By Jon Hill

Law360 (September 24, 2020, 7:04 PM EDT) -- Treasury Secretary Steven Mnuchin told senators on Thursday that he'd be on board with lawmakers authorizing simpler forgiveness for smaller Paycheck Protection Program loans, but he advised small-business borrowers not to play the waiting game.  

At a Senate Banking Committee oversight hearing, Mnuchin said that while the Trump administration would support legislation that provides a presumption of forgiveness for PPP loans under $150,000, small businesses in the program should go ahead and submit their forgiveness paperwork rather than holding out for Congress to act.

"I would encourage them to move quickly and fill that out and not wait for legislation," Mnuchin said. "But if we can get legislation to help them, that would be great."

Created to help small businesses amid the novel coronavirus pandemic, the PPP offered loans of up to $10 million that recipients can apply to have fully forgiven if certain conditions are met. But there have been repeated calls to exempt the smallest loans from the program's usual forgiveness application process, which businesses and lenders have complained is overly complicated and too taxing for borrowers of that size.

Those concerns were underscored this past week by the Government Accountability Office, which published a report that found applying for PPP loan forgiveness is "more time-consuming" than applying for the loan itself. Some borrowers have reportedly needed as much as 15 hours to complete the required paperwork, and lenders are finding a complex forgiveness application may take as long as 75 hours to process, according to the report.  

At Thursday's hearing, Mnuchin noted that the U.S. Small Business Administration and Treasury Department, which run the loan program, have made some efforts to address concerns about paperwork burdens, pointing to their June release of a simplified forgiveness application form.

But without additional legislation, that's about as far as the agencies can go, Mnuchin told Sen. Ben Sasse, R-Neb.

"I know there is bipartisan support for going much further, which we think we need legislation for," Mnuchin said. "And we would support [it] if there is legislation to have loans under $150,000 have a presumption but allow for us to audit them as needed."

Acknowledging that the SBA and Treasury might not be able to institute automatic forgiveness under their existing authorities, Sen. Mike Rounds, R-S.D., urged Mnuchin to nevertheless "take a second look at" what else can be done to simplify the forgiveness process even if congressional action isn't forthcoming.

"'The forgiveness piece of the PPP is a disaster,'" Rounds said, quoting from a letter he said he received from one lender. "'Our borrowers are not happy, nor are we as bankers … we busted our tails off to get this money out, and we are getting absolutely screwed by the process.' "

Mnuchin pledged to work with lawmakers on streamlining the forgiveness process and said he would discuss it with the SBA after the hearing.

"We support legislation that [simplifies] this," the Treasury secretary reiterated. "It doesn't cost any money and we'd still retain our right to have the SBA audit as appropriate."

But while Rounds agreed that any automatic forgiveness proposal should preserve flexibility for officials to audit borrowers later if needed, he also stressed a need for urgency.

"We don't want to have fraud involved," Rounds said. "But it looks to me like there's a huge amount of work out there that we're expecting lenders to do that, basically, they're not going to get done in a timely fashion, and we will have a problem that we'll have to address if we don't find a way to resolve this particular issue."

--Editing by Amy Rowe.

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