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SBA Promises Assistance on Anomalies Affecting Second Draw PPP Borrowers

  • Nearly a quarter-million borrowers who received loans in the first round of Paycheck Protection Program have been flagged for anomalies, inhibiting their ability to apply for a second loan
  • Small Business Administration is pledging rapid assistance to address these issues and giving priority to applications where issues have been resolved
  • Newly revived program has approved more than 400,000 loans totaling about $35 billion

Hundreds of thousands of small business owners who received loans under the initial Paycheck Protection Program have found themselves flagged for a variety of anomalies, inhibiting their ability to receive new funding after the program was revived last year. The U.S. Small Business Administration is promising to provide assistance to these borrowers and give priority to approving applications where anomalies have been resolved.

Due to concerns that the previous PPP was vulnerable to fraud, the new program incorporates protections such as borrower verification and a review process. About 240,000 borrowers, or 4.7 percent of the 5.2 million borrowers who received $525 billion in forgivable loans under the initial program, have been flagged. Most of these anomalies relate to data mismatches or eligibility concerns,

The White House says it is working with the SBA to “identify immediate solutions to address eligibility, compliance, integrity, and promote transparency.” The SBA says flagged borrowers need to follow up with their lender to make sure they can qualify for a second draw loan, and is pledging to work with lenders to provide the information necessary to resolve issues quickly.

The SBA held a national call with lenders on Tuesday to provide information on the resolution of first draw loan reviews and potential issues impacting second draw approval. It will also provide information to its field team of lender relations specialists to better understand potential issues and how to resolve them, while also providing additional guidance to PPP lenders on the review and resolution process.

In addition, the SBA says it will give priority to approving applications where an anomaly was resolved and automatically move favorable decisions to approval.

Under a $900 billion economic stimulus bill approved last month, PPP lending was revived with $284.5 billion in new funding. While the new program expands eligibility for new borrowers, who can receive up to $10 million, those who previously received PPP loans must demonstrate an annual revenue loss of at least 25 percent in any quarter of 2020 and can only qualify for up to $2 million. The new program is also limited to smaller businesses.

The SBA says it has approved more than 400,000 loans under the new round of PPP totaling approximately $35 billion.

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