Congress must take action to solve PPP/EIDL issues

October 19, 2020

CUNA joined other organizations Monday to call on House and Senate Small Business Committee leaders to fix an issue reducing value of Paycheck Protection Program (PPP) loan forgiveness.

Many small businesses applied for both PPP loans and Economic Injury Disaster Loan (EIDL) Advances, the latter of which was directly provided by the Small Business Administration without the intervention of lenders.

Conflicting guidance and timing issues, followed by the SBA’s reversal of original guidance now mean that the forgiven amount of PPP loans must be reduced by the borrower’s EIDL Advance, effectively turning a grant into a loan, or wiping out PPP loan forgiveness altogether.

“Whether intentionally or as a result of confusing communications, PPP borrowers were misled and are only now beginning to discover the truth of their situation. Even today, many borrowers remain unaware of the debt burden they will soon face,” the letter reads. “Lenders we represent are seeing firsthand the spreading awareness, shock and resentment among borrowers who believe they were deceived about the nature of the EIDL Advance. We do not believe it was the intent of Congress to effectively trap one million vulnerable small businesses with unexpected debt.”

The organizations add that PPP lenders “did not consent to having EIDL Advances, which they did not underwrite, shifted onto their balance sheets, tying up capital needed to serve communities during this unprecedented period.”

CUNA urges Congress to “take all necessary measures to provide relief” for affected small businesses and PPP lenders in conjunction with releasing unallocated PPP funds to create additional small business credit.

“At a minimum, SBA should immediately stop the transfer of any residual EIDL Advance balances to PPP lender balance sheets and return them to the SBA Office of Disaster Assistance, which administers the EIDL program,” the letter reads. “Congress and the SBA must find a solution that will fully restore PPP forgiveness and help our nation’s small businesses.”