More Than $38 Billion in PPP Loans for Small Firms Canceled

(Bloomberg) -- About $38.5 billion in coronavirus relief loans for small businesses were canceled as of the end of May as many firms rushed to return loans after a public outcry about larger companies that took funds, while others were spurred by concerns about having the debt become a grant.

The value of the canceled loans was included in a Government Accountability Office report Thursday based on data from the Small Business Administration that showed more than 170,000 loans had been canceled as of May 31 with more still being reported. The GAO report didn’t specify the reasons for the cancellations.

The SBA hasn’t provided a detailed accounting of whether the Paycheck Protection Program loans were canceled because of returns, duplicates or other reasons. An SBA spokesman didn’t immediately respond to a request for comment.

The SBA reported Wednesday night that more than 4.7 million loans totaling $516.5 billion have been approved, including cancellations. There was about $128 billion in remaining funds as of June 20 with only a few days until the agency stops accepting new applications on Tuesday.

Many companies rushed to cancel PPP loans following outrage when entities such as Shake Shack Inc. and the Los Angeles Lakers got millions in loans at the expense of mom and pop shops. That prompted the Trump administration to warn firms with substantial market value and access to capital markets that they would be unlikely to qualify for PPP -- and that all loans of more than $2 million will be reviewed to determine whether they qualified.

Small businesses also reported they were holding or considering returning their loans because of uncertainty about whether they would be required to repay debt. The loans are forgiven if most proceeds are spent on payroll, but the SBA and Treasury Department were late in releasing guidance and rules about the loan forgiveness process.

The SBA hasn’t provided details about loan duplicates. The agency was supposed to determine whether an applicant already had a loan to avoid duplicates. Many borrowers desperate for funding submitted multiple applications through different lenders, and sometimes different identification information was used, the SBA has said.

Democratic Representative James Clyburn, chairman of a House panel overseeing coronavirus relief spending, has asked the SBA inspector general to investigate reports that the agency may have approved more than a thousand duplicate PPP loans that could have cost as much as $100 million.

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