Treasury Secretary Steven Mnuchin Suggests Smallest PPP Loans Should Be Forgiven

Treasury Secretary Steven Mnuchin suggested on Friday that the smallest loans issued under the Paycheck Protection Program, or PPP, should be automatically forgiven by Congress during the COVID-19 pandemic.

Testifying before the House Small Business Committee, Mnuchin said: “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.”

However, Mnuchin did not specifywhat he considered a “small” loan.

But Mnuchin was likely was referring to a recent proposal from banks and other stakeholders who want to convert loans less than $150,000 into grants – which means they would not have to be repaid.

Under this proviso, about 86% of the 4.9 million PPP loans ( totaling $518.1 billion ) issued thus far would be forgiven.

Under current rules, PPP loans up to $10 million can become grants if the borrowers use most of the funds on payroll costs. However , the businesses that took out such loans have to formally apply to have their loans forgiven, and specifically document in detail that they used such funds for payroll and other qualified expenses. A coalition of nearly 150 groups told Congress that bypassing the complex loan-forgiveness application process would save more than $7 billion and hours of paperwork.

Small business advocates have long complained that the application process is too long and too complicated.

Mnuchin also said that Congress should extend the PPP during its next round of legislation. Mnuchin specifically said Congress should consider allowing restaurants and hotels, among the hardest hit businesses, to apply for a second PPP loan.

Politicians from both sides of the aisle supported plans to give more help to struggling small businesses.

“There are still challenges that are presenting obstacles for the nation’s smallest firms,” said Rep. Steve Chabot of Ohio, a Republican. “We aren’t done yet.”

However, Mnuchin warned that the next round of PPP should include safeguards to prevent acts of 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.