Glitches stalls some PPP loan applications

Posted at 4:56 PM, Feb 03, 2021
and last updated 2021-02-03 20:39:21-05

It appears that the roll out of the second round of Paycheck Protection stimulus loans has not gone smoothly for some businesses due to glitches in the application.

In a Jan. 25 letter, the American Bankers Association says it has identified "significant issues" that are preventing businesses from getting the funds.

"Since the PPP application process re-opened on January 11, 2021, the ABA and our member banks have identified specific problems, that are impairing the ability of some banks to make loans (under the program) in their communities," the letter says.

The loans are a major part of the federal stimulus package and are forgivable if an employers spends at least 60 percent of the money on payroll costs.

Michel Malecot, owner of The French Gourmet, said he is now putting his award-winning wine collection up for sale and drawing on his line of credit. His application for a second PPP loan is in limbo.

"It's very worrisome because I don't hear anything, I don't get any update. I don't know if it's being addressed," he said. "It's kind of like, what do I do?"

The ABA says the Small Business Administration system is blocking applications if a borrower has a forgiveness application pending. The ABA says that is incorrect under the government's guidance and must be changed.

"This technical error is leading SBA not to approve a significant number of Second Draw Loans," the letter says.

Additionally, the ABA says lenders are reciting a high number of incorrect error messages when trying to submit loans through the application portal, such as on incorrect loan limits.

"Additionally, attempts to get clarification by lenders via the portal's messaging system have been met with silence," the letter says.

Businesses with fewer than 300 employees that have lost at least 25 percent of their revenue are eligible for the loans. They are forgivable if at least 60 percent of the funds are spent on payroll.

Kelly DuFord Williams, managing partner at San Diego's Slate Law Group, said applications from her clients are suffering a similar fate.

"It's been reviewed by the bank, it's ready to go, they saw no error, and then it gets rejected by the SBA software for an insignificant, incorrect reason," she said.

The SBA said it is beginning to address some of the concerns, including holding a national call with lenders. It said in an initial review, it identified anomalies in 4.7 percent of lender submitted data that would require follow up.