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WASHINGTON - The Small Business Administration mistakenly paid close to $692 million in duplicate Paycheck Protection Program loans to thousands of small businesses, even as others struggled to secure enough financing to stay afloat during the pandemic, according to a new report published by the agency's in-house watchdog.
The Small Business Administration's Office of the Inspector General said in a report released Monday that between April 3 and Aug. 19, lenders made more than one loan disbursement to 4,260 borrowers, including 2,689 with the same tax ID number and 1,571 with the same business name and address.
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In response to the report, the SBA said it would recover the improper payments and prevent loan forgiveness on the second — meaning some businesses may have to pay back the duplicate loan if they can.
The watchdog added it did not find any evidence that borrowers intentionally exploited the program in order to obtain more than one loan.
The SBA identified issues last year that allowed the duplicate loan applications to be processed, but has since turned off controls for its electric loan-application system and will rely on loan reviews to eliminate duplicates moving forward, according to the report.
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"Establishing strong controls to prevent improper or duplicate disbursements from occurring during initial loan processing is more effective than attempting to identify and resolve improper disbursements in the loan review phase," the report said. "SBA's efforts should focus on safeguarding funds up front, as it is more prudent and effective to prevent a loan from occurring than attempting to recover funds after the loan has been disbursed."
Congress established the rescue fund, which provides government-backed forgivable loans to small businesses if they maintain their payroll, one year ago with the passage of the $2.2 trillion CARES Act. In total, lawmakers have approved about $806 billion in funding for the program.
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The rescue fund reopened to applicants at the end of January following the passage of a $900 billion coronavirus relief package. Any business with fewer than 500 employees can apply for a first-time loan, and any business that already received a PPP loan can apply for a second if it employs fewer than 300 workers
Businesses can choose to spend the funds over any period of time between eight and 24 weeks. At least 60% of the money must be spent on maintaining payroll in order to receive full forgiveness.
The interest rate is still 1%.
The program closes on March 31, although a bipartisan, bicameral group of lawmakers has introduced legislation to extend the deadline by two months, until May 31.