AICPA Cites Challenges with PPP Loan Application System in Letter to SBA



The Paycheck Protection Program (PPP) is intended as a lifeline for small business struggling amid mandated shutdowns and significant financial loss in the wake of the COVID-19 pandemic. Unfortunately, there have been a number of setbacks concerning the program, including inconsistencies, ambiguity and mistrust. While several concerns from the first round of PPP funding were addressed retroactively in the Economic Aid Act, operational, system and communication challenges remain according to a letter the AICPA recently addressed to the U.S. Small Business Administration (SBA).

Below, the AICPA details four specific areas of concern affecting first- and second-draw PPP application:

1. Challenges with Draw One & Draw Two applications being denied acceptance into E-Tran system.”

In their letter, the AICPA recognizes that additional validation checks were implemented to reduce fraudulent applications. However, the organization argues that these validation checks are not doing a sufficient job of differentiating between valid and invalid applications, resulting in tens of thousands of legitimate applicants being denied acceptance by the SBA.

The AICPA points to several apparent system/software issues, including one that erroneously informs business owners that they have a criminal record. Even when rectified, there are a number of other validation errors which lead some borrowers to repeated declines.

Finally, lack of communication is cited in the letter as another reason applicants are experiencing anxiety surrounding their submissions. The AICPA recommended that the SBA clearly inform applicants that initial acceptance in the SBA E-Tran system could take at least a week, potentially changing the timeline for funding, especially if they encounter any of the aforementioned errors.

“2. SBA processing and resolution delays for applications successfully submitted into E-Tran system.”

Going further with the previous concern, processing and resolution delays, the AICPA states that 20-30% of all successfully submitted applications into the SBA E-Tran system are being flagged for additional review. The validation checks are a justifiable precaution; however, it would appear that conflicting code logic is creating issues for second-draw applicants. One example concerns a conflict between the use of Employer Identification Numbers (EINs) and Social Security Numbers (SSNs) where second time borrowers are told to enter their EIN but are being denied because their first application used their SSN.

There are over 40 different codes related to these requests for additional information, yet the process for resolving these error codes remains unclear.

“3. SBA capping of PPP Draw One and Draw Two loan amounts.”

As troubling as error codes are, the SBA loan eligibility cap of $35k per employee for both first and second draw applicants is automatically reducing the approved loan amounts back to lenders. Because there is no clear guidance surrounding the PPP loan caps, borrowers are experiencing confusion when their loan amount is reduced without explanation.

“4. Broad communication on available funding, overall processing and timing.”

Fear that funds for the PPP will evaporate before applicants manage to make it past the many validation checks slowing the process abounds. In their letter, the AICPA urges the SBA to issue broad communication to reiterate their statement that the $294.5 billion allocated to the PPP program will be enough to fund it through March 31 as a necessary step to allay these anxieties.

For all of these concerns, the AICPA has recommended that the SBA shift immediate focus to resolving the system/software issues and to improve communication with borrowers. With anxiety already at peak levels, applying for aid should come as a relief rather than one more uncertainty for those that truly need funding. The MICPA agrees that every step should be taken to reduce the anxiety and uncertainty among small business owners as they work hard to keep their businesses afloat. Check out COVID-19 Resource Page frequently as we will be keeping close tabs on any further developments regarding the PPP application process.

Source: MICPA

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