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Outstanding Issues with the Paycheck Protection Program

Below is a summary from a series of Tweets by Senator Marco Rubio regarding the day-one Paycheck Protection Program (PPP) issues identified and how some are being addressed. Thus far, 13,669 Small Business owners have received loans through the program, valued at more than $4.3B.


First issue: Most banks are only offering PPP loans to existing customers due to know-your-customer and anti-money-laundering rules. Because of this, banks are not willing to take on new customers that carry a higher inherent fraud risk and take longer to run through their identity verification processes. The SBA and U.S. Treasury are working on clarifying those rules. Additionally, the government is evaluating granting Fintechs such as PayPal and Stripe to take applications and become certified to extend the loans. This would likely significantly increase the reach and scale of the program.

Second Issue: Lenders are currently required to hold the PPP loans on their balance sheet for 7 weeks before they can be purchased. Many banks may not have the capital necessary to hold the loans for that long. The government is looking to see if they can shorten that requirement by allowing the Treasury to purchase them sooner.

Third Issue: This issue revolves around the affiliation rules for SmallBusiness, meaning which owner(s) of the Small Business can apply for the loan, given various ownership structures. Additional guidance around this is expected next week.

Fourth Issue: There is currently contradicting information on if an independent contractor's 1099s should be included in payroll cost calculation? As an example, many small businesses utilize independent contractors as a way to augment their employees.

Fifth issue: Calculating the avg monthly payroll should be based on the gross payroll amount to ensure that federal tax withholding & FICA costs are included.

Sixth Issue: The SBA’s internal system called E-Tran used for loan applications has been very slow due to the volume of applications Friday. This is preventing many lenders from submitting and processing loan applications in a timely fashion. The SBA has contracted with Amazon Web Services to speed up the E-Tran system. Hopefully, this will be addressed quickly, check out our links section for more information on the E-Tran system.

Seventh Issue: Some community banks have reported issues with accessing the AWS portal which SBA uses to provide access to non-SBA lenders. All-in-all it looks like the E-Tran system is a huge bottleneck.

Eighth issue: Bases on early demand estimates, the PPP money will run out by June 6th. This means that many Small Businesses will potentially miss out on needed aid. Hence, applying early and with the right lender is crucial.