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Weaknesses of government assistance for SMEs

In this month’s “Money Mobility Tracker®”, PYMNTS analyzes why the record increase in stimulus checks has made it clear why governments need the ability to make digital payments to meet consumers’ disbursement needs. and modern businesses.

Ingo Money - Money Mobility: Innovating The Future Of Government Disbursements - October 2022 - Explore how the digital relationship between government and consumers is shaping government disbursements and what the future of these disbursements may hold

An interview with John MosierCEO of ReadyCap loanon the shortcomings of government programs designed to help small businesses.

Navigate government loan paperwork

Even before the pandemic, documentation was the biggest issue for small and medium-sized businesses (SMEs) seeking government-backed loans, according to Moshier. A core service for ReadyCap is simply helping customers understand the documents needed for specific loan programs. This can change not only from program to program, but also from company to company, and there is no one-size-fits-all answer when applying.

When the pandemic hit, the role of commercial lenders was magnified, with everyone from the Small Business Administration (SBA) to businesses seeking Paycheck Protection Plan (PPP) loans having to learn about an entirely new program at the as it is created. PPP loans were an unprecedented type of loan and, pending loan forgiveness, functioned in some ways more like grants.

Commercial Lenders as Fraud Guards

After the deployment of PPP loans, the problems their rapid deployment created for fraud prevention became apparent. Moshier said the SBA guidelines were being issued even as the program was being implemented, and that commercial lenders needed to play a front-line role in making sure the money was going to the businesses it was intended for. ReadyCap also needed to weed out the bots and make sure the applicants had viable businesses and weren’t trying to game the system.

In the end, although there were issues with fraud throughout the PPP, the efforts of the people on the ground who worked with the companies ensured that the money actually got to the companies that needed it to maintain their employees’ pay.

keep forgiveness coming

Not all applicants who received a PPP loan were eligible for loan forgiveness, which was based on funds used to pay employees. For most companies ReadyCap has worked with, that hasn’t been a problem, Moshier said.

Ingo Money - Money Mobility: Innovating The Future Of Government Disbursements - October 2022 - Explore how the digital relationship between government and consumers is shaping government disbursements and what the future of these disbursements may hold

At the same time, government efforts to prevent ineligible companies from receiving a pardon have sometimes resulted in unwarranted denials. By ensuring documentation is squared up front, ReadyCap has been able to help customers who may need to appeal, as well as those who simply have multiple government requests for the same documentation.

Plan your work and work your plan

Managing this kind of information internally and developing better interagency cooperation could improve future responses to crises similar to PPP, Moshier said. Much of the information that needed to be gathered to validate loan applications is already held at the IRS, but there was no system in place for commercial lenders or the SBA to confirm the validity of applications with the IRS. agency. Similar validation is required for other loan programs, but the timing of PPP loans appears to have prevented this. By having a plan in place before it is needed, the government can ensure a smoother and better process.

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