- U.S. Treasury Secretary Steven Mnuchin told House members at a Small Business Committee hearing on Friday that they should consider automatically forgiving small Paycheck Protection Program loans. Mnuchin suggested that the Trump administration would support a proposal from U.S. banks and others to turn loans under $150,000 into grants, according to The Wall Street Journal. "Should we just have forgiveness for all of the small loans?" Mnuchin said, according to Law 360. "I think that's something we should consider. We should obviously make sure there's some fraud protection, but we look forward to working with this committee and others."
- This would impact 86% of the close to 4.9 million PPP loans issued as of July 17, and roughly 27% of the $520 billion lent through the program, according to The Wall Street Journal.
- Mnuchin also said that Congress should weigh the possibility of allowing the most impacted businesses, such as restaurants, to apply for additional PPP loans. He suggested that Congress cap the size of businesses eligible for more funding to around 100 employees compared to the current 500 or fewer employee cap. "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," he said.
Automatically forgiving small PPP loans could both relieve restaurants from program paperwork and prevent technical difficulties at the Small Business Administration, which struggled to process an onslaught of loan applications for round one of the program in April.
If the Trump administration enacts automatic loan forgiveness for small loan recipients, it would ease independent restaurant worries about navigating the program's standards as they struggle to comply with changing reopening — and in some municipalities, reclosing — mandates.
Mnuchin's address comes just a few weeks after President Trump signed an application extension of PPP into law, pushing the deadline to Aug. 8. There is still roughly $130 billion in loan funds left to allocate to new applicants. Changes have also been made to the program to streamline forgiveness applications and reduce the amount of funds required to go to payroll from 75% to 60%, as well as extend the time period businesses have to use the funds and pay back their loans.
Industry groups are still pressing Congress to give restaurants financial aid tailored to their industry, however. The same day that Mnuchin addressed the House, the Independent Restaurant Coalition doubled down on calls to pass the Restaurants Act on its website, including statements from supportive restaurant and bar owners in California. The proposed legislation would create a $120 billion fund to assist independent restaurants and bars impacted by the pandemic. Even if U.S. legislators move to automatically forgive small business loans, this still leaves roughly 73% of the $520 billion lent through PPP uncovered, which could leave mid-sized and large chains that were already struggling financially in vulnerable positions.