Fraud checks, errors slow small-business relief loans
The problems plaguing those seeking loans from the government’s revived small-business relief program have ranged from simple to shocking.
Some applications were stalled for weeks by typos. Overzealous fraud filters trapped others. A change of taxpayer identification rules snarled many freelancers and sole proprietors. And then there were the thousands of people turned down because they erroneously registered as having a recent criminal conviction.
Six weeks into the second run of the Paycheck Protection Program, $134 billion in emergency aid has been distributed by banks, which make the government-backed loans, to 1.8 million small businesses. But a thicket of errors and technology glitches has slowed the relief effort and vexed borrowers and lenders alike.
Some are run-of-the-mill challenges magnified by the immense demand for loans, which has overwhelmed customer service representatives. But many stem from new data checks added by the Small Business Administration to combat fraud and eliminate unqualified applicants.
When the Paycheck Protection Program began last year, the Trump administration — eager to get money out the door as quickly as possible — eliminated most of the safeguards that normally accompany business loans. With applications approved almost instantly, thieves and ineligible borrowers siphoned billions of dollars from the $523 billion the program distributed last year.
In December, Congress approved $284 billion for a new round of lending, including second loans to the hardest-hit businesses. This time, the Small Business Administration was determined to crack down. Instead of approving applications from banks immediately, it held them for a day or two to verify some of the information.
Nearly 5% of the 5.2 million loans made last year had “anomalies,” the agency revealed last month, ranging from minor mistakes like typos to major ones like ineligibility. Even tiny mistakes can spiral into bureaucratic disasters.
In June, Shelly Ross got a $67,500 loan through the program from PayPal for Tales of the Kitty, her San Francisco cat-sitting business. She applied last month for a second loan, but her application sat, stuck in an error queue, for more than a week. Her attempts to reach someone on PayPal’s jammed
customer service phone line went nowhere.
Impatient, Ross put in applications at three other lenders, but each was rejected or left in limbo. Finally, PayPal got back to her with an explanation: Her loan in June was issued under an incorrect employer identification number. The company fixed the mistake, and Ross assumed her loan was imminent — until a new problem arose.
Before taking the PayPal loan in June, Ross had accepted, and then returned, a loan made in April by a different lender. That loan still shows up as active in the Small Business Administration’s system, making it look as if she double-dipped last year, which is forbidden.
Ross has sent multiple emails to the Small Business Administration’s customer service address describing her quandary. After two weeks, she received a generic response instructing her to direct questions to her lender.