SBA improves rollout of PPP2 program as $100 billion in loans already approved
February 15-21, 2021
By Wesley Brown
Unlike the chaotic launch of the Paycheck Protection Program nearly a year ago, the U.S. Small Business Administration’s (SBA) retooled COVID-19 loan programs got off to a smoother start in 2021 as the Biden-Harris administration is closely scrutinizing the process to ensure small businesses receive support they need to keep their doors open.
Only a week after President Joe Biden and Vice President Kamala Harris were sworn in Jan. 20, SBA officials said they are taking step to improve the “first draw” PPP loan review so that small businesses have as much time as possible to access much needed funds to remain afloat.
And after a scathing SBA Inspector General’s report in the fall alleged that the SBA’s two main programs to aid small businesses owners amid the COVID-19 pandemic were rife with fraud and misappropriated billions of taxpayer dollars, the Biden-Harris Administration said it is working to identify immediate solutions to address eligibility, compliance, integrity, and promote transparency.
While reviewing the initial draw of PPP loans, anomalies – mostly data mismatches and eligibility concerns – were identified in approximately 4.7% of the lender-submitted data, Biden administration officials said on Jan. 26. These concerns will require follow-up between the lender and the borrower so that borrowers can access a second round of loans.
“Prior to this newest PPP round, the SBA supported 5.2 million PPP loan borrowers, providing more than $525 billion in economic relief to small businesses and other eligible entities. The Agency is committed to making sure compliance checks are executed on the front-end,” said SBA Acting Administrator Tami Perriello. “The SBA is also committed to addressing issues more efficiently moving forward, to ensure fair and equitable access to small businesses in every community.”
Perriollo, who is replacing former SBA Administrator Jovita Carranza until President Biden appoints a permanent replacement, said agency officials are working with lenders and eligible borrowers to provide the necessary information for follow-up and help get small businesses back on track so that they’re able to receive another round of PPP loans swiftly. The SBA encourages borrowers and lenders to work together as quickly as possible to resolve the issues. The SBA will automatically move favorable decisions to approval. During the newest round of PPP, the SBA has already approved over 1.3 million loans for approximately $104 billion.
Under the new PPP2 rules approved by Congress and signed into law by former President Donald Trump on Dec. 27, Congress allocated another $325 million in targeted aid to small business owners, including an additional $284 billion for PPP (PPP) loans and $20 billion for EIDL grants through the SBA offices in all 50 states. However, the revised program only allows businesses with fewer than 300 employees and at least a 25% reduction in revenues in at least one quarter in 2020 to gain access to up to $2 million in forgivable loans, down significantly from the earlier 500-employee baseline and $10 million maximum loans in the CARES Act.
The new legislation makes publicly traded companies ineligible to receive the new PPP loans while also excluding businesses involved in lobbying activities or those tied to Chinese firms with at least a 20% ownership stake. The SBA will also receive an additional $50 million to audit and mitigate fraud in PPP and EIDL programs.
In response to criticism that the earlier PPP and EIDL loans under the CARES Act left out black and minority-owned businesses, the latest omnibus relief package also includes $12 billion in appropriations that will go to Minority Depository Institutions and Community Development Financial Institutions that underserved firms. Another $20 billion will also fund direct SBA grants to companies in low-income communities.
The new rules will also attempt to increase participation in the program by small-business owners reluctant to participate for fear of their loans not being forgiven by simplifying the forgiveness application process and deduction of business expenses paid for with PPP funds. A new feature further establishes a $15 billion grant program to support shuttered live venues, theaters, museums, and zoos that have experienced significant revenue losses.
The SBA under the Biden administration said it is immediately addressing the PPP loan review to allow for so-called “second draw” PPP loan applications to be processed in an efficient manner. Shortly after Biden was sworn in on Jan. 20, the SBA and top administration officials held a national call to brief PPP lenders on additional detailed information that will assist in the resolution of first draw PPP loan review and potential holds that impact second PPP loan application approvals.
The new administration also said it is equipping the agency’s field team of lender relations specialists with information so they can provide support to lenders and borrowers in understanding the issues and provide the appropriate response. In recent days, the SBA has also provided additional guidance to PPP lenders on the review and resolution process.
Through 68 district offices across the U.S., the SBA officials said they will work in close partnership with the new administration to further leverage its resource partner network and expand on multilingual access and outreach about the PPP. Locally, the Arkansas SBA District Office led by Edward Haddock, has held weekly calls and webinars to update local businesses funding options to assist small businesses affected by the COVID-19 pandemic, including the newest round of PPP and EIDL loans.