When the Paycheck Protection Program began last year, the Trump administration — eager to get money out the door as quickly as possible — eliminated most of the safeguards that normally accompany business loans. With applications approved almost instantly, thieves and ineligible borrowers siphoned billions of dollars from the $523 billion the program distributed last year.
In December, Congress approved $284 billion for a new round of lending, including second loans to the hardest-hit businesses. This time, the Small Business Administration was determined to crack down. Instead of immediately approving applications from banks, it held them for a day or two to verify some information.
That caused — or exposed — a cascade of problems. Formatting applications in ways that will pass the agency’s automated vetting has been a challenge for some lenders, and many have had to revise their technology systems almost daily to keep up with adjustments to the agency’s system. False red flags, which can require time-consuming human intervention to fix, remain a problem.
The problems can be even more complicated for applicants seeking second loans who flew through the process the first time despite errors that are being discovered only now.
Nearly 5 percent of the 5.2 million loans made last year had “anomalies,” the agency said last month, ranging from minor mistakes like typos to major ones like ineligibility. Even tiny mistakes can spiral into bureaucratic disasters.
In mid-February, the agency began allowing lenders to essentially override many of its error flags and self-certify the eligibility of borrowers tangled in red tape. It also has a dedicated help line for lenders, but that, too, has been overwhelmed.
Lenders and government officials believe the program’s funding will be enough to meet demand. The first Paycheck Protection Program ran out of funding in less than two weeks. This time, more than one month in, the program has disbursed less than half of the available money.
But the clock is ticking: Lending is scheduled to end March 31. That deadline has spooked some borrowers who fear they will not get their problems resolved in time.