As COVID-19 shutdowns threatened businesses in 2020, the US government began issuing nearly $800 billion in potentially forgivable loans under the Paycheck Protection Program. The program was designed to help small businesses keep workers employed during the uncertain early days of the pandemic.
More than two years later, the overwhelming majority of those loans have turned into government grants, as 91% have been fully or partially forgiven, according to an NPR analysis of data released by the Small Business Administration on Oct. 2.
The SBA expects that figure to rise to nearly 100% as more pardon applications are processed this fall.
This is despite claims by University of Texas researchers that about 1.4 million PPP loans show signs of possible fraud, such as suspicious payrolls and multiple businesses listed at the same residential address. The SBA disputes those findings, but its own inspector general estimated that at least 70,000 loans were potentially fraudulent.
Meanwhile, the SBA is scrutinizing a tiny fraction of millions in PPP loans for fraud and forgiveness eligibility. The SBA uses computer models to review the 11.4 million loans, according to Patrick Kelley, a senior agency official, but he says auditors only manually reviewed about 215,000 loans, or about 2%. of the total number issued.
And of those thorough, hands-on reviews, Kelley says only about 21,000 have been denied forgiveness, or about 0.2% of all loans issued.
Which loans have still not been canceled?
About 1 million of the 11.4 million PPP loans remain outstanding. The majority of these unforgiven loans are held by sole proprietors and independent contractors: one-man businesses specifically targeted by a later phase of the program. Many work in service jobs heavily impacted by COVID-19, such as barbers, janitors and Uber drivers.
Many of those companies that got their loans through fintech companies, rather than traditional banks, told NPR they had a hard time getting them forgiven.
Fintechs, as they are called, are companies that use newer technologies to offer financial services.
A fintech, called Kabbage, is facing a class action lawsuit for claiming it failed to process loan forgiveness requests quickly and properly. Last week, Kabbage filed for bankruptcy.
NPR contacted dozens of these small businesses with outstanding loans and heard all kinds of additional reasons why they remain unforgivable, ranging from missed emails or sloppy applications to bad advice from accountants.
But the SBA says some of those PPP borrowers simply haven’t applied for forgiveness yet, because many of them can wait up to five years after their loan was issued.
At a Senate committee hearing in August, Kelley said the SBA has already processed cancellation decisions for about 97% of loans made in the program’s first year, 2020. The 2021 loan figure was trailing at 85%, but Kelley told NPR he expects most of the remaining loans to be forgiven this fall.
Sierra Lyons contributed reporting for this story.