Small-business loan data called faulty

PHILADELPHIA -- Michael Schulson was thrown a lifeline by the federal government's bailout for small businesses during the coronavirus pandemic. It helped him get almost half of his 178 employees back to work serving takeout customers and outdoor diners at his popular Sampan and Double Knot restaurants in Philadelphia's Center City.

So he didn't know what to think when he saw his company listed in records released this week by the Trump administration as having received millions more than his actual award from the Paycheck Protection Program -- while retaining no jobs at all.

"I was a bit surprised to see the numbers listed," Schulson said. "All restaurateurs are in survival mode now and are doing the best we can."

The faulty numbers on Schulson's loan are among a mounting number of purported errors, mischaracterizations and omissions in records released Monday on program awards, after calls for greater transparency around the administration's handling of the $659 billion program.

BLANK SPACES

More than 550,000 recipients were listed in the government data as having retained zero jobs. Nearly 50,000 of those recipients received loans of more than $150,000.

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In one glitch, the data dump from the Trump administration asserted that thousands of loan recipients didn't use the money to save a single job. That's because the release, again and again, had blank spaces where numbers of retained jobs are supposed to be or had a zero in those fields.

In another error, the administration listed firms that say they never even applied as getting millions of dollars.

Though loan applications asked for the number of employees a company has, and lenders could provide data on jobs retained upon submitting the applications to the government, it was not mandatory that businesses provide that information, said a Small Business Administration spokeswoman. Businesses will be required to provide it in order to receive loan forgiveness because they will have to show their lender how many employees they have and how much they paid them, she said.

Some of the blame for the poor data quality also falls on the rushed and chaotic way in which the program was stitched together. The Small Business Administration drafted banks into serving as impromptu conduits between borrowers and the government in a frenzied scramble to inject money into a faltering economy at the start of the health crisis.

Philadelphia entrepreneur Alex Hillman helped small-business people apply for the loans. He describes the application process as "operational chaos": websites crashed, government rules kept changing, and every bank seemed to have its own intake process.

RESISTANCE TO OVERSIGHT

But the data problems are also symptomatic of the administration's reluctance to open the program to outside tracking and vetting, leading it to jettison existing systems for collecting and maintaining records for the public's use, said Sean Moulton, senior policy analyst with the nonprofit Project on Government Oversight.

And as more problems with the data emerge, it may become harder to accept assertions by the government about the program's success, Moulton said. Treasury Secretary Steven Mnuchin, for example, said when releasing the data that it shows the program had supported more than 51 million jobs, with more than a quarter of the funds reaching low- and moderate-income communities.

In light of the data glitches, "you have to take that broader narrative with a grain of salt," Moulton said.

The records were released nearly four months after federal lawmakers devised the program of loans that become grants for businesses when they use the money to get at least 60% of their staff back to work. The program was open only to firms employing fewer than 500 workers.

But until this week, Mnuchin had resisted calls from advocacy groups and lawmakers to disclose who was getting money, even though such information had been routinely provided about similar loans in the past.

When the data was finally disclosed, the administration broke with past practice by not fully identifying recipients and specifying all loan amounts.

For awards of less than $150,000, the records include precise sums, but don't identify recipients. For those above $150,000, recipients are identified, but loan amounts were presented as falling within one of five ranges, spanning from $150,000-$350,000 to $5 million-$10 million.

Now, some purported loan recipients are contesting some of the disclosures, while other records have been found to be demonstrably misleading.

ONE-PAGE FORM

The form that borrowers fill out is essentially a one-page questionnaire that asks for basic information, such as average monthly payroll and employee head count, but has no place to enter job retention numbers. Banks use those forms to submit formal loan requests over the Small Business Administration's online application system, known as E-Tran.

While bankers had the option of supplying job retention estimates over E-Tran, doing so was not required for loan applications. So some bankers opted not to, especially since loan-seekers hadn't been asked to supply that information as part of their printed applications.

The Small Business Administration did not respond to questions, and the Treasury Department did not return emails and phone messages seeking comment.

Despite the confusion, having the records out in public is vastly preferable to keeping them under wraps, as the administration originally aimed to do, said Moulton of the Project on Government Oversight.

"The agency would be a lot less inclined to try to fix these things on their own if there weren't hundreds of people looking at this data now and trying to figure out what it says."

Information for this article was contributed by Alexia Elejalde-Ruiz of the Chicago Tribune.

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