WASHINGTON--(BUSINESS WIRE)--The American Institute of CPAs (AICPA) today sent a letter (attached) to the Small Business Administration (SBA) raising concerns about the challenges small businesses are facing with the current Paycheck Protection Program (PPP) loan application system.
“PPP loans have proven to be a critical lifeline for the millions of small businesses and not-for-profits that struggle to stay open and retain employees. As close advisers to these organizations, the CPA community has a unique view into problems with the current PPP application system,” said Barry Melancon, CPA, CGMA, AICPA president and CEO. “We appreciate the SBA’s continued efforts to restore Main Street America’s economies. However, there are significant operational, system and communication challenges that must be quickly addressed for PPP to succeed as intended.”
Specifically, the AICPA letter outlines the following problems small businesses, and the CPAs who advise them, face in applying for the current round of funding for first- and second-draw PPP applications:
1. Challenges with Draw One & Draw Two applications being denied acceptance into E-Tran system:
AICPA’s letter acknowledges the important, additional checks that were put in place to address fraudulent applications. However, it adds, “these validation checks are causing tens of thousands of legitimate applications to be denied acceptance by the SBA. Lenders and loan applicants do not understand the process to resolve these declines, creating great anxiety and confusion for small business owners.”
For example, some applications have been denied because the business owner was incorrectly informed that he has a criminal record. AICPA’s letter requests that “the SBA provide more information on this validation process and correct some of these system issues as an urgent priority. In addition, to reduce anxiety and confusion, small businesses would benefit greatly by being more clearly informed that their initial acceptance in the SBA E-Tran system could take more than a week via broad communications about the program.”
2. SBA processing and resolution delays for applications successfully submitted into E-Tran system:
AICPA’s letter also cites confusion over the more than 40 different “error codes” related to SBA E-Tran system validation checks.
“For example, one of the new requirements for Draw 2 sole proprietor applications is to use an EIN number instead of their SSN, even though many used their SSN with their original PPP application. This new requirement is causing the application to be declined, since one of the acceptance validation checks is to confirm the same number as the original PPP application. The overall top reason for decline is discrepancy with Applicant Tax ID, and the steps to correct this issue do not seem to be working in most cases. For instance, the system appears to report errors even in cases where the borrower used the same EIN on both applications and can demonstrate this fact to the lender,” says AICPA’s letter
AICPA requests that the SBA “provide further clarity and, even more importantly, communicate publicly that nearly one third of all applications are receiving these requests for further review which could delay processing by a week or more.”
3. SBA capping of PPP Draw One and Draw Two loan amounts:
AICPA is aware that the SBA’s loan processing system has put in place a loan eligibility amount cap of $35,000 per employee for both Draw One and Draw Two applications. Because this cap results in the SBA E-Tran system reducing the approved loan amounts back to lenders, AICPA urges the SBA to “provide clear guidance related to these PPP loan caps that is widely communicated. Small businesses are confused when their loan amount is reduced with no explanation.”
4. Broad communication on available funding, overall processing and timing.
Lastly, AICPA’s letter states, “that broader communication from the SBA that there is sufficient funding to support all Draw One and Draw Two loan requests, along with clear communication that processing time could be one to two weeks due to the increased validation checks and reviews, will greatly reduce anxiety with small businesses.”
About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 431,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.
February 3, 2021
Ms. Tami Perriello
Acting Administrator
U.S. Small Business Administration
409 3rd Street, S.W.
Washington, DC 20416
Dear Acting Administrator Perriello:
Thank you for your continued efforts on the Paycheck Protection Program (PPP), which has helped millions of small businesses and not-for-profits by providing much needed support at this critical time. The 44,000 CPA firms the AICPA represents have played a significant role in assisting millions of small business clients related to the PPP.
We would like to share some of the most significant issues that small businesses are experiencing in applying for the current round of funding for first and second draw PPP applications. There are a number of very significant operational changes to the PPP by the SBA which are not fully understood, as well as some process and system issues which need to be addressed in order to effectively provide critical relief to eligible organizations.
Some of these items can be addressed through more communication from Treasury and SBA, while others will require SBA system and process improvements related to the E-Tran and PPP Loan Processing system.
1. Challenges with Draw One & Draw Two applications being denied acceptance into E-Tran system:
We realize a number of additional validation checks were put in place to address fraudulent applicants. However, these validation checks are causing tens of thousands of legitimate applications to be denied acceptance by the SBA. Lenders and loan applicants do not understand the process to resolve these declines, creating great anxiety and confusion for small business owners.
It appears that there are some system/software issues which are creating these declines. For example, in many instances the small business owner is being incorrectly informed that they have a criminal record. Even after redoing this certification, borrowers may then still be declined on the same application due to another incorrect validation rule (for instance, an Applicant Tax ID issue).
Overall, the process for resolving these application declines is unclear to small business owners and their lenders. Small business owners are being surprised by these requests from lenders that are driven by the SBA system.
We request that the SBA provide more information on this validation process and correct some of these system issues as an urgent priority. In addition, to reduce anxiety and confusion, small businesses would benefit greatly by being more clearly informed that their initial acceptance in the SBA E-Tran system could take more than a week via broad communications about the program. Because these validation checks are new, many applicants do not understand the potential change in the timeline for funding, particularly if their application encounters processing errors.
2. SBA processing and resolution delays for applications successfully submitted into E-Tran system:
We realize that there is a different SBA review process for Draw One and Draw Two Applications once they are submitted to the SBA. Overall, it appears that 20-30% of all successfully submitted applications into the SBA E-Tran system are being flagged for additional review based on validation checks related to these processing rules.
There are over 40 different “error codes” related to these additional information requests. For example, one of the new requirements for Draw 2 sole proprietor applications is to use an EIN number instead of their SSN, even though many used their SSN with their original PPP application. This new requirement is causing the application to be declined, since one of the acceptance validation checks is to confirm the same number as the original PPP application. The overall top reason for decline is discrepancy with Applicant Tax ID, and the steps to correct this issue do not seem to be working in most cases. For instance, the system appears to report errors even in cases where the borrower used the same EIN on both applications and can demonstrate this fact to the lender.
The process for resolving these “error codes” is unclear and small business owners are being surprised by receiving these requests from lenders. We request the SBA provide further clarity and, even more importantly, communicate publicly that nearly one third of all applications are receiving these requests for further review, which could delay processing by a week or more.
3. SBA capping of PPP Draw One and Draw Two loan amounts:
We are aware that the SBA’s loan processing system has put in place a loan eligibility amount cap of $35k per employee for both Draw One and Draw Two applications. This cap results in the SBA E-Tran system reducing the approved loan amounts back to lenders. Please provide clear guidance related to these PPP loan caps that is widely communicated. Small businesses are confused when their loan amount is reduced with no explanation.
4. Broad communication on available funding, overall processing and timing.
We also believe that broader communication from the SBA confirming that there is sufficient funding to support all Draw One and Draw Two loan requests, along with clear communication that processing time could be one to two weeks due to the increased validation checks and reviews, will greatly reduce anxiety with small businesses. It’s been previously stated that the $284.5 billion allocated by Congress is believed to be sufficient to see the program through to its conclusion on March 31, 2021. Reiterating this statement in a broader public context would significantly reduce anxiety among business owners.
Thank you for your continued work on PPP to ensure this aid reaches those small businesses and non-profits desperately in need of economic relief. The AICPA and our members continue to be deeply committed to ensuring the success of this program, and we welcome even more open and extensive public-private coordination on these matters.
Sincerely,
Barry Melancon, CPA, CGMA
AICPA President and CEO
cc: Secretary Yellen
The Honorable Nydia Velazquez
The Honorable Blaine Luetkemeyer
The Honorable Ben Cardin
The Honorable Marco Rubio
