Banks applaud changes to PPP rules, even as they push for more leniency in forgiveness

close up shot of ppp loan

Community banks that helped thousands of small businesses access loans through the federal Paycheck Protection Program during the height of the pandemic-related shutdown, are praising Congress for changes to the PPP, passed Wednesday, that make it easier for small businesses to get loan forgiveness.

But they’re pushing for still more leniency, hoping the feds will ultimately agree to forgive all loans under a certain threshold of, say, $250,000 or $150,000.

The Independent Community Bankers of America is lobbying for the changes because it says it’s just too complicated for the smallest of small businesses to fill out lengthy applications necessary for loan forgiveness when the value of their loan is so small.

“We’re hoping they will simplify the process of applying for loan forgiveness by just giving a blanket forgiveness for anything below a certain limit,” Citizens Executive Vice President Jim Purgeson says. “As it stands now, businesses have to fill out an 11-page application and that is not going to be easy for the average small business person to do.”

So far, regulators haven’t taken that step, though the changes Congress passed Wednesday will make a positive difference, according to Purgeson and others.

Under the new rules, small businesses only have to spend 60% of their loan money on payroll instead of the previous 75%. They can use the funds for six months, a change from two months. 

The changes also extend a June 30 deadline to rehire workers, push back the timeline for repaying loans, and allow companies that get loan forgiveness to defer payroll taxes. 

“It’s definitely a step in the right direction,” Investar Bank President and CEO John D’Angelo says. “We’re still waiting on the final rules and things keep changing but we’re hearing everything below a certain amount may be forgiven, so we hope so.”

There’s no word on when the additional changes could come down and on what banks should tell clients who received PPP money and are wondering how to determine whether they have to repay the money. But now that the deadline for spending the funds has been extended to six months, there’s less pressure to come up with those answers immediately.

In the meantime, banks are still making loans under the PPP, which was expected to run out of money after being replenished by Congress for a second time in mid-April but never did.

“Surprisingly, there’s still a lot of PPP money left,” D’Angelo says. “The loan amounts are small, not like the amounts we saw in phase one, and there’s still a lot available.”

But D’Angelo and others say the rate of new applications has slowed, as most of those who qualified for help under the program have received it and commerce starts to slowly resume.

“There’s the sense that things are starting to move forward,” D’Angelo says. “I don’t think everything has turned around, mind you. But I feel some momentum beginning to move forward.” 

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