The Paycheque Protection Program has been established under the CARES Act to help small businesses suffering during the pandemic. But it turned out that he provided too much help.
But the Office of the Inspector General (OIG) found that the Small Business Administration’s program has one major flaw: duplicate loans.
A report released on Monday by the Office of the Inspector General (OIG), a government watchdog, found that among PPP loans approved between April 3 and August 19, 2020, lenders made more than one loan disbursement to 4,260 borrowers, including 2,689 borrowers with the same tax identification number and 1,571 borrowers with the same name and the same business address. These potential duplicate disbursements amounted to approximately $ 692 million and involved 8,731 PPP loans.
The SBA responded to the report’s findings by saying it would resolve the duplicates by recovering inappropriate payments and preventing loan write-offs on duplicate loans. This means that small businesses will have to repay duplicate loans, if they can.
According to the report, the SBA identified issues in 2020 that resulted in the processing of duplicate loan applications. The SBA had disabled controls on its electronic loan application system, resulting in duplication, even though the office said it would rely on loan reviews to eliminate the problem. The report examined the first round of the PPP in August 2020.
“Putting in place strict controls to prevent inappropriate or duplicate disbursements during the initial loan processing is more effective than trying to identify and resolve inappropriate disbursements during the loan review phase,” says The report. “The SBA’s efforts should focus on safeguarding funds from the start, as it is more prudent and effective to prevent a loan from being made than to try to recover the funds once the loan has been disbursed. . “
The OIG recommended that the SBA:
- Review potential duplicate loans and take action to recover any inappropriate payments;
- Review controls related to all PPP loans to ensure that duplicate loans are not canceled;
- Strengthen the controls of the SBA loan management portal for future PPP-type programs;
- And strengthen controls and guidelines for lenders to ensure lenders meet program requirements.
The House coronavirus crisis screening subcommittee had requested that the OIG write the report to examine vulnerabilities in the SBA’s loan processing system. Along with duplicate loans, the PPP encountered problems soon after its implementation in March, notably the fast food chain Shake Shack receiving a $ 10 million loan which he eventually paid back, although the loans were intended for companies with 500 or fewer employees.
However, lawmakers have advocated for PPP and its importance in helping small businesses recover financially from the pandemic. In the $ 1.9 stimulus package, President Joe Biden sign Thursday, $ 50 billion was reserved for small businesses, with $ 7.25 billion earmarked specifically for PPP.
And the House Small Business Committee on Thursday introduced a bill to extend the PPP until May 31, before its current expiration date, March 31.
“The demand for PPP loans at this time is a testament to the effectiveness of the program and the lingering impacts of this pandemic,” Small Business Committee Chair Nydia Velázquez said in a statement. declaration. “That is why we cannot stop aid now and this short term extension is so important.”