heard from banking officials and douglas w. >> the hearing will come to order.

today's hearing will be focused on the paycheck protection program. i would like to thank everyone that is joining us, both in person and virtually, and welcome our witnesses before the committee. i believe we have two virtually and to hear in person. this pandemic has affected virtually every part of our lives -- our health, our education, our jobs, our communities, our families, and our economy. even the way we conduct business here. speak with aon't mask on. i'm doing a, because we have a lot of young people and others here who work in our our process who at this time of year go home to their families. i would hate for anyone to be unable to do so because somebody told him they set to close to me for too long, and as a result, they have to stay here over the holidays. out of an abundance of caution. if anybody has any problem hearing me, let me know, and we will work through that. the pandemic and nationwide lockdowns were, then, and remain

now, a crisis for america's small businesses. in march, as the pandemic and the lockdowns began crushing small businesses, the senate and bipartisan members of this committee responded by coming together and enacting historic support for small businesses in -- for small businesses. one of those lifelines was an entirely new program, built upon the network of community banks that the sba has worked with for many years, to deliver capital to small businesses. support was what is now known as the paycheck protection program. and, in this crisis, we called upon every inch of america's financial infrastructure to help deliver the help it brought to small businesses. and i think it is fair to say that it is not a perfect program, because no government

program is perfect. doubt,o think without a it is clear that the paycheck protection program has been the single most effective part of the cares act that was passed and one of the most effective programs inef modern history. delivering more than $525 billion to small businesses and nonprofits across the country. two goals -- help workers keep their jobs, keep workers attached to employment. second, related to the first was helping small businesses be able to stay open, not have to permanently close their doors. under the crisis conditions in which we created the program, to achieve these goals required setting a third goal -- to deliver the support ppp would provide an do so as quickly as possible before those small businesses ran out of time and

money. i think as we look at, i believe it is more than fair to say that we accomplished all three of -- that the program accomplished all three of those goals. the goal of worker retention, businesses receiving ppp report saving up to 55 million jobs. in may, 2020, the first jobs report after the full amount of ppp loans was disbursed showed the biggest month for jobs gained on record since 1939, beating economists' expectations by over 10 million jobs. as to the goal of helping small businesses, more than 5.2 million small businesses and nonprofits received a ppp loan. by the end of may, the u.s. census bureau reported that more than 70% of all small businesses in the entire country received ppp loans. as to the goal of delivering assistance as quickly as possible, the sba approved nearly $350 billion in ppp loans in just two weeks. this is, by far, and by any measure, the fastest delivery of funds, at this scale, for a

fiscal policy program in modern history. this program was a tremendous success in meeting the goals that we created it to meet. and now, i believe it is time, and a more tailored and surgical way, to do it again. the work that the first round of ppp began, though successful, it is still incomplete. the pandemic is still raging. lockdowns are again being placed on small businesses, and /or restrictions continue to be in place. consumer activity in certain sectors is falling. by enacting a second round of ppp, we can build upon the successes of the first round, fix some of the problems that were identified, and protect small businesses through the winter, as we walked that bridge towards what we hope will be a widely distributed vaccine that gets us to a point where we are no longer dealing with many of

these restrictions. as we consider this second round, this hearing provides as a good opportunity to take stock of what we learned in the first round. the priority of speed that we gave the program, however necessary, created some initial problems in implementation. for example, the average loan size approved at the beginning of the program was larger, and a number of companies that had access to capital elsewhere received ppp loans. that problem was resolved. yet the program's critics persist in saying that the program was skewed toward larger businesses. the fact is, 70% of ppp loans went to small businesses with 10 or fewer employees. the average business receiving a ppp loan at the end of the program had 13 workers. and 80% of all funds went to businesses with fewer than 200 employees, even though all businesses with 500 or fewer were eligible. another example is related to

fraud. we have learned a good deal about the need for inspection and oversight by the administering agencies. however, the evidence so far does not suggest a fraud rate in ppp that is higher than that of any of the other programs in the care act. and the evidence suggests that ppp suffers from a much lower risk of fraud than the sba's eidl program. which is an existing program. one of the reasons for this success has been the fact that the banks and credit unions delivering ppp are still subject to federal anti-fraud regulations. and this public-private partnership in combination with increased oversight allowed us to strike an important balance of ensuring fraud protection while also disturbing program funds in a timely manner. with respectle is to equitable division of funds to small businesses by people owned of all backgrounds, races, and ethnicities. we have learned the importance of community financial institutions and technical assistance grants to agencies

like the minority business development agency. certainly a disparity at the program's beginning, the heroic work of financial institution such as these helped to overcome much of that. there was a survey completed by goldman sachs found that by the conclusion of the program, 93% of black owned small businesses applied for a pvp loan and of those who applied, 95% received a ppp loan. according to the -- received a higher percentage of ppp loans than their relative share of business ownership in the u.s. like an hispanic owned small businesses account for 7.8% of total small businesses. 7.8% of small businesses in the country are owned by african-american or hispanic, and get they successfully received 10 point 6% of the

total loans disbursed. despite some negative narratives i have seen i have heard loud and clear about the success i have seen from small business owners throughout the country. -- said we applied for the ppp loan which help us focus our energy on pivoting our business model. the funds allowed us to reassign staff to these opportunities, which ended up making up the revenue we lost from our traditional business. libertye owner of landscape in jacksonville said if i had to sum up the loan in one word, it gave us confidence. we would be in a much more difficult position without it. these represent only a small portion of comments we have received from small businesses about the program. outset, whilehe there are better days ahead with the promises of a successful vaccine we should have great confidence that before this time

this year we will be living a very different situation. we have an immediate need over the next few months that requires action. small businesses need more help to make it through this winter, even a potential second wave looming and government lockdowns and different jurisdictions, it is vitally important. perhaps the biggest evidence of how this program has worked is that in a time in which it is difficult for the parties and within parties to agree on many things, congress has voted unanimously on three separate occasions to find and enhance ppp and i believe it is far past time for us to do it once again. it was my hope we would do it months ago, but i hope we will do it now. i cannot imagine not doing it and the implications. today's hearing will provide us with an opportunity to provide a discussion of the first round. i look forward to hearing from

today's expert panel on their experiences with ppp and i will recognize the ranking member who will deliver to his opening statements. >> [indiscernible] this ise committee room likely to be senator rubio's last hearing chairing the small business committee. she is moving onto different responsibilities in the next congress. i just want to take a moment to congratulate you on an incredible record during these two years that i have had the honor to sit next to you as the ranking democratic member. you have really put small business and on jupiter -- entrepreneurship committee on the map and this pandemic. under your leadership we have really responded to the needs of small businesses, and we recognize small businesses in

this country are where jobs are created and innovation takes place and they are not as resilient in dealing with economic downturns and it was absolutely essential we respond in a very major way during this pandemic, and under your leadership we were able to do that. i want to congratulate you on a great record, and i look forward to working with this committee on other issues. how we can do things moving forward to ensure the success of small businesses. the programs you referred to we were able to develop, particularly the paycheck rejection program, was one that involved the work of all members of our committee, and i want to acknowledge that this has been a bipartisan group effort to develop ways we can provide comprehensive help to small businesses during this pandemic.

every member needs to be praised. i particularly want to acknowledge the former ranking member on our side, so there heen that- senator sha she did in crafting the different programs. you mentioned the paycheck protection program stood up very quickly. i agree with you. the enhancements in the idle program, including grants, loan forgiveness program, and the fact that we not only passed it but we also acted two other times to replenish and extend the paycheck protection program. when we replenish, we were directed funds we targeted to underserved communities, and when we looked at what we did it was very successful, and i agree with you. i want to underscore that this was a program stood up overnight , it got money out quickly to small businesses, and it

accomplished its intended purpose. more needs to be done. thatssed the cares act included these programs in mid-march, and when we passed those we really thought this pandemic would be behind us by this past summer, but that was not the case. i agree with senator rubio that we need to act and we should have acted before now in extending relief to small businesses. it is desperately needed. as we are holding this hearing, the united states is recording 200,000 new virus cases a day. six times higher than we sought last spring. three times higher then we sought this past summer. in the past we have had regional breakouts that cause concern. we now have a nationwide breakout of the virus in every part of our country. no restrictions are being

imposed, and those businesses that depend upon larger gatherings are very much compromised as this pandemic continues. food services, hospitality, entertainment, travel, tourism, the list goes on. we need to respond. but we need to target the next round of belief for several reasons. learnedemember what we from the cares act. we learned by experience that we put into the cares act a provision to acquire the small business administration to issue guidelines to underserved borrowers. they did not do that. we need to be more prescriptive as we did when we replenish the fi andto allocate to cd other micro lenders.

we need to be more specific as to how we allocate these funds for several reasons. i believe we need to concentrate on smaller of small businesses. senator rubio, i appreciated the numbers you were able to present today. you and i know we have had one difficult time getting information out of the fda as to how this program has worked. their transparency and been terrible. it is something that needs to be corrected. we need to have accountability and we need to understand the , andam as we move forward we have been a because we have not been able to get that information. one thing is clear as we go into a second round, and you and i understand this. we will have limited resources, not as much as we would like to have. we will be dealing with a that willd package hold us all for several months.

we need to recognize we cannot do everything we want to do. smalle hardest hit businesses are the smaller small businesses, so let us target the program to the smaller of the small businesses. let's make sure it is based upon need so that we get to small businesses that really need help, those that are dependent upon large gatherings that cannot have those gatherings in their business, and let us reach out to the underserved community, because what we learned in the cares act, that those who did not have priority establish relationships with bankers were not first in line and in some cases they were not able to get into lines at all. we have to recognize that we have to reach out and do more to make sure it gets to the underserved community and let us also recognize that for many small businesses on loan is problematic. they need to grants.

grants are very important. at the why as we look next round let us concentrate on the idlen fine tune advance program, direct loan grants by the federal government , and how we can refine that grant program to meet the needs of the underserved and under banked community. we have already seen this model in action in my hometown of baltimore with the baltimore development corporation, which provide support to small businesses based on need and other factors. not on a first-come first-served basis. it is vital we learn from best practices of local organizations like the baltimore development corporation as well as directing to small business owners because they have the understanding of what is working and not working. wealso need to make sure retained bipartisan support that was the hallmark of passing the

original programs to help small businesses as we get into the next round. we need to make sure we include democrats and republicans, house and senate, let's get this done. i want to thank our witnesses for providing testimony. looking forward to hearing from the small business owner to share with us the impact covid-19 has had on her small event space and show how she was able to use the money provided by the cares act. my hope is we will leave this hearing with a better understanding of how best to improve not only bbb but all programs small businesses need to make it through the pandemic, including idle small business debt relief programs and future grant programs for small businesses unable to take on additional debt. i look forward to hearing from our witnesses. >> thank you senator cornyn. it would be impossible without a partner like senator cardin.

thanks to the senators not members of the committee but were intricately involved in the design of this program as well. it was a very rewarding process to be a part of and i want to thank all of them and the work they put in. our witnesses today, we have two with us. officer anderating second-generation co-owner of the 21st century expo group, the nation's only minority and women owned general contractor in the events industry serving clients for more than 28 years. the president of the american action form, the chief president's ofe economic advisors from 2001 to 2002. isning us remotely senior vice president of the public place already at the opportunity finance network, the

national association of community development financial institutions and tom zernick, the sba lending division in st. petersburg florida. i want to thank all of our witnesses for being here and we will begin with witnesses here we will starteken with you and go to our wnesses that are remote. thank you for being a part of this important hearing. it is timely to look back at the previous round of assistance, but as we are cultivating new assistance how we can learn from problems in the first round and make it better. thank you all for being here. rubio, ranking members, thank you for the privilege of being cured today. let me make a few brief points. in thinking about evaluating the paycheck addiction program, it is important to remember

economic conditions into which it was introduced. when the pandemic became apparent in mid-march, american households experienced an enormously sharp pullback in spending as they stopped consuming services that involve personal contact. people did not go to restaurants, get on airplanes, go to hotels, and in large cause of american business customers disappeared, and there was an enormous cash flow crunch in the economy. in the face of that crunch what can you do? businesses sold everything they could in order to raise cash as a result massive selloffs in financial markets, which required the federal reserve to step in and stabilize. in the circumstances it is tempting to simply lay everybody off, and there was a need for labs,ention to stop those preserve employer-employee relationships, preserve the infrastructure of the american economy as a bridge to the other

a paycheck tode american households. it is hard sometimes to imagine just how bad those conditions were. it turns out in the second quarter of 2020 the u.s. economy contracted by 9%. in the worst full year of the great depression, 1932 the u.s. economy contracted by 12%, so we experience something close to that in the second quarter of 2020. in those circumstances what the ppp did was simply fantastic. it is the single most effective fiscal policy ever undertaken by the federal government. it got over $500 billion out the door into small businesses in about four weeks. it preserved employee relationships with their employers, thus preventing economic scarring, and it provided that $500 million in workersy, cash flow to

and employers in order to get through 2.5 months the program was designed to cover. it's an enormous success stands out in contrast to the mainstream lending program, which was intended to handle larger employers, which has effectively provided no support whatsoever. in thinking about the pvp it is important to recognize speed was of the essence, the scale of the response had to be enormous because the scale of downturn putenormous, and it had to a premium on speed and scale and it did that very well. the data is quite striking. 75% received a small business loan. we now find ourselves in a situation where we need a bridge to the other side, another surge

in the coronavirus pandemic, and another round of ppp is entirely merited. the good news is there is a lot of experience from the first round we brought to bear on a second program and it can be designed with a little more targeted approach, because we are experiencing the same kind of broad cash flow crunch we saw in the first part of the year. it would make sense to address those issues with lenders. givenimportant lenders be strict limits on their liability so they are held harmless from any misrepresentation by borrowers. that was close but not done the first time around. there is no need to cover publicly traded companies. they have access to capital markets and so should be targeted more carefully. i do not think it is a failure gotten loans have out to larger employers.

the whole point was to preserve employee's paychecks. that was a success in that moment. it should be targeted to smaller think-- firms, and i having lender liability and a broader -- will ensure funds are sure to were broadly in this economy. i thank you for the opportunity to be here today. doneencouraged by what was last spring, and i think it is possible to do again in this moment and i look forward to answering your questions. senator rubio: thank you so much. >> senator rubio, ranking members of the committee, thank you for the opportunity to testify before you. mcfarland, the the expo group.

i am representing not only myself but my business partners, my mom and dad here with me today, but also my employees, my community, and other small business owners around the country. started our family business 30 years ago in their basement when i was only four years old. black andre the only women owned trade management firm in the entire country. 2020 with 10 employees and plans to expand, but as we lost the ability to generate event revenue in february and our contracts were canceled we were forced to furlough those employees. 20th century has weathered the impact of the 9/11 terrorist attacks at the 2000 financial crisis, but 2020 was the first

year in our entire history we had to close our doors completely and lay off staff. thankfully for our business and 5 million others, the federal government acted quickly to pass the cares act in march and stood up the paycheck protection cases ofnd expanded the economic disaster loans. our 21st century expo group was fortunate to have a strong relationship with our bank, to have up-to-date financial records, and fortunate enough to quickly receive ppp and idle funds that allowed us to stay afloat during the first half of this year when our revenue declined by a staggering 81%. keepings went toward five employees and providing health benefits for employees, while our idle funds went to expenses like overhead costs, vendor payments, and our internet bills. the funds only lasted until

october and we knew we had to explore new opportunities, so we did what any entrepreneur does, we took stock of the assets we had and needs we could meet i looked to chart a new path forward. my mom and i looked around the county and saw kids, schools, teens, and trainers facing unprecedented challenges and hardships, and then we looked at are 40,000 square-foot warehouse and saw an opportunity to give back while giving our opportunity at life. we transitioned our rows into an academic and athletic training center. not only are we helping the kids of the county, we are providing coaches and tutors a much-needed place to generate income for themselves. we haven't been able to hire new administrative staff, bring back warehouse managers, and employee other small businesses to help clean and manage our warehouse. the government funds we receive not only assured our company

will continue to be here when our industry returns, but it will also help us create a second enterprise that provides employment in our community and needed services, but we are not in the clear. we have gone to great lengths to keep our business is solvent. we have laid off our staff, cut employee benefits, and dipped into personal savings to cover business expenses. and we are obviously not alone. i am a proud member of goldman sachs 10,000 business -- small business program. 42% have been forced to lay off employees were cut employee compensation. 52% have forgone paying themselves. 33% f dipped into their own personal savings. and these statistics are even more bleak for businesses with black owners. i am one small business and one voice, but i speak to the .hallenges

millions of people throughout the country need more help to survive. things,ld ask for three first we need additional ppp and idle funds. we need to ensure that ppp loans do not have negative tax applications for small business rented and commercial deferrals would be invaluable for businesses like mine where facility rental loan is a major overhead cost. response to this pandemic must be first and foremost about protecting lives, but it must also be focused on protecting livelihoods, including those of our nation 12 against most vital small businesses. senator rubio: thank you so much. ms. williams. >> good morning. i am pleased to testify today about why community development financial institutions, cfis

must be central to the federal government strategy to help small businesses. these businesses cannot afford for cdfi to be an afterthought. the paycheck protection program experience demonstrated that when cdfis are empowered with adequate capital they outperform other lenders. ppp has been a critical lifeline to save businesses and jobs. opportunity finance network supports an extension of this program. through the initial iteration of ppe business owners and lenders also learned lessons. who your lender is mattered. there are gaps in our financial system that log people out. minority-owned, women-owned and rural businesses are underrepresented. reach lenders who understand and are working in this markets.

as specialized lenders that focus on under bank communities, cfi provides unique -- incomerowers are 85% low , 50% people of color, 48% women , and 26% rural. thankfully there is been bipartisan recognition that leaving cdf i out of ppp meant many customers were left out too. we have greatly appreciated ongoing efforts to modify the program as challenges arrive and these changes, including the $30 billion card out to financial institutions and $2 billion cdfi set-aside plus dedicated access to -- a platform for small lenders was effective. more loansde totaling more than $7.5 billion. our average loan size was about

$65,000. the latino economic development center dissipated and employed 109 loans totaling more than $2.2 million to businesses in washington, d.c. and puerto rico. cdbis maderida based loans totaling more than 700 billion dollars. the average loan size was about $36,000 and 86% of their loans went to ethnic minorities, including 67% to black business owners and there are stories like this from cdfis across the country. our party is one shared with the members of this community, that bbe must help industries that are the backbone of this community that are the backbone of this pandemic. --

streamlined loans, a minimum processing fee so that loans are able to have their cause covered for lenders, addressing the issue of tax treatment and idle investments stressing borrowers. universal logistics of women-owned trucking companies loan.ed a $20,000 bbb she now has an unexpected $9,000 loan to repay. other clients that expect fully forgiven loans are facing that same reality. we are pleased to see many fixes in the framework for the small business lifeline act and the bipartisan covid relief framework. -- inhese fixes and pays toce, cdfi stand ready deliver other relief to small businesses, but we need capital to provide needs.

we were pleased to see a bipartisan framework for the covid relief package include $12 million for cdfi. this institutional level capital will enhance our capacity to support multiple businesses and pppunities who are part of but beyond into the recovery. focusing on under bank at remission lenders best equipped to serve them will ensure a more equitable recovery. thank you for the opportunity to testify today and i look forward to your questions. senator rubio, thank you, and finally, mr. zernick. make sure your audio is turned ugly -- turned on please. tens of thousands of small businesses have closed due to covid-19 and more are closing in day. in tampa bay 22% of operational

businesses in january are now gone and nationwide 25% of small businesses have been shattered. -- surviving businesses have lost 21% of revenues on average. small businesses have been adversely affected by covid-19. provided 2.5 months of payroll and operating expenses was a lifesaver for small businesses but that was nine months ago and the pandemic is far from over. ppp rubbed one as proven not to be enough. as congress deliberates the next relief package i would like to offer three recommendations. we need to know because fixes to help followers and lenders and ensure participation in a second round. drafteds act had to be and implemented at warp speed, but with lessons learned we need to address what we have lived through it so ppp can work

better. congress should simplify the round one forgiveness process to create an appetite for round two. the requirement to conduct idle advances so borrowers are not left with unanticipated debt and lenders are not left with thousands of loans of $10,000 or less. to clarifyprovisions it lenders or liability. allow tree applications for loans inadvertently repaid or canceled and provide a reinstatement process to adjust loan size if there was an error, and a broadly eligible use of proceeds. these are just some, not all of you because fixes we need. individually these fixes may seem small, but together they would make the program substantially more palatable. while you consider these fixes, please remember, lenders are slogging through $5.2 million forgiveness applications without guidance and given the onerous process, borrowers are concerned

they will face unexpected debt they cannot afford. unless congress addresses these issues and there will be many lenders unwilling to participate in round two. failing to make reasonable program changes would be a tragedy. we need long-term small business recovery programs. ppp provided small business relief for small business workers, not long-term recovery for small businesses. most innovative approach this country has seen, it does not ensure a small business will survive these difficult times. a serious recovery package needs to support the small business itself. small businesses need long-term working capital available through the program. during the great recession i experienced the benefits of an and aned sba guarantee increased authorization cap.

these are among others would once again increase the flow of capital to small businesses. enhancements the millions of employees we work so hard to keep on payroll using ppp may not have an employer to go back to. congress needs to use existing funding to extend its usually successful 712 payments. now that most of these payments are ending things like minds -- might are being inundated with payment request. economic conditions for most borrowers have not improved since march. bowers -- borrowers in the traditional program must be eligible for sba programs. payments receiving 712 are the most vulnerable in the country and the entities we need to be helping. congress must include section

11-12 and other fixes immediately, including making payments nontaxable. otherwise i feel we will see more borrower loan defaults as they struggle to make payments. this will cause significant stress on the portfolios rather than taking advantage of the already funded relief. in closing, my experience tells me the best path forward for the next relief package is one that does not merely rely on a second but includes the full range of my comprehensive recommendations. by encouraging these proposals to take this holistic approach and include enhancements and extensions for long-term recovery alongside ppp for short-term emergency relief. thank you for this opportunity to share my thoughts. i look forward to your questions. senator rubio: thank you all and let me start with mr. holdseeken

. do not the function ppp served in in conjunction with liquidity. what role do you think that plate overall in the u.s. economy in april and the numbers i decided earlier. >> it was a crucial support for the u.s. economy. between the middle of march and lost 22h of april, we million jobs in the united states and the downdraft was , ande and enormously quick the bbb was able to put $500 billion out into the small business sector during four and we sawat period employment rebound in may and away we did not anticipate and that bbb was crucial for that occurrence. it should be judged as nothing but a success given circumstances introduced. mcfarland you ms.

pointed out one of the things that helped you with ppp's you in a prior relationship with your lender, your bank and up-to-date financials and so forth. i am leaning toward the question. in your opinion, what is the biggest barrier for women and minority small business services when they are applying for programs? we heard it was technical aspects of the application, in some cases awareness that it exists and is one of the studies that came out yesterday talked about distribution to distressed areas was generally in-line with our percentage. there are urban areas in the country where we have evidence of failure and one begins to wonder if it is the lack of banking or infrastructure relationships in that area or lack of access to technical

assistance for applications. i do not know what your answer is going to be, but i'm curious beyond your own business what do you think is the biggest barrier to others similarly situated in accessing these programs? >> thank you. i completely agree with you, chairman. i think one of the biggest barriers is finding an appropriate bank in the community of that business to the them navigate intricacies of the program. we had a bed with our bank for over two years, but i do note that is not the case for most small businesses. the bank was in communication with us on almost an daily

basis. via phone calls and emails. he felt at ease navigating through the application process because we had a bank like that and i understand that companies did not have access to that, which is a big barrier when applying. senator rubio: which leads me to ms. williams to talk about the cdfitant -- importance of and so forth. it is clear you are supportive of a second around as most members of the committee are setting aside for community letters to alleviate these disparities. curious and if you have any recollection, at what point during the second round the sba made the decision over a 24 hour or 12 hour period of time, the only lenders who could access the system, meaning send in applications, were lenders under

a certain size or standard, and the rationale was because of larger lenders had loaded up application formats and were just pressing send and it was overloading the system. by clearing that out, it created online capacity to process, it created an express lane over a sustained period of time for non-larger lenders to get their applications in. my understanding was that it is not something so much we need to legislate but make it work. apart from dollars set aside, a time set aside, the mechanics of actually pushing through the application online became a real problem for the system they had set up online. do you recall that part, and even if you do not, is that something that makes sense in terms of helping others get their applications in?

dedicated access for small lenders was incredibly effective. ifis and their borrowers needed more time to prepare their applications. have accessalways to tax professionals to prepare the application immediately, and so that first-come, first-served model disadvantaged business owners that needed more time to prepare. on the lender side, when you are a smaller lender which may not have had an existing relationship with sba and knowledge, there was a process when you had to understand how to get your loan through and access the system, and so that dedicated window opened up space for small lenders to get their applications through the system without having to compete with better lenders during that time. senator rubio: i am not sure it is something we need to put in a bill but it is a process i know

anded clear up the backlog i am hoping we can figure out a way to make sure that happens again. zernick, this would not have worked without community banks and nontraditional lenders. from the capacity standpoint, there is no way we could have done this with larger major banks. have done it only with them. i can tell you with regional banks and nontraditional lenders , without them there is no way we would have reached the scope of businesses we did. with concerned about anything in a second round of assistance that would prevent banks from participating, in your view what issues, what requirements, what could prevent banks from participating in a second round of ppp? thank you, chairman. we need to focus the forgiveness ppp.ss for round one of

we have had numerous hurdles to go through with our clients regarding how to calculate the required,lculation separate applications that come with separate instructions. ppp, wey need to more need to fix in the forgiveness process and round one. we do not need a blanket waiver. processa streamlined for forgiveness so banks like ours that have 9000 loans to process forgiveness on can focus on a next round of ppp under round two. lenders do not need to calculate the forgiveness amount. justifyd not need to documents provided by the bowers support forgiveness amount. we simply should invalidate that

documents have been uploaded, the application is complete and it needs to be submitted to the sba. these are the things we can do in the forgiveness piece of round one two process round two and ppp. seven rubio: thank you. senator cardin. senator cardin: let me think are witnesses. i think this has been very helpful in giving a specific recommendations to improve these programs. obvious that you support ppp, another round, but you believe we need to do more. it needs to be more comprehensive. we have to deal with improvements in current programs, and tom zernick, you mentioned we need to deal with waivers and things like that that are critically important for us to deal with. i appreciate that.

to misso first go mcfarland. it seems you are telling us ppp [indiscernible] initially but you needed the idle fault to pay for expenses not covered by ppp. otherwise you may never have reached that point where you are today where you haven't been able to adjust to keep your business afloat as the economy is rebounding. am i correct you needed both ppp and idled to get through the initial period. >> absolutely, we had to furlough all of our employees, us 10, and the ppp allowed to hire five employees back. extend two return offers to our employees but they decided to utilize unemployment benefits and they also were living with at risk family members, and the other three

employees we were not able to to weareturn offers project managers, and because we had not seen a project since february, it was not feasible for us to bring them back. staff wethe warehouse were able to bring back allowed us to win a sizable ppp distribution contract in april, whereby we were housing and disturbing one million pieces of pbe to 100 community health centers. wereg our employees back amazing, and we sat down and were trying to determine what we could do to generate revenue. and we still knew we needed additional capital, so the idle loan went to our overhead and

working capital and utilities like our internet bill. funds were those free, we then were able to utilize those funds to transition our facility into an athletic and academic training center. thank you, ms. williams what his recommendation about getting resources to getting to the under banked and underserved communities? one of your recommendations is that there should not be an offset from what is were given by the idle advance funds that were received. the offset of the loan forgiveness by the amount of the idle advance. am i correct? you believe there should not be an offset, that that is creating an additional

burden on small businesses? >> that is correct. we have heard from our lenders that borrowers were essentially unaware of this provision when they set up their loans and as they start to apply for it is coming as a shock that when they thought they were receiving and idle grant they would not have to pay back and a loan fully forgivable that now they are actually face with a loan payment they were not anticipating. on the lender side, they are also faced with having to hold and serve as a loan they did not anticipate, they expected was going to be forgiven and would not remain on their books. it is creating challenges for both borrowers and lenders. : as we talk to lenders, it is eight natural bias to get larger loans because of processing costs, etc.

it makes sense. one of your observations it the processing fee on smaller loans. if a very small business as to rely upon a commercial loan as part of the ppp program in order to get access to the help, if the processing fee does not match the cost of the lender, it will be much more challenging to get that activity, particularly in under banked communities. recommendationat that it not be kept at amount that may be reasonable? >> that is correct. for small loans, that lenders are finding that the cost they are entering both on the front and for preparing and processing applications is very resource intensive work, especially when you are dealing with a needation that cdfis

additional support in getting those documents ready. on the forgiveness and there is -- end there is an additional cost borrowers and lenders are encountering to make it so that some lenders are losing money on the smaller loans and for cdfis that want to provide these resources to their communities this is a challenging position to be in because they cannot cover the full cost of providing these loans. a flat fee that is reasonable that will allow lenders to realize the full cost of making small dollar loans will actually encourage small dollar lending from more lenders. and i reallyn: appreciate the role cdfis play and i want to acknowledge we have had bipartisan support in empowering cdfis in this process so think senator rubio for his

help. we certainly have cooperation from secretary mnuchin as we try to deal with these issues. i went to put that on the table, because i think we recognize that needed to be done and we were disappointed the sba did not follow our additional request to develop ways that we ensure minority and underserved committees were served. tom zernick, one question with regard to the programs, you believe we need to improve the currents available. the largest program we have under the sba prior to the ppp program, and you are suggesting that waivers and other issues involved in that should be part

of this process to ensure we respond properly to covid-19? think wetely, i really need to create a business vaccine. we are doing it now to save humans. we need a business vaccine that will save our business communities, and that vaccine needs to be a cocktail made up of another round of ppp plus no cost fixes. it has to include long-term working capital solutions by using the enhancements of an increase sba guarantee. we need help lending into this pandemic through the 7a program, fee waivers for our clients and an increased authorization cap. we need to be prepared to help businesses launch and relaunch and restart their businesses going forward. sba clients at0 first on bank need senator

extension.coons it was a tremendous help, and thank you senator, but now it is time for more of this. our businesses often cannot make their payments. we are getting inundated with deferral requests. we need to protect our portfolio and our small business community , and that business vaccine includes chairman rubio's program with no cost basis, but we need that 7a enhancement and senatorcoon's extensions. i strongly -- >> i strongly agree with you on the proposals. it is money that remained in that program enough to cover moving forward. it is a matter of reversing money already in that program. thank you, mr. chairman. senator rubio: thank you.

>> i went to join the others in kudos to you for having led this fight. it was tremendously successful. at the other important thing that we probably never will know is this was a bipartisan effort for real, honest to goodness. the chairman deserves much credit for that, being able to bring the two sides together. we hear lots and lots of stories about us arguing and fighting and not being able to get anything done and ppp was certainly a great exception to that. theso want to think chairman for allowing all of us to have input into this. we all had our fingerprints on this to some degree, but it certainly was your effort and this has your name on it. for people like myself who do not necessarily worship at the

altar of government solutions to problems, i have to tell you i was astonished first of all by the fact that this program came together as quickly and as well as it did and i was even more astonished that it worked out in the field. been so ugly, it would be amusing, the way the media ran around the country looking for failures in this program, and yes they found them. as you said it is not perfect. there is no government program that is perfect, and there certainly are things that could be done better and there are situations the government cannot fix, and the media was writing programs or putting on stories in the media about this. those of us who have worked this this was a a -- know

tremendous success. i think another person that deserves real kudos here and when the rent he will get to his own chapter in the book and that is treasury secretary mnuchin. i was absolutely amazed. we wound up with glitches starting right away, and every time we did we called up the treasury and talk to steven mnuchin. we talked to the secretary of treasury and they were not necessarily big things but he paid close attention and at the conclusion, unlike what you usually get, i think we can fix work and he went to good faith and it resolve virtually every problem i was associated with and i have to think every member of congress had a similar situation. you will be interested to hear you spoke quite a bit about the forgiveness program.

to meet the forgiveness program was the poster child for the good work secretary mnuchin did. soon thatobvious very we had left way too much up to the bureaucrats to design a program for for forgiveness. we sought one inch sheet of papers for questions about forgiveness. by the time we got to steve mnuchin key was on the third iteration of that. we continue to work on that. i think your suggestions are well taken. we understand it is on both sides, not only on the borrower. that is getting better. i can tell you. this has been a real success. i never thought i would be able to sit here and look at how well this is operated out of the field. i think everyone is in agreement

on a bipartisan basis we need another round of this. i am sure everyone on the committee as the same view as this. we shake our heads as leadership and the body as a whole goes through these initiations of trying to get to another covid bill. if we threw this bill out on the floor it would get unanimous support on both sides of the aisle and both houses and yet we cannot move because we have these other moving parts, 18 or 20 moving parts and because we have disagreement on some of them, it is disturbing and disheartening we cannot move this forward when we are in agreement on it. hope they wille proceed with that. let me ask one question of you, and that is, i think from all of the testimony we have heard today and from what we have of time theaperiod

idol as not work as well as ppp has it, so we are interested in seeing in the next round we do .etter with idle one of the interesting questions i have is the situation where people have bothered -- borrowed both from ppp and taken money , both of them.le what percent of borrowers or applicants applied to both idle bothpp received funds from ? can anyone give me an answer on that? at the rubio: i am sure staff level we can find that answer from the sba. sense?about a general i understand the problem, i just want to know how wide the

problem is? rubio: maybe one of our two lenders involved in the program can tell us how common it was to see people into both camps without giving us a run number. question in one of you take a stab at that as to how widespread? over half, undrafted, 10%? we will get staff. senator, this is tom zernick. as we process forgiveness we are 20% including an advance.t -- idle it is less than 50% but those -- people anything we can do to get those paid off would be tremendously helpful to small businesses.

i understand.and what i am driving at is i am looking for a price tag, and until we get that nailed down, it is kind of hard to make a decision on that, but i guess the first point is what percent and get we monetize that and see what the price tag would be? senator quick some certain we can get that. we will call in today. i can i respond as quickly as might? i want to make sure we get this clarified. to me, there's a problem with the eidl program. there was not enough funds put into it. they kept loans at $150,000, even though there was $2 million authorized by congress. they kept the program at $1000

per employee. we have colleagues on both sides of the aisle that have objected to that type of administration, but that seemed to be the major problem we heard of in regards to the eidl program. saying,r what you are and i agree with that, but it was not just underfunding. when the inspector general went in, there was considerably more rod in the -- more fraud in the eidl program than the ppp program. when you have a blemish like this that you can and should fix, that is something we should focus on. don't get me wrong, i don't question your assessment that eidl was underfunded, but there's some other issues there

that need to be addressed. thank you. >> thank you, mr. chairman. i will also leave my mask on in the interest of the pay -- the people who may need to go home for the holidays. i want to echo senator cardin's comments about your leadership on this committee, senator rubio. i have very much appreciated the creativity with which you have approached your position as chair, and, of course, your leadership as we work to get the ppp program done, and i was honored to be part of that group to work with you and senator cardin and senator collins to help design that program. hopefully, we can get another round. i think all of us agree it is critical to get that out. i also want to join with everyone who has talked about the success of the ppp program, and the really good work despite some of the difficulties that theand lenders did across

country in getting funding out to small businesses who needed it. and,s been a big success, hopefully, we can get another round that will allow us to make some of the corrections we have heard people suggest today. as a macroeconomists and somebody who recognizes because you have worked in the congressional budget office in congress, can you talk about what the impact will be if we are not able to get additional help for our small businesses and broader help in the economy in the way we did with the cares package back in march? what will we see if we fail to do that? >> i think we will see tremendous damage to the labor market, the disruption of employee-employer relationships. joble have to find a

perhaps in different sectors of the economy. been a slow and costly process for people. that is a paramount concern. it also undercuts other efforts congress is attempting. a big those businesses is disruption to the supply side of the economy. in the action -- the absence of ,hat functioning supply-side additional measures congress when notk for stimulate the economy. that 25% of small businesses have closed since the start of the pandemic. have you seen any estimates about how many additional small businesses will close if they don't get help? mr. holtz-easkin: i have not seen any such estimates, but we know that the core problem, which is spending on services,

often provided by small businesses as well as personal contacts, has not recovered. that simply has not come back. -- initial decline cost caused a quarter of small businesses to go through another surge and has a comparable pullback i think is a real danger. >> thank you. misses harlan, you talk about the help he received from the loan.an and the eidl can you talk about which aspect and howworks for you they worked together or did not to address your needs? >> sure. were a crucial lifeline to maintain our business function. without it, our doors would simply still be closed today. to rehirelowed us

five employees. it allowed us to pay for rent. it also allowed us to pay health care benefits to those employees, while eidl went toward our overhead and working capital, but the eidl advance difficulting we found to understand when we are now understanding it will be deducted from our loan forgiveness, but both were incredibly crucial to the sustainability of our business, and now, because of these funds, small able to ploy businesses to operate and clean up our facilities, and we are providing some sense of normalcy to kids in our community. 2200 kids come through our doors. covid-safe, of course, but to see these kids' faces light up,

we would really be only able to see that because of the ppp and eidl. >> that's great. let me also say in answer to senator risch, we have heard from a number of businesses in new hampshire who have also been very shocked by the fact that they have to deduct their eidl advance from their ppp and the hardship to place -- it places on them. >> would -- i think we all share in that information we have gotten. senator shaheen: i wonder if you have seen the new form that you may have been collecting from borrowers seeking forgiveness of their ppp loans. one of the things we have heard from people is about this new form called loan necessity

.uestionnaire it asks borrowers to complete and lenders to collect responses to questions about ppp loans over $2 million. i appreciate the need to get that information, but there is particularly that we have heard in new hampshire, from the diabetes center, from careey health, from association, all of whom are dealing with medical questions. when they submit this paperwork, they are concerned about how the information will be used. have you heard these concerns as you have met with small business people, and do you have any sense based on your experience as to how this information might be used? >> yes, thank you, senator. impact 41onnaire will

of the 9000 loans we did. we did not do a lot of loans over $2 million, but i can guarantee you this was not disclosed upfront, and my dear is that with the start of this questionnaire, there could be a trickle-down effect for sba -- where sba and others continue to investigate and do a deeper dive into the validity and necessity for these businesses to acquire the ppp loan. while we want to help our small businesses complete that questionnaire, again, i feel it is unnecessary outreach, and again, it will send red flags across ppp borrowers who for legitimate reasons have larger payrolls and were truly eligible for the loan over two -- over $2 million. sba already agreed to review all loans over $2 million. to me, that should be sufficient

oversight. senator shaheen: thank you. i share that oversight, and that is certainly what we have heard from the businesses that called our office. i hope we can look at this and try to get more information. is senatorio: ok, scott on the web? he's not? ok. senator. >> thank you, mr. chairman. sorry, but we are having a hearing in transportation commerce on how to get the vaccine distributed. running back and forth. two very important hearings. i hope everybody is absorbing this information. senator rubio: i would argue interrelated. senator cantwell: very interrelated. you said this was an issue of municipality liquidity program and why we are turning back money when we could be using it. i'm hearing from my cities and

counties -- we just talked to the major distributors downstairs with fedex like we are going to get it there, and i'm like, what happens when it gets there? a forcel have to have on the ground to get it there. don't we need to be using those municipal dollars to help our cities and counties and public theth people get distribution system? i don't want to see another puerto rico where we get it to the docs but cannot get it to the location. then, ms. williams, i want to ask you, we have been working broadcast revenue -- newspapers lost 40% of advertising revenue due to covid. we issued a report showing how essential it is for public health information that we have

broadcasters and newspapers to do that, so we definitely support a ppp program that helps treat those organizations. just because you are an affiliate does not mean you have a big bloc helping you with lots of money. talk to any affiliate and they will usually tell you they are usually getting screwed over by the entity. being an affiliate is not such a great thing for the affiliate. this means that african-american radio stations that are part of urban one like baltimore and spanish-speaking stations -- they don't get relief. to me, we should be allowing for distribution of information, particularly during this crisis. we had to disney -- we had the chairman of black-owned newspaper and radio stations who said they need help because they are the source for trust in the community. so we want to see relief. just because people are part of a larger ownership does not mean

we cannot direct help to the individual affiliates. if we could address those two issues, i would be so appreciative. thank you. >> the design of the ppp was essentially a decision to provide grants to small businesses in the form of these forgivable loans. largerstion in helping businesses really was do you want to continue with a grant solution or move to a lending solution. the decision was not to have these facilities be lending facilities. neither was particularly successful. the economic equivalent of the grant program for municipalities, particularly in distribution of the covid-19 vaccines, it goes back to a grant program and do it through appropriations. given the importance of this to the health of the nation and the functioning of the economy, i don't think there should be any

hesitation in doing that by congress. >> thank you. thank you. ms. williams -- senator cantwell : thank you. thank you. ms. williams, we learned basically local news is the most trusted news source, and the news community is where you have, again, diversity. how do we get them help? ms. williams: thank you, senator cantwell. is00% agree that local news tolocal newspapers are key reaching communities. they can provide culturally and language competent information. they are also helpful for small cities with limited bargaining budgets to reach potential clients. we believe they are critical to the flow of information to make

sure small business owners are aware of the resources available to them. senator cantwell: people say never ask a witness a question when you don't know what they are going to say, but i'm going to double down today, mr. holtz-easkin. get perfectlps us information. the competition of the press helps us get perfect information. markets need perfect information. do we not have to figure out how we are going to save a broader news information source and competition? do we not need to do something as we are sorting out legal issues on antitrust? mr. holtz-easkin: i think virtues of competition cannot be overstated, and that is true in this business as well. preserving the competition is an enormous part of the portfolio of this committee because it is a entrant smaller competitors who in all industries provide

the sort of innovation and competitive impulse that give us better results and outcomes. senator cantwell: and about 75% of u.s. employment. thank you. kunz,r rubio: senator thought you were on the web, but now you are here. i'm present. excuse me. to myyou like me to yield colleague from iowa? me to proceed or would you like me to yield? you, mr. chairman. thank you to our witnesses. thank you, in particular, to senators rubio and cardin for having led this committee in such a remarkable way. as a number of our witnesses who have done a tremendous job of being the voice of small businesses and the lending community have conveyed, this is in some ways the

underappreciated, unsung hero of pandemic response. in a strong, bipartisan way, ,embers like senator shaheed cardin, and rubio have worked tirelessly to put together and deliver a package which has made an enormous difference. there is a long road to recovery for small business and the employees of small business all over our country. i hear from folks literally daily. i got several texts this morning from folks who work at restaurants in our chambers and folks who represent businesses large and small in my state asking when congress will do another round of ppp. i am grateful for all who worked on the eidl, on the debt relief program, in particular my team who has helped lead that. .hank you the debt relief initiative really has made a lasting difference, and i think we

should extend it, but i just wanted to make sure that we drill down on just a few of these issues. small business owners across my state from warren station, a family-owned business, to eat clean, which is a full-service relatively new startup juice bar i recently visited in wellington, have seen on the ground the reality of what the dramatic drop in employment and profitability and opportunity has meant for small business employees and small business owners during the course of this pandemic. i. williams, if i might, wanted to thank you for the way the opportunity finance network has been an engaged and effective advocate, particularly on behalf of those who make access to credit or possible, for minority serving institutions. two frequent concerns from very small business owners related to the complexity of applying for forgiveness and the tax consequences -- i know these have been covered by other

members, but these are the sorts of issues i hear day in and day out. tell me about the importance of these concerns for the borrowers the opportunity finance members serve, and what you have heard so far today in hearing how we can address this and quickly in the bills that have been proposed recently. ms. williams: thank you, senator coons. we have heard extensively about how borrowers are concerned about the complexity associated with applying for forgiveness and from lenders, frankly, who are continually getting new guidance coming from sba and treasury. the rules are changing, and there has been a bit of hesitation, i think, for borrowers to start moving forward into the forgiveness process because there is a concern that the rules could still change and congress might make a bunch of additional changes in another stimulus bill. i think that uncertainty is creating a lot of hesitation,

and i think it also may impact demand from small business, quite frankly, going forward if they cannot understand exactly how their loans are going to be forgiven if they are facing a lot of unforeseen and unanticipated costs associated with their ppp loans they did not expect to have. that will discourage borrowers who may be set of the first round or could not get access from trying to access ppp and also borrowers who might be looking into a second drawer. the tax implications are also of great concern to some of the 's areers that our cdf i encountering. i think it is crucial that these issues ine order to make sure both lenders and borrowers understand the associations -- the applications and costs associated with the program. : how can we best

address the capacity of the cdf industry and make sure they are able to serve the needs of underserved communities and under-bank communities? ms. williams: the most and port thing congress can do is strengthen the ability of lenders to work with under -- underserved communities. they provide critical equity capital that is used to leverage low-cost debt from our bank and private sector partners, and this allows us to not only be able to make ppp loans but also to provide additional products at our borrowers need by working capital but also providing things like loan forbearance and deferrals or other emergency relief programs to help borrowers really meet their needs. quite frankly, there are 1100 i's in urban and rural

communities. we know how to mobilize. deploying those rapid response grants is a way to make sure these federal resources are able to meet our most vulnerable businesses quickly and effectively. senator coons: i am excited about the bill before us that has been proposed by a partisan working group that would deliver at least 300 billion dollars in aid. there has long been bipartisan support for a prioritized ppp or p4 to serve small and underserved communities. it also has provisions about small business grants addressing some of the tax liability, but i also want to -- i hope we have time in future hearings to talk about the ways in which we ensure an equitable recovery going forward. senator scott and i just

introduced the next-generation entrepreneur core act, which would create a program with mentorship and access to capital to hundreds of new entrepreneurs . the relief bill in front of us is the one i know my folks in dover want to see us move, so let's not miss this opportunity to make a lasting difference for the communities in need all over our country, but we also need to look forward for how we make this an equitable recovery. thank you, mr. chairman, for your leadership of this committee. rubio: anchor. senator ernst. senator ernst: thank you, mr. chairman, and thank you to all of our witnesses who are appearing in person as well as virtually. we all understand how difficult the last nine months has been. it has been an extra ordinarily difficult time for small businesses all across the united states, but through all of this, one of the few bright spots has been the paycheck protection program, which, of course, we

refer to as ppp. it has allowed businesses to keep employees and survive the shutdowns and the economic slowdowns. in my home state, the ppp 61,000 small businesses in loans totaling $5.1 billion of relief, and it did save hundreds of thousands of jobs. while the ppp, which was created through bipartisan efforts on this committee, has proven to be widely successful, it is very clear to all of us that an additional round of assistance is needed for small businesses that continue to be impacted by covid-19. just to share a story from iowa, i did recently hear from a movie theater owner in iowa who has been forced to take out multiple one hundredt their

three-year-old founder's life insurance policy just to get by. it is these folks who really need the assistance now, and that is why i'm glad that we are taking the time to identify ways as wee can build upon ppp continue to work on an additional round of covid relief. for the panel, i do have a couple questions. as our businesses do continue to feel the impact of covid-19, it is becoming clear that some businesses, like restaurants, loanneed more than a ppp to survive. a recent survey found 41% of iol restaurant owners say it is unlikely that their restaurant will still be in business six months from now, and that is

really heartbreaking i think for so many of us. can you speak to the importance of immediately passing assistance or industries like restaurants, movie theaters, and maybe others that because of the circumstances have not been able to open back up? can you briefly speak to that and maybe share some thoughts on what might be necessary? ,r. holtz -- mr mr. holtz-easki: if we could start with you. mr. holtz-easkin: there are some socialies where ppp and distancing allow you to continue to operate, but we are finding with the surge in cases in restaurants that probably will not be able to succeed, and in most circumstances, essentially to write them in financial protection and carry them through until the virus proceeds. that is what the ppp program did

in the spring. a second round could do it again going forward. similar to the restaurant and theater business, live event venues and producers have also been devastated by this. we always love to have tens of thousands of people together in one space, and right now, we .ust are not able to do that with the course of the virus on the schedule of the vaccines, we are just not sure when we would be able to revitalize our core business, so we are -- myself and other small businesses are in great need of additional funding in order for us to ensure we can make it to that time. ernst: thank you. any other panelists that are joining us, if you have thoughts?

ms. williams: i would only add that the failure to support these businesses will have a devastating impact on the surrounding economies, so when businesses close, it is not just a business owner who, of course, loses their livelihood, but employers lose their jobs. if the business owner put their home up for collateral, the -- they are at risk of losing their home. there are a lot of impacts that result from the closure of businesses, so i think it is important that we think about how we protect these businesses to make sure we are not encouraging these negative economic impacts. senator ernst: thank you, ms. williams. you are speaking a little bit to the frustrations and impacts to the surrounding businesses as well. we have heard from an increasing number of ppp participants about their frustration at the fact s paid foress expense

using ppp funds are taxable, according to the irs. i have had many business owners bring this directly to me. i know we spoke about this earlier in the testimony, but in your specific testimony, you note this has become an unexpected expense for many of these businesses. i do worry this will be very devastating and have a huge impact on iowa businesses. can you discuss the importance of reversing the guidance and making sure these business expenses are deductible. ms. williams: absolutely. i think it is an unanticipated expense were businesses who thought they were receiving a fully forgiving -- fully forgivable loan are now

potentially facing a big tax bill in the spring at a time when they can least afford to pay for it. i think it is a time that congress needs to address because this is not anything the lenders or borrowers had an understanding of when they entered into the agreement for the ppp loan, and it has the potential to have a significant financial impact on businesses that are already struggling. agree, itnst: i would is something that does need to be addressed. does the strength of ppp outweigh the weaknesses in the program, and are there areas where we need to see improvement before another round of funding is passed? you suggest the single most effective reform we could make from change the focus payroll to revenue, which you say and i tend to believe as well that that would be the most reflective metrics of the challenges that our small

businesses are facing. can you expand a little bit on that thought? mr. holtz-easkin: as i said in my opening marks, the broader this enormous was cash flow function across large swaths of the economy, so there were no customers and there was no revenue coming in. the ideal replacement would be to replace the revenue in its entirety, and that would cover all the cost, and that would preserve those businesses. a trillionhave been dollar program easily last spring, and it will be more expensive going forward. i recognize there are challenges theeeting that, but challenge is to not pick and choose among expenses, but replace the business model. senator ernst: we want to make sure that as many of the jobs that were supported by ppp are protected. that is very important, but we

do recognize that perhaps some changes need to be made moving forward. i do want to thank you and others on this committee that have worked so diligently on this program. i cannot tell you how many times i hear from iowa businesses how important this has been in protecting their employees and livelihoods. i look forward to working on some of these reforms and moving forward with additional relief for our small businesses, so thank you very much. >> thank you, and thank you to all of your members. the unique input you gave us was instrumental. let's go online here. senator booker, are you ready? senator booker: i am. thank, chairman. i want to thank you in the ranking member for holding this important hearing. i really want to thank the panelists as well for joining us. as we speak, we are negotiating this covid package.

while this is certainly long overdue, i'm very concerned this current package will not fully address the needs of the hardest hit small businesses and minority-owned businesses. we have already discussed a lot challenges of the ppp program, and really, what small businesses have faced in getting resources they need to .tay alive, to survive i'm thrilled, as i talk to a lot involved on the frontline of this package, that for cdfi's, more mdi's, and the small business development agency. we knows -- we know many small businesses are not involved in and you networks, and we need to

change that, and many small businesses are not interested in taking on more debt. to me, a piece of this equation state and local relief funds, which have an un-parable in communities of color, and the funds need to be flexible in terms of financing options and must include grants, so i would love to hear from the panel, do you agree with me that when you are shutting down businesses or limiting hours or other things that are important for us to get out of this health crisis, i really believe the funds and grants are important for us to fill the gap. i would love to hear any feedback or thoughts on that. thank you forker, your comments. i wanted to mention that in my testimony, i mentioned that we

need to expand the eligible use proceeds under round two of ppp. to know they can cover all of their operating costs to stay open, and i would encourage all of you as you look to the new covid relief package this week that we not only address the ppp program and making the no cost fixes we talked about, but part of this has to be providing long-term capital to businesses that want to relaunch. today, we are looking at companies whose profit/loss showing losses, and there are very difficult credit decisions left to make. that's why we need the enhanced

sba guarantee, and waving the fees for these small businesses can also increase our authorization cap. i amr as minority lending, proud to announce just this week, first home bank launched a minority-owned business initiative. ms. williams, i will be contacting you because i think we can help many of your clients, but we will open our 7a to smallp and businesses across the country. we need resources including an enhanced 7a, and we certainly need more ppp today with the no-cost fixes i described in my testimony. senator booker: thank you very much. i understand your business

received aid from maryland and prince george's county's. i have a bipartisan proposal called the relief for main street act that would allow access to funds like that that allow communities to know where the need is, and i wonder if you could talk a little bit about that experience of having a more locally-based fund to allow you to get more resources. ms. mcfarland: absolutely. the state and local funding initiatives are crucial to our community and small businesses around the country. we were fortunate to receive funding from both the state and county levels. they were not as restrictive, so toy allowed us to invest house our basketball facility and allow kids to train there.

in addition, our local -- providing them with resources enables them to support us in effective and efficient ways. for exam will, in response to covid-19, employee prince georges and several partners launched the prince georges county covid-19 hourly employee relief fund which provides cash cards to county residents who were recently laid off due to the pandemic. at the state level, my state set up the maryland small business covid emergency relief fund, which was a $75 million fund that offers $55,000 loans to assist maryland for-profit small with 0% interest due for the first 12 months and 2% for the remaining 36 months, but the fund stopped accepting applications in early april, so

we are still in need of those fundings for the local and state levels. senator booker: thank you. i want to be respectful. i think i met my time, but i want to say we have made a lot of progress about reviewing collateral consequences for people who have prior criminal conventions, but we did not eliminate them, and there are still some that i believe are really unfair exclusions for people with past criminal convictions within a year that have nothing to do with their business enterprise, nothing to theirh concerns about financial reliability or what urge folksnd i would here to try to remove those final restrictions as we go to another round -- god willing -- as we go to another round of ppp and potentially eidl loans as well. rubio: i think it would

be interesting to look at that as well. are those new glasses? senator booker: this is what you call "i am getting old, my brother." these are called readers. us x-geners, we are getting there. senator rubio: i'm going to get cardin uses.ed -- look at how wide those are. senator booker: i suggest you shave your head first. senator rubio: it rounds out the look? stay safe. all right. we have senator hirono and senator rosen. senator hirono: thank you, chairman, and thank the

witnesses. i'm glad we're discussing how we can improve programs designed to help small businesses. you would like an increase of woulduthorization cap, so the suggestions that mr. zernick made? >> absolutely. we support the guarantee on raising the 78 program and the extension of the cares act debt raising thent -- cap on the 7a. those were crucial to providing borrowers a little breathing

room, where borrowers did not have to make payments, but lenders were still able to receive payment. senator hirono: i think some of these provisions are in senator cardin's heroes act. have you read that proposal? i wonder if you support the provisions of the bill because i think it does really help the people that you represent. mr. zernick? have you read the bill? yes, i certainly support that. i saw firsthand in the great depression of 2009 when president obama's recovery act elevated the guarantee to 90% but also entrenched the authorization cap and waived the lender and borrower fees. we lift our way through recovery

loans. 7a borrowers simply have more access to capital, and that is the benefit, so i strongly encourage the covid relief bill that gets reviewed next week only our no-cost fixes, include an enhanced guarantee. needus the optimization we . : thank you very much. i think we are still focused on getting republican support for the bill we just talked about. i have been very much focused on helping those businesses, so i would call these smaller within the work of

smaller businesses. we need to make sure that these smaller businesses -- they do not have the lawyers to help them navigate through all the requirements for getting ppp or eidl. can any of the witnesses elaborate on the particular i have described that have experience with ppp and what can we do specifically to make sure these smaller businesses are able to access these programs? this is for any of the witnesses . was can tell you that i getting my hair cut this weekend in preparation for this hearing today, and my beautician happened to get a small ppp loan, and i said, how is it said, quitehe

honestly, the application was so complex, she had to hire an accountant, and she just did not have the money to pay for an accountant to help her compile the information needed to process her forgiveness. that was very concerning to me, i think that as we look at lending money in the smaller loan space, we have to make it noncomplex. we have to keep it simple, keep the calculations simple, and again, this program can work. at firstloans we did home bank, 6800 of them were less than 10 employees. we may loans less than $500. again, we have to focus on these truly small businesses, and that is what main street is about.

hirono: if people cannot , and they have to hire people to help them, it does not make much sense. if you have really specific ways you can change the language used, the requirements, let us know, and, mr. chairman, i hope let us know how they are dealing with hundreds of thousands of small businesses right now trying to get loan forgiveness. i think my time is up, but thank you, mr. chairman. and again, thank the witnesses. senator rubio: thank you. senator rosen: thank you, mr.

chairman. i want to give you a special shout out for your leadership .ver the past couple of years small businesses are just in a better position because of it. i appreciate working with you and your staff. andink the ranking member senator shaheen for their continued mentorship and leadership as well. it really has been so helpful. 99% of dismisses in nevada are small businesses. this committee has really helped the resources we need at home, particularly in a pandemic. small hearing about the businesses and how coronavirus has put millions out of work. i am fighting, like everyone else, for a second round of ppp, for help to restaurants, help

for all your hospitality and tourism industries. very important in nevada, the backbone of our economy, which is why i have helped introduce legislation to provide direct relief to all small businesses, and this bipartisan legislation would lift the sba cap on both advancens and the eidl grants we have been talking about. and the full $10,000 in grants regardless of size, and it would bylenish the eidl account $180 billion. and ppp have worked together to take care of our businesses. we really need flexibility in the ppp, and i hope we will continue to do that, but ms. yourland, we know that in

business, you received eidl funding early on before the sba put on these arbitrary caps we are trying to lift. could you speak briefly, if your bid -- business had not received the full loan you are eligible for and only received the $150,000, how would that have affected your business, if you have these caps placed on you? ms. mcfarland: i would be sitting here today telling a much darker story had weaving cap at that 150 k -- had we been capped at that 150k. because we were not cap, we were able to put together a dream my parents and i had to not only to surviveommunity but allow our business to thrive. those loans were crucial in the rehiring of our staff, paying our rent.

our rent is 130 $6,000. we had a gracious landlord that allowed us to reduce our rent during the summer. that extension ended around wereer, so those funds also able to cover those expenses as well, but all of those funds were exhausted at i implore october, so congress too, you know, provide an influx of funding as soon as possible so that we can continue to be of service to our community and our employees. senator rosen: thank you. i want to follow-up on that because we need to be sure when we support our businesses that people feel safe going back indoors, to a restaurant, to a venue, to a hotel, casino, or wherever it is -- movie theater -- whatever it is they are doing. i want to be sure that we provide businesses with funding

not just for ppp technologies, but other technologies that might make indoor spaces more safe, like increased insulation, tax credits for that, updating and some of those things. have you incorporated any systems like that? how would that help you if you were able to upgrade your ventilation system so people might feel more confident about the air they are breathing indoors? ms. mcfarland: absolutely. our main priority is the safety and health of our customers. the kids that come through our doors, our employees, my parents. we have already taken the sacrifice to invest in expensive technology and equipment to ensure the safety of the participants that come through our facility. we have hired another small business to come in and cleaned

our facility 10 hours a day. betweenan and sanitize uses of the basketball facility. we have also updated our hvac extent which was a large of what we had to commit to that because we are committing to our community wholeheartedly. having funding to allow us to continue to invest in those safety precautions would be incredible. thank you.en: i appreciate everything you are will bend hopefully, we able to provide some sort of help to make all spaces safe going forward. chairman.ou, mr. thank you for holding this hearing. thank you to the witnesses for being here. i want to begin by acknowledging that the ppp program has been a vital lifeline to small businesses in my state of missouri. it has saved probably countless

jobs. hopefully, we will know the number at some point. it will be i'm sure a high number indeed, but it has been a vital program and has enjoyed broad bipartisan support, but i think it is worth noting -- we have to note that despite the supposedly broad bipartisan support, we still have not been able to get the program renewed. we still have not been able to get consensus and to actually bring to the floor, have a debate, and vote on a bill that would supply additional funding to renew this program a final time. we see that unemployment claims are once again on the rise, and this can be described as a failure of the senate and congress to take action at this vital time, so i want to underscore again that it is time to give this program another lease on life, to make sure that we can get small businesses the help they need. i also want to raise one other issue, one other problem with the program that we have seen in my state, at least, and that is on the loan terms

issuance at the front end and also the loan forgiveness. in particular, now, the sba has recently announced it is going to mandate that borrowers that receive loans of more than $2 million complete a questionnaire that asked -- that describes their operations during the raiseic, and i want to one concerned with that questionnaire as it has been ridden as it relates to churches. i want to be clear -- i am all for making sure that for-profit organizations like the lakers, for instance, that i think applied for initially tried to get a ppp loan -- i mean, give me a break. for-profit institutions, absolutely -- first of all, no institution should be getting the loans that do not need them. secondly, for-profit institutions should be subjected to rigorous scrutiny. perhaps many nonprofits as well, but as it applies to churches,

churches now are being asked to disclose all manner of information under this questionnaire that they had no ability to anticipate when they applied for the loan. can i just say, it was very difficult for quite a few churches in my home state to get loans initially because the sba wrongly informed local lenders for the first approximately week of this program, that churches were not eligible. so after all of that difficulty in applying for the loans, now churches are told, wait a minute, actually, we are changing the terms of the forgiveness program, and we want lots more information -- different information than we told you initially we would ask for, and if you don't give it to us, maybe we just will not forgive your loan after all -- i submit to you, mr. chairman, that is simply not fair as it relates to these nonprofits and religious institutions, so i have written to the sba about this. i want to express my concerns about that questionnaire as it

applies to religious nonprofits, and i hope this is still a draft, that the questionnaire has not yet and sent out, but i want to be clear that i have need your concerns with how this will be applied and how it will affect religious institutions, who, frankly, have had a more difficult time under this program than they should have. in the time i have remaining, let me just ask you, starting with the question about how this program in your experience, processing loans under this program, has gone for urban and rural areas. my state, the state of missouri, majority rural and exurban. i imagine you're institutions have process loans for small businesses in both urban and rural areas. can you give us a sense of what your experience has been in assisting borrowers in the heat of different regions that have -- have rural borrowers been able to get access to the

program successfully? sure.rnick: let me start by saying last year, first home bank was a top 10 lender in the country. we lend nationally in all 50 states, including your fine state. we lend in rural markets. we lend in large metropolitan areas. the program, we opened our doors to businesses across the country, and while about 1/3 of our loans were done in our home state, 2/3 were done across america. we are proud of that, and as we position ourselves for round two, we will continue to open our doors to first home bank customers and non-first home bank customers, and i assure you we will be lending in rural communities as well like we did in round one. : ms. williams,

may i ask you to comment if you have any perspective on this? ms. williams: absolutely. there are many cdfi's focus on meeting the needs of their communities, and ppp was no exception to that. serve their existing customer base with ppp loans first, but then opened their doors to other small businesses that needed it. operatingl nature of during the pandemic made it easier to reach some of these rural customers through online means to help them apply for ppp loans than we might have seen based on a physical, and person process. 's are always looking for ways to expand capital in our rural communities. senator hawley: thank you. i also have some additional questions for the witness for the record, but my time has expired.

senator rubio: thank you. do we have anyone else? great. senator cardin, did you have any follow-up questions? senator cardin: i just want to thank this panel, and i think this has been one of our most informative hearings. it has given us a lot of good suggestions moving forward. i think it is very timely and gives us hope we will be able to act on a covid package before we adjourn for the holidays. i think we have gotten some valuable help through -- from all four of the panelists. i can assure you we take notes and we will use this information moving forward to try to do the we were waiting for senator young, but he is not back on the webex -- he is on? senator young, are you there?

i'm going to give him a few seconds -- i don't want to hold the witnesses up any longer. he was on earlier. there he is. young: thank you. we had some technical challenges. can you hear me ok? -- thankhe witnesses the witnesses so much for being before the committee today and i commend chairman rubio for his leadership on small business issues throughout this pandemic. that paycheck protection program has been highly successful helping small businesses, and by extension, their employees that whether the pandemic, i'm glad we are here to discuss the program and assess ways we might .mprove it

according to the 2020 indiana manufacturing survey, 24% of aspondents cited the ppp primary survival. still nine months after many government mandated closures first went into place, we are seeing small to midsize businesses struggle to meet ends meet, placing more jobs at risk. as one example, tyler trust systems in pendleton, indiana has been a leading trust manufacturer to the live events industry. they received a ppp loan in may that enabled them to keep their 72 employees on the payroll. but as the pandemic has continued and the live events industry remains largely shuttered, tyler trust has seen a significant decline in sales with an 87% drop in the third quarter of this year. the company is now down to less than 20 employees and without

additional relief, they will continue to struggle. for several months, i've been pushing for additional small myiness relief, including restart act with senator michael bennet and i would like to thank chairman rubio for working with me and my staff on including some of the principles like their revenue decline threshold and expansion of forgivable expenses in the second draw proposal. given the progress in negotiations these past few weeks, i hope we can come together and pass more relief in short order. of businesses still facing financial uncertainty, my restart act would address concerns heard from across the country where businesses were restricted from relief programs, including businesses and manufacturing, hospitality, travel, recreation and entertainment. the restart proposal would target our limited resources to the hardest hit as this is,

including those over 500 employees, by offering partial loan forgiveness based on revenue decline. additionally, it would provide flexible loans to help employers with a broad set of operating expenses instead of a focus on payroll cost. this is especially important for full who cannot maintain payrolls due to significant and sustained loss in revenues. the restart act currently has 59 bipartisan cosponsors in the united states senate. eakin, and your testimony, you indicated one of the most effective reforms would be to change the reforms from payroll to revenue replacement, similar to what my restart act would do. can you kindly elaborate on the importance of this possible reform and its benefit for a recovering economy? >> certainly, senator. was a large problem

cash flow crunch generated by the virus itself and the fear people had to engage in commerce and thus risk infection and transmission of the disease. when the customers disappeared, the revenue disappeared and the mechanical replacement of the revenue would address that business model problem. the difficulty that you face is that it's much more expensive and targeting a smaller part of the cost base of the business but economically, it is far more effective. sen. young: thank you very much. i have one more additional question if the chairman will indulge me stop it pertains to seasonal employment. indiana ibusiness in like to cite as an example -- holiday world and splash safari -- it's a fourth generation family-owned theme park located in the southern part of my state and historically, holiday world has earned 99% of its revenue

between the months of may and october. however, like most seasonal businesses, holiday world was unable to open until june and ended the season early in said number. i'm told holiday world experienced a 66% year-over-year revenue loss in 2020. unfortunately, the amusement park did not qualify for an original ppp loan because it exceeded the full-time employee threshold. however, i'm hopeful the second program will incorporate a new seasonal employee definition that takes into account the unique fluctuations for these types of businesses. again, for mr. holtz eakin, are there any additional ppp improvements you think congress should consider to assure small businesses receive the relief they need, especially changes related to seasonal businesses? given any specific

thought to seasonal businesses but the rule of thumb should be it better over the full year and see if it qualifies for the program in my expectation is it would. that's the modification i would think about going forward. sen. young: very good. you so much to all of our i yield back to the chairman. chair rubio: i want to thank all the witnesses who participated and attended this hybrid hearing and i appreciate the time you have given us. i know it has been in excess of the two hours but i hope you have sensed how important this is to everybody. just a technical note for a business item, the hearing record will remain open for one week instead of the usual two because of the end of the year. if any members have any statements or questions for the record, we ask they submit it by

thursday, december 17, a week from today at 5 p.m.. with that, thank you to everybody and with that, the hearing is adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

change. this is just over 90 minutes. >> hello, everybody and thank you for joining us for setting a new agenda, the final conversation of the 2020 transition event. my name is john and i am studying government, african-american studies with a minor. despite a virtual start, i've been able to get involved in geopolitics by participating in the student strategy teams with fellow and