Report: SBA made a mistake in providing PPP loan guidelines
A new report says the Small Business Administration (SBA) failed to follow several mandates from Congress in implementing a loan program to assist businesses during the COVID-19 crisis, The Wall Street Journal reported.
Companies rushed to apply for the initial $ 340 billion Payroll Protection Program (PPP). They were used up in 13 days. Since then, Congress has provided the fund with one Additionally $ 310 billion.
The 40 pages report Issued on Friday (May 8) by the SBA’s inspector general, the SBA found that the SBA failed to inform lenders that underserved communities are prioritizing PPP under the $ 2.2 trillion stimulus package under the CARES bill should be.
“We have found that the SBA’s tentative final rules for implementing the PPP and the SBA’s FAQs are largely in line with the law,” the report said. “However, we have identified the following areas that are not fully in line with the provisions of the law: prioritizing underserved and rural markets, futile loan proceeds, guidance on loan deferral and loan registration.”
The Inspector General noted that because the SBA did not provide lenders with guidelines on how to prioritize borrowers in underserved and rural markets, borrowers, including rural, minority and women-run businesses, may not have received the loans as intended.
It also noted that the SBA has enacted rules requiring borrowers to use most of loan proceeds on payroll in order to obtain full waiver. However, the report states that the CARES bill passed by Congress does not impose a specific amount on payroll.
The clause was rejected by many small businesses who said they needed the money more for overhead expenses, including rent, not payroll.
In addition, the inspector general found that the SBA was failing to comply with government regulations on issuing guidelines on loan deferrals and registering program loans, the WSJ reported.
The report was written in response to a request from Senators Chuck Schumer (D-NY), Ben Cardin (D-Md.), And Sherrod Brown (D-Ohio).
There could be more problems in the second round of funding. On Friday (May 8th), PYMNTS reported that the new guidance from the SBA to the change from the original application guidelines when the program opened on April 3rd.
“The administration and the SBA have changed their intentions for these loans,” said Judie Rinearson, partner at law firm K&L Gates. “If you look at the original announcements, they are so clear. Even if you have access to other funding, no problem. The goal is to make America work, and it has clearly encouraged companies to seek those resources. “