SBA rolls out fixes for PPP error codes

The Small Business Administration has announced a series of steps to address a nagging problem with error codes that Paycheck Protection Program lenders claim are needlessly delaying the approval of thousands of loans.

In perhaps its biggest step to remedy an issue that has dogged the program for weeks, the SBA said on Wednesday that it would permit lenders to certify borrowers whose loans are impacted by validation errors to hasten their receipt of funds.

The agency also said it would allow lenders to upload supporting documents for loans hit by the error messages.

Relief can’t come soon enough for many PPP lenders.

Error codes emerged as a leading bone of contention for shortly after lending resumed on Jan. 12. In the weeks immediately following the program’s relaunch, the codes interrupted the processing of as many as 30% of the loans submitted for approval.

The American Institute of CPAs had urged the SBA earlier this month to address the issue.

The codes are tied to validation checks the SBA created to combat fraud and stem the origination of improper loans. There were no such protections in place when the PPP was first launched in April.

“I think the intentions from SBA were very good, and it is catching a lot of probably questionable activity for the industry overall, but there are a lot of validation errors that are simply wrong, for lack of a better word,” said Rick Kraemer, chief financial services officer at the $40.7 billion-asset Valley National Bancorp in New York.

“The industry has expressed some frustration,” Kraemer added.

Though the percentage of loans being flagged with error codes has decreased recently, Kraemer said the problem was still big enough to cloud the PPP’s funding picture.

Between “what has been approved versus what has been applied for, there’s a pretty dramatic delta,” Kraemer said. “So much of what has been applied for is getting held up in the SBA pipeline due to validation errors.”

The SBA said on Wednesday that it had approved $101 billion in loans as of Feb. 7.

At Biz2Credit, a New York fintech that has been approved for more than 69,000 loans totaling $2 billion in the latest PPP round, error-coded loans have generated a customer-service backlog, said CEO Rohit Arora. He said frustrated borrowers have been repeatedly contacting the company seeking updates.

“Things have gotten better, but it’s not a walk in the park,” Arora said. “There are still a lot of error codes and that has created confusion and delays for borrowers in desperate need of money.”

For its part, the SBA is pledging better communication with lenders — including plans to conduct a conference call to detail the loan processing system’s new capabilities.

“We are committed to taking additional steps to ensure that there is equitable access for underserved businesses and that we are leading with empathy to support small businesses in a difficult spot,” Senior Advisor to the Administrator Michael Roth said in a Wednesday press release.

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