Efforts to combat fraud related to the Paycheck Protection Program (PPP) and other coronavirus-related relief remain front and center among government agencies. In addition to updating guidance related to PPP customer due diligence and beneficial ownership, the federal government recently warned about fraudulent schemes promising to help borrowers get SBA loans for a fee and about phishing emails targeting business owners.
The American Institute of CPAs (AICPA) on Feb. 3 asked the Small Business Administration (SBA) to address quickly “significant operational, system and communication challenges,” including applications being erroneously denied due to validation checks in place this round.
In a letter, the AICPA cited an example that, in many instances, small business owners applying for PPP loans were being incorrectly informed they had 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),” the letter said. “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.”
After facing criticism and increased scrutiny during funding in 2020 for the PPP, the SBA is performing more due diligence on borrowers this year before loan approval, whereas in earlier rounds, the focus was on getting loans approved quickly to get funds out to businesses, and more of the due diligence has been performed during the forgiveness process, SBA officials have said.
The SBA has said that during this round of the PPP, it is conducting some initial verifications of applications within the PPP loan platform and E-Tran, and then it is checking borrower data against the U.S. Treasury’s “Do Not Pay” list to make sure the federal government doesn’t provide loans to people or businesses on that list. It is also running a public-records check via LexisNexis.