SBA’s PPP Lending Platform Rejects Some Dignified Businesses. But there is a fix

According to most accounts, this last round of the Paycheck Protection Program was a much smoother process. Under the now $ 284.5 billion aid program, the Small Business Administration has already approved more than 400,580 forgivable loans for about $ 35 billion. Yet some lenders claim that not all eligible borrowers have received the help they need. Worse yet, they get immediate rejections.

In a phone call with lenders on Tuesday, the SBA offered new remedies to deal with such rejections, which triggered the suspension of PPP loan applications from borrowers and thus delayed vital financing for struggling businesses. The SBA estimates that about 4.7% of data submitted by lenders in previous PPP cycles contained anomalies – described by the SBA as “primarily data mismatches and eligibility issues.”

“These concerns,” the agency added in a statement, “will require follow-up between the lender and the borrower so that borrowers can access a second round of loans.” But wasted time can mean wasted money. While he now has a clear path to resolving issues, a false negative can be heartbreaking for a business owner who relies on quick relief. Moreover, the PPP funds themselves could run out while waiting for a resolution. The last cycle was officially launched about a week ago to all lenders on January 19; the first round, which started in early April 2020 with $ 359 billion, only lasted two weeks.

Blame it on efficiency.

The problem, in part, lies with the SBA’s new automated approval system, which was designed to streamline a previously inconsistent process and provide additional audit checks to guard against fraud. Unlike previous cycles, where a lender would submit a borrower’s data and then wait for the SBA to approve or reject a borrower’s loan application, this time a rejection can be instantaneous.

Approvals can take one to three days, while the SBA’s automated system, dubbed the Paycheck Protection Platform, tries to verify the information. For second draw loans, the SBA system examines a borrower’s previous PPP application, as well as commercial databases, which may include Dun & Bradstreet and LexisNexis. The platform runs on the existing E-Tran platform that the agency used last year.

Lenders are also increasingly embracing the technology this time around. In previous PPP cycles, the Republic Bank of Philadelphia, for example, manually completed all 5,200 approved loan applications. This time he is using a service called Newgen Software. The old process was labor intensive, says Margaret Manthe, senior vice president and head of PPP loans at the bank. “The borrower usually scans a file at the bank – and in that file is all of their payroll records, all of their tax records, their application, their entity details,” she says. More often than not, she adds, “that data would be mixed up and out of order and we would have to print it out, piece it together and figure out where the holes are.” The new platform, she adds, “is much more efficient, more complete and more precise in the end.”

Dirty data

But sudden cleanliness is part of the problem, says Dan O’Malley, CEO of Numerated, a Boston-based digital lending platform for banks. Indeed, he says, “We’ve removed the technical challenges and now what we’ve added is a data validation challenge.”

The SBA’s remedies for dealing with data mismatches are threefold: 1) on Tuesday, it held a nationwide appeal with lenders to resolve any loan review or hold issues; 2) Also on Tuesday, he provided further guidance on how to deal with these issues; and 3) it will provide information to its field teams of lender relations specialists to assist lenders and borrowers who may be stranded. The SBA has 68 district offices across the country.

While resolving these issues should be easier now that the SBA has released these new guidelines, the third remedy remains a headache for lenders, who say it can be difficult to get someone from the SBA. on the phone. “We try to make contact when we can, and it’s usually not successful given the volume the SBA handles,” said Eric Ellingsen, CEO of California Bank & Trust, a division of Zions Bancorporation. The San Diego-based lender has supported 47,000 PPP loans in previous cycles.

What the SBA hasn’t said it will do is change its system to stop triggering false negatives. Instead, it doubles the platform as a necessary verification tool. “The agency is committed to ensuring that strict measures are put in place upstream and that compliance checks resolve issues more effectively to ensure fair and equitable access for small businesses in every community,” SBA Acting Administrator Tami Perriello said. in a report.

For better or worse, the system is here to stay, says O’Malley. “I think everyone wants taxpayers’ money to be used appropriately and for the SBA not to issue loans if they are fraudulent. That is really what it is about.”