Banking Groups Call For PPP Loan Forgiveness


The Consumer Bankers Association and Bank Policy Institute, in a co-signed letter, have called on Congress to automatically forgive Paycheck Protection Program (PPP) loans under $150,000.

Although that would cover around 85 percent of the loans, it would only cover about 26 percent of PPP loan dollars, the two groups said.

Businesses would still be required to verify that their PPP funds were used in the correct ways the program mandated, to keep employees on the payroll. But they would not have to fill out lengthy forgiveness applications, which would save them time and money. The two organizations said it would save more than $7 billion for business owners, which could be used for reopening and other such costs.

The PPP was passed by Congress in March as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to give out loans to small and medium-sized businesses (SMBs) affected by the economic strife of the coronavirus. The letter from the two organizations says the forgiveness aspect of the program had proven slow and burdensome for businesses, though.

The letter also comes with an independent analysis done by research firm AQN Strategies, which finds that the combined resources needed to apply for forgiveness under the current plan would amount to $2,000 to $4,000 per business for third-party expenses and other costs, alongside 20 to 100 hours of focused time, due to the length and complexity of the forgiveness application.

The smallest 60 percent of loans, the letter says, were for under $19,000. The estimate to pay for the current forgiveness criteria would be around 10 to 20 percent of the loan itself and could be used instead to pay for rent or utilities, the letter says.

“For smaller businesses who function without full-time finance professionals, leaders need to be focused on managing their businesses through these crises — not dealing with paperwork and reading complicated regulations in an attempt to play amateur accountant,” the analysis reads.

The PPP has run afoul of controversy due to the fact that many large, publicly traded businesses ended up getting large sums of the money, and that the eight-week period for businesses to use the money was too short. Some have called for that period to be stretched to 24 weeks.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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