WASHINGTON (Reuters) - The U.S. government is introducing new “robust safeguards” when the third round of the country’s main small business pandemic aid program launches on Monday after fraudsters and ineligible companies claimed cash last year, administration officials said on Friday.
The Small Business Administration (SBA) will kick off the third round of the Paycheck Protection Program (PPP) on Monday, opening initially to community financial institutions and to all lenders shortly thereafter, the officials said during a media briefing.
In contrast to the program’s previous two rounds during which loan applications were automatically approved upon submission, the SBA will vet the initial information, slightly slowing approvals. That process will involve running automated identity and data verification checks overnight, the officials said.
The additional $284 billion authorized for the program in a December relief bill is expected to be enough to meet incoming demand and will not run out, senior administration officials said.
The new safeguards were first reported by Reuters earlier on Friday, citing two sources familiar with the process.
The PPP, created by Congress to help small businesses hurt by coronavirus pandemic lockdowns keep staff on payrolls, enabled participating lenders to dish out $525 billion worth of loans during two rounds last year.
Government watchdogs and congressional investigators have warned that the program has attracted fraudsters, while many large and listed companies, as well as blacklisted companies, gamed the program’s rules to take cash.
The Department of Justice, working with other agencies, has charged more than 80 individuals with stealing more than $250 million from the program.
Congress also made several changes to the program when it reauthorized it, including allowing small companies which suffered a 25% or greater decline in 2020 revenues to apply for a second loan of up to $2 million. It also tightens language promising lenders will not be held responsible if borrowers break the rules, pledging no enforcement action may be taken against the lender if it acted in good faith and complied with relevant federal and state regulations. That tighter language had been lobbied for by lenders, who worried they would be swept up in a broader federal probe into PPP fraud, putting more onus on the SBA to vet applications.
Dan O’Malley, CEO of Numerated, a fintech company that provides software for roughly 125 banks to process PPP loans, said the program changes were positive but had caused it to become “really complicated” and warned that could create new technical hitches.
Reporting by Michelle Price, Koh Gui Qing and Pete Schroeder; Editing by Kirsten Donovan, Jonathan Oatis and Andrea Ricci
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