The Biden administration is facing mounting pressure from banks to resolve significant technical issues hampering the distribution of Paycheck Protection Program (PPP) loans to struggling small businesses.
The American Bankers Association (ABA), representing financial institutions across the country, raised the alarm in a letter addressed to the Small Business Administration (SBA) and the Treasury Department. ABA President and CEO Rob Nichols highlighted a “technical error” in the SBA’s newly developed loan application portal that is blocking many employers from securing much-needed aid.
The SBA reopened the PPP on January 11, with over $284 billion in fresh funding as part of the latest federal economic relief package. While the agency has revamped its loan-processing system with a new interface designed to avoid the chaos of the program’s initial rollout in 2020, banks say a new wave of technical problems is undermining the program’s effectiveness.
Issues With Second-Draw Loan Applications
The core issue lies with businesses applying for a second round of PPP loans. According to Nichols, the SBA’s system is erroneously rejecting applications from borrowers whose forgiveness applications for their first PPP loans are still pending—a step not required under the program’s rules.
“This technical error is leading SBA not to approve a significant number of Second Draw Loans,” Nichols wrote. “We urge SBA to fix this technical error and permit lenders to upload second-draw applications regardless of the status of a borrower’s first-draw loan forgiveness application.”
Wider Systemic Problems
The ABA also cited other systemic problems with the portal. Lenders are receiving incorrect error messages related to loan limits and borrower eligibility, creating delays in processing applications. Furthermore, attempts by banks to seek clarification through the portal’s messaging system have gone unanswered.
“These issues are preventing small businesses from accessing this critical federal lifeline,” Nichols stressed.
Past Challenges and Future Expectations
The PPP’s first iteration in 2020 faced widespread operational challenges as the SBA scrambled to scale its systems to handle unprecedented demand. While the revamped system shows some improvement, the issues flagged by lenders indicate the program still has hurdles to overcome.
The SBA and Treasury have yet to comment on the concerns raised by the banking industry. However, with millions of small businesses relying on PPP loans to stay afloat during the pandemic, the urgency to address these glitches cannot be overstated.
As the situation unfolds, banks and small businesses alike are looking to the administration to act swiftly, ensuring the program delivers on its promise of providing a lifeline to America’s entrepreneurs during one of the toughest economic periods in recent history.
