Some small businesses received PPP coronavirus funds twice

Some small businesses received PPP coronavirus funds twice

A technical problem in the US government system. USA It caused many small businesses to receive loans twice or more under a federal aid program to help businesses affected by the COVID-19 pandemic, nearly a dozen people with knowledge of the matter said.

The money given in error could amount to hundreds of millions of dollars that the government and the lenders, who granted the loans, have been trying to identify and recover in recent weeks, one of the people informed on the matter said.

The technical issue and scale of resulting duplicate deposits made under the Small Business Administration’s $ 660 billion Check Protection Program (PPP) have not been previously reported. They are the latest problem to come up with the massive program, which was designed to keep companies affected by the new coronavirus afloat and their employed workers.

The error was caused by a blind spot in the SBA’s loan processing system that it was unable to see when some borrowers filed applications multiple times, usually with several different lenders, three of the sources said.

Information provided by sources, including industry executives and borrowers, as well as Reddit posts, suggests that at least 1,020 duplicate deposits were issued. While that is a small fraction of the funds disbursed under the huge program, it could be approximately $ 116 million based on the average size of the loans.

An SBA spokesman declined to comment, while a Treasury spokesman, who jointly manages the program, did not respond to a request for comment. Launched in April, the PPP allows pandemic-affected small businesses to apply to a bank for a government-backed loan. The SBA has approved approximately 4.48 million loans with an average size of $ 114,000 for a total of $ 510 billion as of May 30.

READ  Elon Musk's crimson satin Tesla 'short shorts' provide out in minutes

Under the program, lenders issue the loan and are then repaid by the SBA. The government has said it will only guarantee one loan per borrower, which means that lenders, rather than the taxpayer, are likely to be hooked on the error.

Wells Fargo, JPMorgan Chase, Bank of America, PayPal, Kabbage Inc., Square Inc. and BlueVine are among the companies that have deposited duplicate loans, according to Reddit sources and publications.

“The SBA inadvertently issued duplicate loan approvals to some small businesses. It is our impression that most of these borrowers are … honest small business owners who had applied for a PPP loan through multiple lenders, “a BlueVine spokeswoman said in an email, adding that” multiple “lenders were seen affected.

A JPMorgan Chase spokeswoman said the bank was aware of a “handful” of duplicate deposits and had referred those clients to the SBA. A Square spokeswoman confirmed that she was working with the SBA and borrowers to resolve the issue.

Spokespersons for Wells Fargo and Bank of America declined to comment. A Kabbage spokesman responded to requests for comment.

“We have seen a small number of duplicate applications funded through the SBA’s Paycheck Protection Program, despite the administration’s guidance that applicants do not apply for a loan more than once,” said a spokesman for PayPal, which partnered with a bank to finance the loans. He added that PayPal was working with the SBA and borrowers to resolve the problem.

The PPP was launched in a rush on April 3 when the government rushed to bring cash to millions of desperate borrowers. From the beginning, the unprecedented first-come, first-served program ran into technology issues and paperwork issues that led some companies to lose themselves while some wealthy companies raised funds.

READ  Elon Musk's crimson satin Tesla 'short shorts' provide out in minutes

In the fight for cash, many companies applied with multiple lenders. Industry sources estimated that approximately 15 to 20 percent of requests received by the largest banks were duplicates.

Most of them were seen and removed, but a fraction seemed to slip if a borrower’s Social Security Number and tax identification code were mixed into the system, one of the people said. Another informed source on the matter said the SBA estimated the universe of duplicate approvals to be hundreds of millions of dollars, if not more.

“The SBA has asked lenders to review the duplicate loans based on a list they provided and to work with other lenders who may have extended funds for one party to cancel,” said the BlueVine spokeswoman.

The SBA has said in the past that it does not collect disbursement data from lenders, so the agency may not know the total amount of duplicate deposits. And lenders may not know if they have issued a duplicate deposit unless the borrower tells them to, three of the people said.

“How come I was successful in getting money from two different banks?” asked a California-based company owner who said she received two deposits, one of which was processed by Wells Fargo. She told Reuters that she repaid the other loan.

Companies that refuse to repay loans could be referred to the Justice Department, which is investigating suspected PPP fraud.

Some borrowers said they were unclear on how to fix the problem. A Reddit user who reported receiving duplicate deposits from JPMorgan Chase and PayPal last month acknowledged having “deep fear” that reporting the problem could mean running out of “PPP.”

Cory Weinberg

About the author: Cory Weinberg

Cory Weinberg covers the intersection of tech and cities. That means digging into how startups and big tech companies are trying to reshape real estate, transportation, urban planning, and travel. Previously, he reported on Bay Area housing and commercial real estate for the San Francisco Business Times. He received a "best young journalist" award from the National Association of Real Estate Editors.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *