By Jon Hill

Law360 (January 26, 2021, 9:52 PM EST) -- The nation's largest banking industry trade group told federal officials on Monday the second round of the recently revived Paycheck Protection Program still has some kinks to work out, pointing to several "significant issues" including glitches with the coronavirus relief program's online loan portal.

The PPP, which is run by the U.S. Small Business Administration and the U.S. Treasury Department, reopened earlier this month for more lending to qualifying small businesses after Congress reauthorized and expanded the program to allow certain hard-hit borrowers to come back for a second forgivable loan.

But in a Jan. 25 letter addressed to SBA and Treasury officials, the American Bankers Association said an apparent technical error with the lender portal for the program is holding up approval for a "significant number" of these so-called second-draw PPP loans.

In particular, the ABA said the portal isn't letting lenders submit applications for second-draw loans where the borrowers in question are still awaiting a decision on forgiveness for their first PPP loans from last year.

The trade group said the portal also has been more generally throwing off a "high number of incorrect error messages" when lenders try to submit borrowers' loan applications for approval, and troubleshooting inquiries sent through the portal's message system "have been met with silence."

"We are writing to make you aware of some significant issues that are preventing the program from fully supporting small businesses in need," the ABA wrote in its letter. "We have detailed those 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."

In addition, the letter urged the SBA and Treasury to clarify compliance obligations for lenders and borrowers in light of guidance released by the agencies last week that addressed how to calculate and document the 25% revenue reduction needed for second-draw loan eligibility.

While the ABA called this new guidance "helpful," it said many banks already had loan applications prepared based on previous guidance.

"We ask that you please clarify that borrowers and lenders are able to rely on the guidance at the time the loan application is received by the lender, thereby saving small businesses countless hours of re-doing applications for second-draw loans," the group wrote.

Asked about Monday's letter, an SBA spokesperson told Law360 on Tuesday that the agency was in the process of announcing certain actions to improve PPP loan review.

Those actions, outlined in a press release issued Tuesday, include providing more guidance on the loan review process, doing more to empower the agency's lender relations specialists, and briefing lenders on "additional detailed information" available through the portal that should help with resolving holds on second-draw loans.

The SBA said in the same announcement that a review of first-draw PPP loans had turned up "anomalies" in about 4.7% of data provided by lenders. Those anomalies were "mostly data inconsistencies and eligibility concerns," according to the agency.

The SBA added that these issues "will require follow-up between the lender and the borrower so that borrowers can access a second round of loans."

"The agency is committed to making sure stringent steps are put in place on the front-end and compliance checks address issues more efficiently moving forward so we are ensuring fair and equitable access to small businesses in every community," the SBA's acting administrator, Tami Perriello, said in a statement Tuesday.

--Editing by Janice Carter Brown.

For a reprint of this article, please contact reprints@law360.com.