In this month’s “Money Mobility Tracker®,” PYMNTS analyzes why the record rise in stimulus checks explained why governments need the ability to make digital payments to meet the modern exchange needs of consumers and businesses.
meeting with John MosherCEO ready lendingabout pain points in government programs aimed at helping small businesses.
Browse government loan papers
Even before the pandemic, documentation was the biggest struggle for small and medium-sized businesses seeking government-guaranteed loans, according to Mosher. A core service of ReadyCap is to help customers understand the paperwork needed for specific loan programs. This can change not only from one program to another but also from one business to another, and there is no one-size-fits-all answer when applying.
When the pandemic hit, the role of commercial lenders was amplified, with everyone from Small Business Administration (SBA) down to companies seeking Paycheck Protection Plan (PPP) that has to learn about a completely new program while creating it. PPP loans were an unprecedented type of loan, and with loan forgiveness expected, they worked in some ways like grants.
Commercial lenders as gatekeepers against fraud
With the introduction of PPP loans, the problems posed by their rapid spread of fraud prevention became apparent. Mosher said the SBA’s guidance was being issued even while the program was being implemented, and commercial lenders had to play a direct role in ensuring that the money would go to the companies it was earmarked for. ReadyCap also had to get rid of the bots and ensure that applicants had viable business and were not trying to tamper with the system.
In the end, although there were public-private partnership fraud problems in general, the efforts of the people on the ground who worked with the companies helped ensure that the money actually got to the companies they needed to maintain their employees’ salaries.
Save the next forgiveness
Not every applicant who took out a PPP loan was eligible for loan forgiveness, which was based on money used to pay employees. For most of the companies ReadyCap has worked with, Mosher said, this hasn’t been an issue.
At the same time, government efforts to prevent ineligible companies from receiving amnesty have sometimes led to unwarranted refusals. By making sure that the documents are in the front box, ReadyCap has been able to assist customers who may need to appeal, as well as those who have multiple requests from the government for the same documents.
Plan your business and work on your plan
Mosher said treating this type of information internally and developing better interagency collaboration can improve future responses to crises such as PPPs. Much of the information that should have been collected to validate loan applications is already kept with the IRS, but there was no system in place for commercial lenders or the SBA to confirm the validity of applications with the agency. Similar verification is required for other loan programs, but the timing of PPP loans appears to have prevented this. By making a plan before it is needed, the government can ensure a better and smoother operation.
We are always looking for opportunities to partner with innovators and opponents.