The American Institute of CPAs is asking the Small Business Administration to fix some problems that businesses are encountering when applying for loans from the Paycheck Protection Program.
Among the issues CPAs and their small-business clients have encountered are challenges with applications for PPP loans being denied acceptance in the SBA’s E-Tran system. Even when the loan requests have been successfully submitted, there have been processing and resolution delays on the applications, and confusion over more than 40 error codes related to validation checks in the E-Tran system. The SBA’s loan processing system has imposed a loan eligibility amount cap of $35,000 per employee for both first- and second-draw applications for the PPP loans, causing lenders to reduce the amounts of the loans they are promising. The AICPA wants clearer guidance to reduce confusion, along with better communication about the available funding, overall processing and timing of the program.
The Paycheck Protection Program was revived with the latest stimulus package passed by Congress in December in response to the economic fallout from the COVID-19 pandemic. It provides forgivable loans to small businesses that keep their employees working. The program was subject to a rocky rollout last year when it was initially passed in March through the CARES Act early on in the pandemic. The initial guidance was often hurried and confusing, and many of the loans went out to larger companies and organizations that didn’t necessarily need the help. Nevertheless, accountants were able to help many of their small-business clients secure loans and apply for loan forgiveness. The program expired last summer and was revived this year with an additional $284 billion, much of it left over from last year.
“PPP loans have proven to be a critical lifeline for the millions of small businesses and not-for-profits that struggle to stay open and retain employees,” said AICPA president and CEO Barry Melancon in a statement Wednesday. “As close advisers to these organizations, the CPA community has a unique view into problems with the current PPP application system. We appreciate the SBA’s continued efforts to restore Main Street America’s economies. However, there are significant operational, system and communication challenges that must be quickly addressed for PPP to succeed as intended.”
There were many instances of fraud in the program last year as lenders rushed out applications to businesses that were sometimes nonexistent or misstated the number of employees. In its letter Wednesday, the AICPA acknowledged the SBA added the extra safeguards to address the problem of fraudulent applications. However, the AICPA pointed out the validation checks are causing tens of thousands of legitimate applications to be denied acceptance by the SBA. “Lenders and loan applicants do not understand the process to resolve these declines, creating great anxiety and confusion for small business owners,” said the letter.
Some applications have been denied because business owners were incorrectly told they had a criminal record. The AICPA asked for the SBA to provide more information on the validation process and correct some of these system issues as a top priority. To reduce anxiety and confusion, the AICPA recommended the SBA inform small businesses that their initial acceptance in the SBA E-Tran system could take more than a week.
