A technical glitch in the US small business aid system caused many applicants to receive loans twice or more.
The federal aid program intended to help businesses hurt by the pandemic, mistakenly handed out hundreds of millions of dollars, which the government is now trying to identify and recover in recent weeks, nearly a dozen people briefed on the matter told Reuters.
The scale of the resulting duplicate deposits made under the US Small Business Administration’s (SBA) $660bn (£526.02 bn) Paycheck Protection Program (PPP) has not been previously reported. It is the latest in a string of issues to emerge with the government-backed program, which was designed to keep US small business afloat and workers employed.
According to information by industry executives and borrowers suggest at least 1,020 duplicate deposits were issued. That is a tiny fraction of the funds disbursed under the massive US small business aid program. However, it could amount to roughly $116m based on average loan sizes.
Taxpayer off the hook for error
A spokesman for the SBA, led by administrator Jovita Carranza (pictured, left), declined to comment, while a spokesman for the Treasury, which jointly administers the program, is yet to respond to a request for comment. Launched in April, the US small business PPP allows companies hurt by the pandemic to apply with a bank for a forgivable government-backed loan. Roughly 4.48 million loans averaging $114,000 in size for a total of $510bn were processed under the program as of 30 May.
Under the US small business program, lenders are reimbursed by the SBA for the loans they issue. The government guarantee only one loan per borrower, which means lenders, rather than the taxpayer, are likely to be on the hook for the error.
Among the companies that have deposited duplicate loans are Wells Fargo & Co, JPMorgan Chase & Co, Bank of America Corp, PayPal Holdings Inc, Kabbage Inc, Square Inc and BlueVine, according to sources. Lenders who are aware of the issue are already working with the SBA and borrowers to resolve the issue.
Some of the US small business owners have returned the duplicate deposits they received although not all are clear on how to fix the issue. Businesses that refuse to return loans could be referred to the Department of Justice, which is probing suspected PPP fraud.