PD Editorial: Congress should relax coronavirus loan paperwork for small business

Millions of businesses hammered by the pandemic-induced recession received a lifeline from the federal government under the Paycheck Protection Program. Now that lifeline is turning into an anchor for some small businesses. Paperwork required to apply for loan forgiveness has proved excessively complex and expensive. Congress should streamline the process for small businesses.

Under PPP, businesses received federally backed loans. If they used the money for the intended purposes — mainly continuing to pay thier employees — the loans would be forgiven. In other words, if a business spent the money on payroll, the loan would become a grant. If they didn’t, they’d have to pay the money back.

It was an infusion of cash that helped keep businesses afloat when the economy went into lockdown. The program kept millions of Americans employed, blunting the spike in unemployment.

One of the advantages of structuring the program around loans was accountability. Nothing prevented a person who received a $1,200 stimulus check this summer from buying new golf clubs — or just banking it. A business that did something similar would have to repay the money. Federal investigators already have charged dozens of people with crimes related to fraudulent PPP loans.

Unfortunately, the paperwork for loan forgiveness is overwhelming small businesses not accustomed to dealing with government bureaucracy. A mom-and-pop shop that keeps its books in a simple spreadsheet might not have the detailed payroll records that the loan-forgiveness application demands. And if it doesn’t, it could have to pay back the money even though they used it for the right purposes.

A bipartisan group of lawmakers have proposed easing off on those small businesses. The Paycheck Protection Small Business Forgiveness Act (H.R. 777 in the House and S-4117 in the Senate) would allow any business that received a PPP loan of $150,000 or less to submit a simple, one-page form attesting that they used the money appropriately. Rep. Jared Huffman, D-San Rafael, is a co-sponsor.

Think of it as something like how the Internal Revenue Service handles taxes. For most people, the 1040-EZ form works fine, and they can complete it themselves. Wealthier people with more complex finances, need to hire accountants and supply a lot more information. The bills would create a PPP-EZ form. That would restore the promise of the program to help struggling businesses.

In California, more than a half-million businesses received loans of $150,000 or less. And of those, three-quarters received $50,000 or less. (Full disclosure: The Press Democrat’s owner, Sonoma Media Investments, received a PPP loan. It was worth more than $150,000, so SMI would not be eligible for the short form if approved.)

The nation must balance accountability with efficiency. When deceased people received stimulus checks, experts chalked it up to the rush to get money out there. Some small fraud might escape detection, but none of this would prevent the Department of Justice from continuing to search for fraud.

Small businesses don’t need the hassle of bureaucratic red tape when they are trying to survive. At a time when Democrats and Republicans in Congress seem farther apart than ever, the Paycheck Protection Small Business Forgiveness Act is a chance to show that bipartisanship for the good of the country still is possible.

You can send a letter to the editor at letters@pressdemocrat.com.