Small Business Administration Admits Loopholes in Paycheck Protection Program Loan Application


The Small Business Administration admitted to banks on Monday in an email obtained by The Washington Times that there were frustrating flaws in its system for processing loan applications for struggling small businesses, even as the White House and lawmakers were considering a second round of massive business aid.

“We know your efforts have been frustrated by system issues, policy questions and slower-than-usual responses,” an email from the SBA regional offices told the lenders.

Among the problems: The SBA’s electronic loan application processing system, called E-Tran, was not coordinated with the $ 350 billion paycheck protection program the administration rolled out on Friday.

“E-Tran is currently creating a loan authorization for PPP loans,” the SBA email read. “Unfortunately, this is not at all consistent or in line with the PPP. Please do not close any loans using the current version of the loan authorization! “

The email also stated that the SBA was “very aware that many lenders have problems signing up for new user accounts and unlocking / resetting passwords for existing user accounts in the capital access financial system so that they can enter applications for PPP into E-Tran. “

“Unfortunately, our district office staff have absolutely no way of setting up user accounts, unlocking user accounts or resetting passwords,” the email read.

Some lenders reported on Monday that the SBA’s system had crashed as they attempted to submit loan applications, many from current customers.

President Trump said Monday evening that the paycheck protection program was working well despite “a few small problems. [that] have already been taken care of.

“To date, tens of thousands of small businesses have requested more than $ 40 billion in aid,” he said. “These funds will save nearly 2 million jobs, so we are taking care of our workers, small businesses and our workers. Almost 3,000 lenders have already made loans under the program.

Speaking to a reporter who asked about the program’s problems, Mr Trump retorted, “You are just incapable of asking a question in a positive way. “

The president said the administration “is signing additional lenders very quickly and quickly. Community banks have been very responsive and big banks are mobilizing.”

He said if the program runs out of money because of its success, “we will ask Congress to refill it immediately.”

White House economic adviser Larry Kudlow said the administration’s efforts with the paycheck protection program were top notch.

“We’ve got a good start on this, lots of loans … $ 38 billion, and that’s 130,000 loans from 2,400 lenders, big banks included, including a lot of community banks,” Kudlow told reporters. “I think we’re fine, frankly. I know there are still some issues, but I would give it an “A”. You might not agree.

Sen. Marco Rubio, Republican of Florida and chairman of the Senate Committee on Small Business and Entrepreneurship, said Monday that the SBA “worked all weekend with Amazon to improve the system used by bankers to interact with she”.

“I hope these improvements make a difference,” Mr. Rubio told CNBC. “You are talking about something here for 350 billion dollars, which has no precedent, which has never been done before. You have to create this massive program and its rules in six days and launch it. Anytime you do it this way you will of course have problems, but we have no choice. This is an emergency situation. And when you do things in an emergency, they will be far from perfect. “

Mr Rubio said the Treasury Department at the end of last week “had to rewrite all the rules set out by the SBA because they were far too confusing and in no way reflected the law we wrote.”

The SBA did not immediately comment.

As the administration grappled with problems with its new agenda, the White House and Republicans in Congress were discussing the need for another round of government aid for struggling small businesses.

Mr Kudlow said he was discussing with President Trump and Treasury Secretary Steven T. Mnuchin the idea of ​​issuing 50-year “war bonds” against the coronavirus to raise funds, some of which may be used for loans and grants to small businesses.

“If we need more money, we will go and get more money, and until that point, we will fund it,” Mr Kudlow told reporters.

The president also suggested that part of the money would go to a second round of direct payments to most Americans, who are expected to start receiving checks of $ 1,200 each within the next two weeks.

Mr Rubio said he had discussed with colleagues in the Senate the need for another bundle of money to help small businesses. He said aid from the $ 2.2 trillion economic bailout signed two weeks ago was not enough.

“This is a problem that will have to be addressed here,” Mr Rubio said. “What we did a few weeks ago was sort of an emergency measure to deal with a crisis ahead of us. I think Congress is going to have to go back somehow and address additional things that have arisen since then. “

He said the next aid plan must include “the replenishment of the small business loan program fund, because I think those funds … will not reach on June 30”.

The Paycheck Protection Program offers small business loans to keep their employees on the payroll for eight weeks and pay for certain overhead costs. If a business meets employee retention requirements, the government will write off most of the loan amount.

Mr Trump also spoke positively of another bailout, but White House officials say such a move is premature. Mr Kudlow said the administration wanted to see how the current $ 2.2 trillion plan is helping workers and businesses.

“Let’s see what happens. Our job is to execute what we have,” Mr. Kudlow said. “You have help [checks] going out to 175 million people. We need to execute what we have on the table. It’s a massive package. Give it a few weeks minimum, a month, and let’s see how effective we are, see how effective we are.

The Consumer Bankers Association said many of its members are engaging with the SBA to provide the help small businesses urgently need.

“The majority of CBA members are now accepting applications and some are already funding loans,” said CBA spokesperson Nick Simpson. “We expect both of those numbers to increase in the coming days as banks continue to work around the clock to make this new program work at full capacity for small businesses, and we also continue to work with the SBA on any additional implementation guidelines required. “

Sources in the banking industry have reported that demand for loans is high, with some banks receiving nearly twice as many applications as they received for standard SBA loans all last year.

“This program brings in $ 20 billion in a typical year,” a banking source said. “Now we are making $ 350 billion in a matter of weeks.”

Bank of America dropped its requirement that paycheck protection program applicants already have a loan relationship with the bank after being inundated with complaints. He said about 171,000 of his clients have applied for paycheck protection loans worth more than $ 32 billion.

Wells Fargo & Co. said it had already “reached its capacity” for claims due to a regulatory cap on the amount of its loans.

The program is intended for businesses with 500 or fewer employees. But an exemption has been given to franchise owners in any business that employs more than 500 workers, as long as a single outlet does not have more than 500. This exemption worries some small business owners, who fear it may not be left out before flaws in the application process can be resolved.

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