Almost 350,000 loans made to small businesses in 2020 during the Covid-19 pandemic haven’t been forgiven, according to a Bloomberg News analysis of Paycheck Protection Program data, and most of them are for less than $25,000.
That lingering debt — about $28 billion, the analysis shows — is creating a burden for the smallest businesses, including many run by minority entrepreneurs, say advocacy groups, community leaders and business owners. Many are struggling with the process of seeking forgiveness under terms of the loan program that distributed more than $800 billion over two years.
Unlike traditional loans, those given as part of the pandemic relief program can be forgiven if certain conditions are met. Proceeds had to be spent on payroll and other eligible expenses within a designated time frame, for example. But some borrowers who say they meet the criteria are struggling with technical snafus, onerous documentation requirements and confusing websites.
Angela Thompson, owner and chief executive officer of a property renovation company based in Jacksonville, Florida, first applied for forgiveness for her $172,000 PPP loan in December 2020. Over a year and more than 100 calls to loan providers later, she’s gotten several notices saying she’s on the hook to start repaying the debt.
Initially, she applied for forgiveness via Kabbage, the online lender that had given her the loan. But when American Express Co. bought Kabbage in August 2020, it didn’t acquire its pre-existing loan portfolio. Instead, her loan lived with another provider, K Servicing. Thompson did not get a link to their PPP forgiveness website until August 2021. She immediately submitted her application. But in December, she got a bill for $22,000 for her monthly loan re-payment; and then another in January and another in February.
K Servicing customer service told her to ignore the notices, but the Small Business Administration, the federal agency that administers the program, still listed her loan as unforgiven in its most recent data update on Jan. 3. “I have great credit. How are you telling me to ignore a bill?” Thompson said in an interview. “This has me stressed out.”
K Servicing told Bloomberg News that the majority of its PPP loans have been forgiven and that it’s continuing to work with customers who have outstanding loans.
Advocates led by the Center for Responsible Lending, on Thursday asked the SBA, the U.S. Treasury and Congress to take steps to help small business owners with outstanding PPP loans, including by automatically forgiving those of $25,000 and less.