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Law360 (July 17, 2020, 8:31 PM EDT) -- U.S. Treasury Secretary Steven Mnuchin told House lawmakers on Friday that automatically forgiving smaller Paycheck Protection Program loans could be a good idea, and said the Trump administration is interested in giving some businesses the option of going back for more loan money.
Appearing at a House Small Business Committee oversight hearing, Mnuchin gave a boost to calls for Congress to institute an automatic loan forgiveness option for as a way to streamline paperwork burdens facing small businesses in the coronavirus relief program, which offers loans up to $10 million that recipients can apply to have fully forgiven if certain conditions are met.
"Should we just have forgiveness for all of the small loans?" Mnuchin said. "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."
Mnuchin didn't endorse a particular dollar threshold for automatic forgiveness, but some industry groups like the Bank Policy Institute have suggested forgiving all loans below $150,000, a figure that has also been proposed in a bipartisan Senate bill.
According to the most recent available data on the program, nearly 87% of the businesses that have received PPP loans would qualify for automatic forgiveness under a $150,000 threshold, which would cover just under 28% of loan dollars to date.
More than $517 billion in PPP loan money has been approved so far, with just over $132 billion in uncommitted funds left in the program, which is currently set to expire in about three weeks.
Mnuchin also said Friday that the Trump administration would support legislation to "top up" this amount as part of another coronavirus relief package. The administration also supports allowing "especially hard-hit" small businesses to take out another PPP loan, the secretary added.
"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," Mnuchin said, adding that he wanted to see "certain safeguards" to keep out companies that are larger or better positioned financially.
The goal of automatic forgiveness would be to free small-time PPP borrowers to receive the program's main benefit — essentially turning their loans into grants — without having to spend time, money and energy on navigating the complexities of the loan forgiveness application process.
Although Mnuchin noted there have been efforts to simplify this process, he said he believes more can be done. But he added that he still wants to keep a minimal filing requirement for even the smallest borrowers.
"I'm somewhat hesitant to just say, a blank check, if you are $150,000 or less, you don't have to do anything, because again, I'm concerned about fraud and want to make sure that the oversight committees are comfortable that this money was used appropriately," Mnuchin said. "I think some level of reporting, in a simple way, is important."
--Editing by Alanna Weissman.
For a reprint of this article, please contact reprints@law360.com.
