The Paycheck Protection Program (PPP) portal does not appear to allow lenders to upload a borrower's application for a second-draw loan if the forgiveness application for that borrower's first-draw loan is still pending, American Bankers Association (ABA) President Rob Nichols wrote Monday in a letter to Small Business Administration (SBA) and Treasury Department officials.
But an interim final rule the SBA issued doesn't mention first-draw forgiveness as a prerequisite for receiving a second-draw loan, Nichols wrote. Second-draw applicants need only certify that they have spent or intend to spend all of their first-draw funds by the time they receive a second infusion of funds, he wrote, citing the rule.
"This technical error is leading SBA not to approve a significant number of Second Draw Loans," Nichols wrote, urging the agency to fix the portal's user experience so that lenders can upload borrowers' second-draw applications "irrespective" of first-draw forgiveness status.
Nichols also flagged that "lenders are receiving a high number of incorrect error messages" when they try to submit applications through the portal, including messages that state incorrect limitations on second-draw loan amounts or that a borrower's first draw is under review when it is not.
"Attempts to get clarification by lenders via the portal's messaging system have been met with silence," Nichols wrote. "Clear and precise guidance about the restrictions on loan sizes, such as why a $30,000 per employee loan cap has been implemented, will allow for a more efficient loan origination process."
The SBA worked with a contractor between the end of PPP's first iteration in August and its relaunch Jan. 11 to develop a new interface for banks on the portal, Politico reported. Spokespeople for the SBA and Treasury did not immediately respond to the publication's requests for comment.
Former President Donald Trump in late December signed a bill that shuttled $284 billion into PPP, which has reopened in stages since Jan. 11 — first to community development financial institutions, minority depository institutions and certified development companies, then to lenders with $1 billion or less in assets and, finally, to all lenders Jan. 19.
The program is open through March 31, but second-draw applications for loans of up to $2 million are limited to businesses with 300 or fewer employees that can show a 25% decline in revenue in any quarter of 2020 compared with the same quarter from the previous year. Additionally, $15 billion of the program's funding is set aside for lenders with less than $1 billion in assets, and another $15 billion is earmarked for those with less than $10 billion in assets.