Another phase of the Paycheck Protection Program (PPP) should be more focused and should provide loans on a “more targeted” basis to help the companies that need it most, U.S. Treasury Secretary Steven Mnuchin said during a Committee on Small Business hearing on Friday (July 17).
“A next phase of relief should extend the PPP, but on a more targeted basis for smaller companies and those that are especially hard-hit, such as restaurants, hotels and other travel and hospitality businesses,” Mnuchin said during the hearing.
He also stated that he didn’t mean to imply that companies in those sectors were the only ones significantly impacted by the pandemic, but that the government should look at a company’s sales before issuing another iteration of the PPP.
“I think this time, we need to have a revenue test and make sure that money is going to businesses that have significant revenue declines. That's something Congress didn't have in the first provision,” Mnuchin noted.
He had previously said that any extension involving the loan program would be “much, much more targeted to the businesses that really need this money and the smaller businesses.”
New Lenders Mobilized
U.S. Small Business Administration (SBA) Administrator Jovita Carranza noted that the PPP loans provided “much-needed fiscal relief to America’s small businesses.”
“We administered this first-of-its-kind program with an eye toward equity, recognizing that this pandemic has been particularly harmful to socially and economically disadvantaged businesses,” Carranza said.
She said that thousands of new lenders have mobilized, including credit unions, community banks and FinTech firms.
But Mnuchin acknowledged the shortcomings of the PPP rollout.
“As you might expect with a program of this magnitude executed on a national scale rapidly, we initially experienced some complications. We resolved them quickly. To implement the program, our teams work with members of Congress on a bipartisan basis to issue rules and guidance to provide clarity. By standing up the program quickly, we were able to support tens of millions of jobs,” Mnuchin noted.
The U.S. Treasury and SBA have issued and refined a bevy of guidelines that determine who is eligible and who is not – and what happens to companies that should not have gotten those loans, such as public firms, arguably at the cost of smaller companies that desperately needed the financial support.
In a scathing report issued on June 25, the U.S. Government Accountability Office (GAO) said that the rushed rollout of the PPP led to “confusion and questions about the program and raised program integrity concerns.”
The agency cited the need for more clarity regarding “good faith necessity certifications.” To speed up the distribution of funds, the government allowed lenders to take borrowers' word for things when determining eligibility for PPP forgiveness loans.
Mnuchin acknowledged that there were “provisions in the existing act” that made the forgiveness process “complicated.” He noted, “We look forward to working with this committee and the Senate Small Business Committee to simplify the process.”