lot of industries that were 
hardest hit, and that are now trying to reopen and reboot. And 
that is just something that is coming up very frequently.
    Mr. GARBARINO. I have heard that a lot from every industry 
I think, from construction, to restaurants, manufacturing, to 
retail. Everybody is having trouble right now finding 
workforce. But as for programs, like PPP, is there something we 
could do better next time, you know, if there is another 
shutdown? Like, what should we address on how this program ran 
out, or how we ran this program compared to what we should have 
done? Like, what can we do better? For anybody?
    Ms. WARD. I would say we at least have a template now, even 
if this exact same program was put in place, there is lot more 
clarity. That is a huge improvement. One of the biggest 
challenges was that almost daily, changes came through during 
the duration of this program, and it really made it impossible 
for borrowers to know whether they were eligible or how much 
they were eligible for. So that would be an improvement.
    The funds could be--there could be other ways to deliver 
these funds to borrowers. I think, by and large, banks, big 
banks, community banks, CDFIs, even fintechs getting in got 
these funds out to a lot more borrowers, and allowed these 
funds to be funneled through a lot of sources so that more 
money could get out the door as quickly as possible to these 
businesses that needed it to survive.
    Having clarity in the rules from the beginning, and having 
clear steps for forgiveness, delivering on that promise, taking 
away that uncertainty as to whether you are going to get these 
funds forgiven, or whether you suddenly have unexpected debt 
after you kept your staff on, those are the things that I think 
could be addressed to help more businesses if we, you know, 
hopefully don't, but if we ever had to go through something 
like this again.
    Mr. GARBARINO. Thank you. My time is up. So I yield back.
    Thank you, Chairwoman.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentlelady from California, Mrs. Kim 
for 5 minutes.
    Ms. YOUNG KIM. Thank you. Thank you, Chairwoman and Ranking 
Member. I also want to thank the witnesses for being with us 
today.
    You have heard a lot from my colleagues about the PPP has 
been tremendous assistance in allowing small business owners. 
And in my district also, it has been a lifeline for them to 
weather the economic downturn caused by the COVID-19 pandemic 
and unprecedented lockdowns.
    We are talking about now the next phase of PPP forgiveness, 
you know. The massive effort of distributing close to 12 
million PPP loans and sustaining close to 50 million jobs could 
not have been possible without our partners, like the banks and 
credit unions. So I want to thank them and the partnership they 
have had with you guys.
    But I was troubled to hear SBA was threatening--excuse me. 
I was really troubled to hear that SBA was threatening lenders 
to opt into the direct forgiveness program to avoid audits by 
the Office of Credit Risk Management. SBA later clarified that 
audits would focus on lenders that have yet to accept 
forgiveness for 2021 PPP borrowers, or those that are not 
actively reaching out, the damage has been done. And SBA must 
be careful not to vilify lenders moving forward.
    And I also must stress that whether a bank or any other 
lending institution, obscene or not with the SBA's forgiveness 
quota has no bearing a borrower's opportunity to get their PPP 
loan forgiven. You know, many banks and lenders have already 
set up their own forgiveness platforms that are complementary 
to SBA and having really highly efficient.
    So let me ask you, Mr. Fisher, I agree with your testimony 
that the SBA should not force lenders to opt into the direct 
forgiveness portal. And with the high number of review requests 
from the SBA which requires lenders to put resources aside to 
provide documentation, what should we expect if SBA decides to 
proceed with audit on lenders on top of all these review 
requests? And how is that going to divert your attention in 
serving your customers properly?
    Mr. FISHER. It just diverts resources away from my mission 
of serving our local community and our customers in helping 
small business. If I am trying to provide documents and trying 
to deal with auditors from SBA, it just becomes problematic for 
us.
    Ms. YOUNG KIM. Sure.
    You know, Mr. Fisher, you also said in your testimony, you 
mention SBA's lending programs like the 7(a) and 504, they rely 
on bank underwriting and the expertise that lenders bring to 
the table. So can you explain to our committee what would 
change if SBA moved in the direction of direct-to-borrower 
programs at the SBA?
    Mr. FISHER. I just--obviously, if you leave the bank out of 
it, you are subject to potentially more fraud. I think that has 
been brought up that the EIDL advances saw substantially more 
fraud in direct loans to SBA than the bank loans. So, I think 
looking at it from the standpoint of trying to reduce fraud, I 
think utilize your existing framework of community banks and 
banks to continue that lending through the S-7(a) program and 
504 programs, and even PPP was very successful, and I think 
limited fraud by utilizing the banking framework that we have.
    Ms. YOUNG KIM. Well, thank you very much. I mean, I think 
the biggest concern that we have is the impact. And we want to 
make sure there was a prevention of waste, fraud, and abuse 
with those programs.
    One more question. And I would like to direct this to Ms. 
Payne. Why do you believe that forgiveness review process by 
the SBA is challenging and time consuming? Are there certain 
steps that add extra days to the review?
    Ms. PAYNE. When a loan goes on to--into loan review, it is 
a time-consuming process because it is not typically that we 
have that the lender has a direct communication with the SBA 
representative. It is basically an email is sent out, sometimes 
can be fairly vague, and then we are asking for additional 
documentation. Sometimes it is already been uploaded and they 
are repeating ourselves, sometimes we have to then reach out to 
the borrowers to get additional information, not always 
understanding what that is going to go do for the loan itself, 
in terms of the forgiveness review. So it does add days. It 
also add frustration, and confusion, and stress for the 
borrower in terms for the fear about why am I under review.
    So there are a lot of factors. It does add time. And it can 
add other things, stress that a small-business owner does not 
need at this time.
    Ms. YOUNG KIM. I have one other question to ask, but I 
think my time is up so I will yield my time back. Thank you.
    Chairwoman VELAZQUEZ. The gentlelady yields back. Now we 
recognize the gentlelady from Texas, Ms. Van Duyne.
    Ms. VAN DUYNE. Thank you very much, Chairwoman Velazquez 
and Ranking Member Luetkemeyer for holding this hearing today.
    As the driving force behind our economy, you know, an 
employer of nearly half of all American workers, the success of 
small businesses is critical to each of our communities. And 
this is no more apparent than during the pandemic. While 
government shutdowns forced many businesses closed, the 
Paycheck Protection Program delivered the emergency capital 
that small businesses needed to be able to keep their doors 
open. After providing almost $1 trillion to small businesses, 
we are finally nearing completion of the program.
    As this massive relief program shuts down, we must continue 
to push for more rigorous oversight to protect American 
taxpayers.
    I want to echo Congressman Hagedorn's request and express 
my disappointment that we are discussing complex policies yet 
again without an SBA representative present. There are 
questions that Members of this committee have that can only be 
answered by those actually running the program. So I hope we 
can have someone from SBA in front of the committee very, very 
soon.
    That being said, I want to thank the witnesses that we do 
have here today.
    Mr. Fisher, I appreciate all the work that you do in 
upstate New York. I think I actually used to have an account 
with your bank when I was up in college in Ithaca. So I know it 
is raining there today, but now is when I want to be there, 
because I am in Dallas, Texas, and it has been 100 degrees here 
today. So enjoy your summers and your falls because winter is 
coming soon.
    But I do have a question for you. Despite many 
circumstantial setbacks and concerning amounts of fraud, the 
PPP program successfully kept small businesses afloat during 
the pandemic. So as we look ahead to preparing for the next 
major disaster, these problems are not unique to just PPP. And 
I know Congressman Garbarino had also asked a similar question. 
I am going to change it a little bit. How can we improve the 
PPP model to disperse the quickest aid, but also minimize 
fraud?
    Mr. FISHER. I guess I would suggest not trying to go direct 
to the borrower. I think utilizing the network of banks that 
participated, utilizing banks that have a long history of 7(a) 
lending is definitely probably the way to go, because we have 
relationships with those businesses. We know the businesses, 
because it is down the street. I drive by it every day, versus 
somebody who is just, you know, seeing it in application, 
either on paper or virtually, trying to make that decision. I 
think we can be a great mutual aid to help get those dollars 
out and also curb fraud.
    Ms. VAN DUYNE. That is good to know.
    Ms. Bilonick, in your testimony, you state that in 2019, 
before the pandemic hit, that Latino-owned businesses had hit a 
record-breaking strive with their average annual revenue 
increasing 10 percent to over $525,000 per year. This is 
impressive, and it is the exact type of growth strategy I think 
that we are looking for in the business environment and we need 
to get back to that.
    What would you attribute that success to back in 2019?
    Ms. BILONICK. I think the success was reflecting the 
scaling of Latino-owned small businesses, so businesses that 
may have started 5 to 10 years ago that were going to the next 
level, expanding, adding additional locations, adding 
additional personnel. And, unfortunately, the pandemic is a 
setback, but I do think that we can harness that, you know, 
sort of growth mentality and perseverance moving forward, and 
it hopefully will just be a hiccup in the story of our 
entrepreneurship story.
    Ms. VAN DUYNE. Were there any particular policies that you 
think that helped back in 2019 that we should either try to 
strengthen or, you know, bring back?
    Ms. BILONICK. I don't know that I would point to a 
particular policy. I am not sure. I think--I really do think it 
was sort of was just maturity of the businesses that had taken 
off at that point. But I am open to suggestions of what 
policies you may be referring to.
    Ms. VAN DUYNE. Well, I don't know. I mean, maybe tax cuts. 
I mean, were you looking at any other tax cuts in the Tax Cuts 
and Jobs Act, for example? Did that strengthen? Did that help? 
I mean, I know that right now we have got from the Biden 
administration a number of financial policies that are coming 
down that are talking about increasing taxes, you know, gut 
inflation, so in backing away on some of the policies that I 
think really helped grow the economy and were very positive, 
beneficial to small businesses, and I am just wondering if you 
are seeing the same thing.
    Ms. BILONICK. I don't know that I would attribute it to 
that. I would say that I am not opposed to taxing those larger 
businesses. I think a business that is making under a million 
dollars is certainly not, you know, going to be targeted in 
that segment.
    Ms. VAN DUYNE. No. But I am talking about specifically 
small businesses. Right?
    Ms. BILONICK. Well, these are, I guess--would be probably a 
threat closer as a microbusiness in the $250 to $500 thousand 
range.
    Ms. VAN DUYNE. Well, I thank you.
    I yield back my time. Thank you.
    Chairwoman VELAZQUEZ. The gentlelady yields.
    Now we recognize the gentleman from Florida Mr. Donalds for 
5 minutes.
    Mr. DONALDS. Thank you, Madam Chair, and thank you to the 
Ranking Member for holding this hearing.
    I have got to tell you, I think SBA getting involved, as 
involved as they are trying to be with this forgiveness process 
and, frankly, you know, threatening community banks from doing 
what they kind of already been said to do I think is 
outrageous. It is outrageously wrong.
    You know, in a prior life, I was a credit underwriter at a 
community bank. I had to deal with SBA when we were doing joint 
credit with them. And, to be frank, SBA would be late to the 
table often with respect to their lending decisions. We already 
knew it was good credit. It just took forever to deal with SBA. 
So for them to try and come in now and, in some respects, 
completely take over the forgiveness process, to me it just 
doesn't make much sense at all.
    So, I guess, my question, my first question is to Mr. 
Fisher. Mr. Fisher, you are going through the process of 
forgiveness. What kind of data are you actually looking at in 
order to clear [cut out] forgiveness?
    Mr. FISHER. We just make sure that it is a valid, you know, 
loan. We validated all the customers at the front end, so the 
forgiveness, we just have to ensure that they have all of the 
documentation required by SBA, and it goes through--we have an 
automated system that it goes through and submits directly to 
SBA, and we typically--right now we are getting forgiveness 
back very quickly from SBA, so it is a pretty smooth process 
for us right now.
    Mr. DONALDS. Okay. And, Ms. Ward, my question for you is, 
what different or what value added is SBA bringing to the 
forgiveness process as to why they should be involved in it?
    Ms. WARD. Well, I think the value SBA is adding is, in 
creating this Direct Forgiveness Portal, they are giving an 
easier, more efficient online access for some PPP borrowers 
that may not be getting that from their lenders, and in that 
case that is incredibly valuable. I am really happy to see that 
they have created the portal to fill that gap.
    I agree, though, for lenders that have already created 
their portal or lenders that are efficiently processing PPP 
forgiveness, they should be allowed to keep using their own 
systems. I think SBA's direct portal should expand access to 
forgiveness and not limit different ways that borrowers can get 
forgiven.
    I have worked as an SBA lender for over 15 years. I have 
worked with SBA on micro loans, 7(a) loans, 504 loans, and now 
PPP loans, and SBA works best, in my opinion, when it works in 
partnership with the lenders. Each has a role, and SBA can have 
drastically more impact working through the lending community. 
That needs to be expanded, more community lenders, credit 
unions, CDFIs, mission-oriented lenders that are making sure to 
hit underserved borrowers, but that is where I think SBA 
provides an incredible and unique service and much needed 
loans. These SBA loans of all types are part of why the U.S. 
has such a vibrant small business economy.
    Mr. DONALDS. Ms. Ward, as a follow-up to that, I mean, like 
I say, somebody who has been in the community, actually done 
credit underwriting, with the amount of loans in the system, 
how would SBA actually go about dealing with loans that there 
might be early indications are fraudulent or that dollars were 
spent and maybe not in line with the PPP program and, as such, 
those dollars--a portion of those dollars or those dollars 
overall would not be forgivable, how would SBA deal with that?
    Ms. WARD. So what we've seen that process include since the 
program got rolled out, I think initially in the speed to get 
these dollars out, a lot of the normal safeguards----
    Mr. DONALDS. No. Ms. Ward, I have to reclaim my time real 
quick. I understand what you are saying about what happened on 
loans from now going forward.
    What, frankly, special mechanism is SBA going to do if they 
see early warnings that there was, not so much even just 
fraudulent, but a misapplication of funds where those funds are 
now no longer subject to forgiveness under the various--and I 
know there have been a couple iterations of PPP. But what if 
those dollars were spent and none of those iterations that were 
allowable for forgiveness, what is SBA going to do? What would 
it ordinarily do to ensure those dollars are repaid to the 
taxpayer? [Audio cut out on his question]
    Ms. WARD. So all of these go through SBA for the final 
determination. The bank, the community bank, or the lender 
submits our recommendation per SBA based on does this loan 
qualify for forgiveness or partial forgiveness, and then SBA 
bases its forgiveness on that. SBA also has the right to review 
those and ask for additional documentation.
    And so they will keep doing that same thing. They will 
continue to review and make sure that forgiveness is 
appropriate. If the funds were not spent for the intended 
purposes, the business should be paying them back. The use was 
to keep your business operating and keep your staff employed. 
Businesses that didn't do that knew going in and should be held 
accountable for paying that back.
    Mr. DONALDS. Well, Ms. Ward, thank you for that.
    I know I am over my time. Madam Chairwoman, thank you so 
much more the indulgence, and I yield back.
    Chairwoman VELAZQUEZ. Thank you. The gentleman yields back.
    Let me thank all of the witnesses for being here today. 
Your testimony has shown the progress we have made in forgiving 
PPP loans and also the challenges that small businesses still 
have----
    Mr. LUETKEMEYER. Madam Chair, we have got one more 
witness--one more Member. Mr. Fitzgerald from Wisconsin is 
still on.
    Chairwoman VELAZQUEZ. Well, he has his camera off and----
    Mr. LUETKEMEYER. No. He is on.
    Chairwoman VELAZQUEZ.--he has had his camera off throughout 
the hearing.
    Mr. FITZGERALD. Madam Chair, I am not sure if I--I just 
have a quick one if I could sneak in.
    Chairwoman VELAZQUEZ. Sure. But we have always said that 
while you are in a hearing to please to keep the video on. So, 
sir, you are recognized now for 5 minutes.
    Mr. FITZGERALD. All right. And thank you, thank you.
    Just real quick, and I don't want to be redundant. I know 
that the hearing has gone on.
    So to Mr. Fisher and probably to Ms. Payne, there is kind 
of this--these stories that have been swirling for some time 
now that there was kind of this cottage industry that was 
created basically because PPP loans were available. There were 
accounting firms, as well as law firms, that were starting to 
market, if you will--and I am trying to keep this at a 30,000-
foot level--market the idea that, hey, if you want to apply for 
a PPP loan, don't worry about it, we will take care of the 
paperwork. This is what you are eligible for. And then once the 
PPP loan was granted, then on the back end, you know, there 
would be legal fees that were charged for some of these or, 
certainly with some of the CPA firms, you know, there was 
billings that were done on the back end.
    And I bring this up--and like I said, I am trying to keep 
this--I am not necessarily making the accusation, but it is out 
there. It is very much out there. And I would just say, this is 
one of the problems I think with just loan forgiveness is you, 
once again, take down one of the hurdles that, you know, 
otherwise legitimate businesses would look at and say, well, 
wait a minute, if I have got to pay this back in the end, no, I 
am not going to take that $25,000 loan. I am not going to take 
it because it is going to be a burden on me later. But if I 
know that it is going to be forgiven anyways, sure, what the 
heck, you know, let's make this arrangement now with a law firm 
or CPA firm. And, you know, suddenly you find yourself in a bad 
spot.
    And I am just worried that this cottage industry was 
created and that, you know, if we don't try and keep this in 
check, it could go wild. And I wonder if you have any comments 
on that, if you saw any of this type of practice going on. You 
know, in my mind, you know, it sounds like criminal activity 
but very hard to define and very hard to delve out.
    Mr. Fisher and Ms. Payne, I would ask either one of you who 
had direct involvement with these loans to just--have you seen 
anything like this?
    Mr. FISHER. You know, we did have, you know, accounting 
firms and lawyers that were working with customers, but they 
were all customers that were known to us. We actually brought 
in I think 40 percent of the first round of SBA--or PPP loans 
were new customers to our bank; but most of those were not 
necessarily referrals from attorneys or accounting firms. They 
were, you know, the borrowers coming to us directly. I think 
there was--we had a couple of accounting firms that maybe 
referred a deal over, and I think they thought they were 
entitled to some of the fee that was being generated from the 
PPP loan, but we didn't have any type of an agreement signed 
with them for, you know, sharing those fees.
    So we didn't really see anything that you are talking about 
as far as fraudulent or, you know, the type of activity that I 
think you are talking about, I haven't seen it, so, I don't 
know----
    Ms. PAYNE. And I would add, we really didn't see any of 
that, and we didn't have anything from accountants or anything 
of that nature. We talked more to accountants more on the 
forgiveness end of things than the early stages because of the 
complexity sometimes of the documentation that they had to 
provide for forgiveness. But we didn't really see anything of 
what you are speaking to. We didn't have any familiarity with 
that.
    Mr. FITZGERALD. Ms. Ward, are you aware of anything along 
those lines?
    Ms. WARD. We really didn't see that in our PPP lending 
either. We saw a lot of technical assistance being provided by 
accounting firms and small business technical assistance 
providers. Third-party payroll processing companies we saw step 
up and provide reports for their customers to help them 
calculate the loan amount. We saw a lot of different industries 
really doing what I think all of you and all of we and, you 
know, all of these businesses did, it was all hands on deck.
    I am--I suspect you are right that there are organizations 
that took advantage of that fear and that desperation, and to 
the extent they can be found out and held accountable for that, 
I would applaud that; but most of what we saw, fortunately, was 
organizations trying very hard to help the businesses and the 
nonprofits in their communities keep their doors open.
    Chairwoman VELAZQUEZ. The gentleman's time has expired.
    Mr. FITZGERALD. Madam Chair, I am just worried--yes, Madam 
Chair, I think this is something we have got to be aware of, 
and I appreciate the time.
    Chairwoman VELAZQUEZ. Thank you.
    Again, thank you to all of our witnesses for being here 
today. As I mentioned before, your testimony has shown the 
progress we have made in forgiving PPP loans and also the 
challenges that small businesses still face.
    While the small business economy has made tremendous 
progress toward recovery over the past 17 months, we are 
entering another precarious state with the spread of the Delta 
variant. For small businesses that struggled for over a year, 
even minor setbacks can instill monumental trouble. That is why 
our committee must work to ensure that small businesses can 
achieve maximum loan forgiveness.
    This hearing has provided significant insight into the 
obstacles that PPP borrowers still face. I look forward to 
working as a committee to achieve policy solutions that ensure 
entrepreneurs obtain the forgiveness they are entitled to.
    I would ask unanimous consent that Members have 5 
legislative days to submit statements and supporting materials 
for the record.
    Without objection, so ordered.
    If there is no further business to come before the 
committee, we are adjourned.
    Thank you.
    [Whereupon, at 3:15 p.m., the committee adjourned.]
                            
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