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- The Paycheck Protection Program distributed more than one loan to over 4,000 borrowers in 2020.
- From April to August, it issued 8,731 duplicate loans for a total of around $ 692 million, according to a watchdog.
- Of the 4,260 borrowers, 2,689 had the same tax identification number and 1,571 had the same name and address.
- See more stories on the Insider business page.
The Paycheque Protection Program was established under the CARES Act to help small businesses suffering during the pandemic. But it turns out that provided too much help.
A report released Monday by the Office of the Inspector General of the Small Business Administration says that of PPP loans approved from April 3 to August 19, lenders made more than one loan disbursement to 4,260 borrowers: 2,689 with the same tax identification number and 1571 with the same business name and address.
These disbursements were for 8,731 loans and totaled about $ 692 million, according to the report.
The SBA said in the report that it would resolve the duplicates by recovering overpayments and preventing loan cancellation on duplicate loans. This means that small businesses will have to repay duplicate loans if they can.
The report says the SBA identified issues in 2020 that resulted in the processing of duplicate loan applications. The SBA said it had disabled checks on its electronic loan application system and would rely on loan reviews to eliminate duplicates, according to the report.
“Establishing strong controls to prevent inappropriate or duplicated disbursements from occurring during the initial loan processing is more effective than trying to identify and resolve inappropriate disbursements during the loan review phase.” , indicates the report. “The SBA’s efforts should focus on safeguarding funds from the start, as it is more prudent and effective to prevent a loan from occurring than to attempt to recover funds after the loan has been disbursed.”
The OIG recommended to the SBA:
- Review potential duplicate loans identified by the OIG and recover undue payments.
- Review controls related to PPP loan reviews to ensure that duplicate loans are not canceled.
- Strengthen SBA loan management portal controls for future PPP-type programs.
- Strengthen controls and guidance for lenders to ensure they meet program requirements.
The special House subcommittee on the coronavirus crisis had asked the OIG to examine vulnerabilities in the SBA’s loan processing system.
The PPP faced other problems shortly after its implementation last March. In one case, the fast food chain Shake Shack received a loan of $ 10 million, while the loans were intended for companies with 500 or fewer employees. Shake Shack finally returned the money.
Lawmakers have advocated for the program and emphasized its importance in helping small businesses recover financially from the pandemic. The $ 1.9 trillion stimulus bill President Joe Biden signed on Thursday set aside billions of dollars for small businesses, with $ 7.25 billion to be used specifically for PPP.
On Thursday, the House small business committee introduced a bill to extend the P3 – which will expire on March 31 – until May 31.
“The current demand for PPP loans is a testament to the effectiveness of the program and the lingering effects of this pandemic,” Representative Nydia Velázquez, chair of the committee, said in a statement. “That is why we cannot stop aid now and this short term extension is so important.”
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