Banks on Monday warned the Biden administration that the restart of the government's massive small business rescue program, the Paycheck Protection Program (PPP), is facing significant operational problems. This error is preventing some applicants from receiving loans. Here's whats happening and who is affected. If you still haven't applied for a PPP loan, you can apply here.

The First PPP Round Had Significant Issues

Under the first PPP program that effectively started in April 2020, the SBA faced major issues with the millions of PPP applications. This, of course, was primarily due to this being a brand-new program. The SBA literally had days to come up with a system to process applicants from lenders in an effective manner. Eventually things improved, however this time around — almost 9 months later — the system is still not working.

Banks Submitted a "Technical Error" Letter Today to the SBA

In a letter to the SBA and Treasury today, the American Bankers Association President and CEO Rob Nichols basically reported a "bug" in the system that the SBA should have already figured out. The SBA worked with a contractor over the past several months to develop a new system, however, the system is not working as it should and preventing people from receiving loans.

Certain Second Draw Applicants Are Affected By This Error

For businesses who applied for a PPP round last year and who are now applying for a second draw are facing this problem: the PPP application portal is not allowing banks to submit second-draw loan applications if a business previously applied to have its first PPP loan forgiven and that application is still pending with SBA. Under the programs rules, having forgiveness is not a requirement to receive a second PPP loan.

Banks Are Trying to Identify Systemic Problems for the SBA

In the letter to the SBA, Nichols said the bankers' group was trying to flag problems "that we believe are systemic and require the immediate attention of your agencies to ensure struggling small businesses can access this important federal lifeline."

He also cited concerns that lenders are receiving a high-number of incorrect error messages when they submit applications to the SBA. According to Politico, which originally reported the story today, the SBA and Treasury did not immediately respond to requests for comment.

The SBA Should Be Working Hard to Fix These Systemic Issues

We hope the SBA will be fixing these glitches this week — officially the 3rd week of the PPP round 2. Hundreds of thousands of applications have already been submitted. You can keep an eye on the PPP Tracker on the Skip app, and apply if you haven't via Bluevine, or via Funding Circle, or via Credibly.

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