AICPA raises PPP concerns with SBA

By Jeff Drew

The AICPA sent a letter Wednesday urging the US Small Business Administration (SBA) to address problems small businesses are encountering when trying to apply for Paycheck Protection Program (PPP) forgivable loans.

The letter, which is signed by AICPA President and CEO Barry Melancon, CPA, CGMA, refers to “a number of very significant operational changes to the PPP by the SBA which are not fully understood, as well as some process and system issues which need to be addressed in order to effectively provide critical relief to eligible organizations.”

Some of the issues could be addressed by more communication from Treasury and the SBA, which oversee the PPP, the letter said. Other items will require SBA system and process improvements related to the E-Tran and PPP Loan Processing system, according to the letter.

The letter addresses four areas of concern, as follows.

Challenges with first- and second-draw PPP applications being denied acceptance in the SBA’s E-Tran system

Additional validation checks put in place to counter potential fraudulent applicants are causing tens of thousands of legitimate applications to be denied acceptance by the SBA, the AICPA letter said, adding that “Lenders and loan applicants do not understand the process to resolve these declines, creating great anxiety and confusion for small business owners.”

The letter describes some system/software issues that are causing declined applications, giving the example of many instances in which the small business owner is being incorrectly informed that they have a criminal record. Even after redoing this certification, borrowers may then still be declined on the same application due to another incorrect validation rule (for instance, an Applicant Tax ID issue).

The AICPA requests that the SBA provide more information on the validation process and correct some of these system issues as an urgent priority. In addition, to reduce anxiety and confusion, small businesses would benefit greatly by being more clearly informed that their initial acceptance in the SBA E-Tran system could take more than a week via broad communications about the program. Because these validation checks are new, many applicants do not understand the potential change in the timeline for funding, particularly if their application encounters processing errors, the letter said.

SBA processing and resolution delays for applications successfully submitted into the E-Tran system

The SBA E-Tran system is flagging 20% to 30% of all first- and second-draw PPP applications for additional review based on validation checks, the AICPA letter said, noting that there are more than 40 different “error codes” related to these additional information requests.

The letter outlines the following example: “One of the new requirements for second-draw sole proprietor applications is to use an EIN number instead of their SSN, even though many used their SSN with their original PPP application. This new requirement is causing the application to be declined, since one of the acceptance validation checks is to confirm the same number as the original PPP application. The overall top reason for decline is discrepancy with Applicant Tax ID, and the steps to correct this issue do not seem to be working in most cases. For instance, the system appears to report errors even in cases where the borrower used the same EIN on both applications and can demonstrate this fact to the lender.”

The process for resolving the “error codes” is unclear and small business owners are being surprised by them, the letter said. The AICPA requests that the SBA provide further clarity and, even more importantly, communicate publicly that nearly one-third of all applications are receiving these requests for further review, which could delay processing by a week or more.

SBA capping of first- and second-draw PPP loan amount

SBA’s loan processing system has put in place a loan eligibility amount cap of $35,000 per employee for both first- and second-draw applications, the AICPA letter says, adding that the cap results in the SBA E-Tran system reducing the approved loan amounts. The AICPA asks the SBA to provide clear guidance related to these PPP loan caps because small businesses are confused when their loan amount is reduced with no explanation.

Broad communication on available funding, overall processing and timing

The letter recommends broader communication from the SBA confirming that there is sufficient funding to support all first- and second-draw PPP loan requests. The SBA also is urged to provide clear communication that processing time could be one to two weeks due to the increased validation checks and reviews.  

Despite the system issues, the SBA approved nearly 900,000 loans totaling $72.7 billion from Jan. 11 through Jan. 31, leaving almost $212 billion available. Applications for PPP loans close March 31, 2021.

AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held most weeks on Thursday at 3 p.m. ET, including on Feb. 4. The webcasts, which provide CPE credit, are free to AICPA members and $39.99 for nonmembers. Go to the AICPA Town Hall Series webpage for more information and to register.

The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA,, and fintech partner Biz2Credit.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

— Jeff Drew ( is a JofA senior editor.

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