- The Paycheck Protection Program distributed more than one loan to more than 4,000 borrowers in 2020.
- From April to August, he issued 8,731 duplicate loans, totaling about $ 692 million, a watchdog found.
- Of the 4,260 borrowers, 2,689 had the same CNPJ and 1,571 had the same name and address.
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The Pay Check Protection Program was established under the CARES Act to provide help to small businesses that suffered during the pandemic. But it turned out that it provided too much help.
A report released on Monday by the Office of the Inspector General of Small Business Administration said that of the 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 1,571 with the same business name and address.
These disbursements involved 8,731 loans and totaled about $ 692 million, the report said.
The SBA said in the report that it would resolve the duplications by recovering undue payments and avoiding forgiveness of duplicate loans. This means that small businesses will have to repay duplicate loans if they can.
The report said that the SBA identified problems in 2020 that caused the processing of duplicate loan applications. The SBA said it had turned off controls on its electronic loan application system and would rely on loan analysis to eliminate duplicates, according to the report.
“Establishing strict controls to prevent undue or duplicate disbursements from occurring during initial loan processing is more effective than trying to identify and resolve undue disbursements in the loan review phase,” said the report. “SBA’s efforts should focus on safeguarding funds in advance, as it is more prudent and effective to prevent a loan from occurring than to try to recover the funds after the loan has been disbursed.”
The OIG recommended that the SBA:
- Analyze the potential duplicate loans that the OIG has identified and recover undue payments.
- Review controls related to PPP loan analyzes to ensure that duplicate loans are not forgiven.
- Strengthen controls on the SBA loan service portal for future PPP-type programs.
- Reinforce creditors’ controls and guidance to ensure they meet program requirements.
The House Subcommittee on the Coronavirus Crisis had asked the OIG to review the 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 $ 10 million loan, although the loans were intended for companies with 500 employees or less. Ultimately, Shake Shack returned the money.
Lawmakers have defended the program and emphasized its importance in helping small businesses to recover financially from the pandemic. The $ 1.9 trillion stimulus law that President Joe Biden signed on Thursday set aside billions of dollars for small businesses, with $ 7.25 billion to be used specifically for PPP.
The Chamber’s Small Business Committee on Thursday introduced legislation to extend the PPP – due to expire on March 31 – until May 31.
“The demand for PPP loans is now a testament to the effectiveness of the program and the remaining impacts of this pandemic,” said Congresswoman Nydia Velázquez, the committee’s chairwoman, in a statement. “That’s why we can’t cut aid now and this short-term extension is so important.”