Mnuchin suggests automatic forgiveness of smallest PPP loans
Treasury secretary appears to back step for Paycheck Protection Program loans under $150,000
Congress should consider automatically forgiving Paycheck Protection Program loans taken out by the smallest U.S. businesses, Treasury Secretary Steven Mnuchin said Friday.
Mr. Mnuchin, testifying before the House Small Business Committee, appeared to back a proposal from U.S. banks and others who have said the massive lending program should see loans under $150,000 automatically turned into grants.
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That would account for 86% of the roughly 4.9 million PPP loans issued to date. Without a change to the law, all those businesses will have to apply to have their loans forgiven, documenting that they used the money on payroll and other qualified expenses.
“One of the things we will talk about is should we just have some forgiveness for the small loans? I think that is something we should consider,” Mr. Mnuchin said. He was testifying at a time when Congress is considering another round of help for businesses struggling during the coronavirus pandemic.
Mr. Mnuchin added that Congress should extend the Paycheck Protection Program in its next round of legislation.
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Lawmakers in both parties expressed support Friday for extending help to small businesses. “There are still challenges that are presenting obstacles for the nation’s smallest firms,” said Rep. Steve Chabot of Ohio, the House panel’s top Republican. “We aren’t done yet.”
To date the small-business lending program has distributed about $520 billion, and has about $130 billion remaining available.
Mr. Mnuchin, who has been one of the Trump administration’s main negotiators on pandemic legislation, said Congress should consider allowing the hardest-hit businesses, such as restaurants and hotels, to apply for a second PPP loan. It should also ensure money is set aside for minority-owned small businesses, he said.
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Mr. Mnuchin cautioned that the next version of the PPP might need to have more safeguards to prevent fraud, waste, and abuse.
“I think this time we need to have a revenue test and make sure that money is going to businesses that had significant revenue declines,” he said.
The forgivable loans are currently distributed if businesses self-certify they need the funds, without any requirement that businesses demonstrate they were harmed—a structure that helped distribute massive amounts quickly but that government auditors say creates the potential for abuse.
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Businesses stampeded to get PPP loans in April, but demand has subsided and some companies have even returned the funds. Small Business Administrator Jovita Carranza on Friday estimated the program’s total lending at $518 billion, compared with the $521 billion in loans the SBA reported on June 30. She didn’t explain the change.
Write to Ryan Tracy at ryan.tracy@wsj.com