SBA Outlines Process for PPP Lenders to Clear Hold Codes, Error Messages

With many banks continuing to receive hold codes and compliance check error messages when submitting first- and second-draw Paycheck Protection Program loan applications, the Small Business Administration today issued a second procedural notice with new instructions for lenders to clear these codes and move applications forward.

Under the newly issued procedural notice, SBA clarified that the borrower must certify the information used to resolve the hold code or error message. Specifically, lenders may resolve certain hold codes and error messages “by obtaining a written borrower certification along with supporting documentation of the type identified for each Hold Code or Compliance Check Error Message in the First Revised Hold Code Notice.” Once obtained, “the Lender may execute the updated certification within the Platform,” SBA said. “The Lender must retain the borrower’s written certification and supporting documentation in its file and must provide them to SBA as indicated in the Lender Certification.” Once the process is complete, the PPP platform will “automatically move the loan guaranty application to the next stage of loan processing.”

With the window for PPP applications extended by Congress through May 31, SBA said it “has obtained a validated machine learning scoring model” that allows it to process automatically first-draw PPP loans with “minimal risk of noncompliance with eligibility requirements, fraud, or abuse.” Once deployed, SBA said the number of first-draw PPP hold codes would be “significantly reduced.” SBA added that lenders will know the model is deployed when the loan subject to a hold receives an SBA loan number.

Meanwhile, SBA said it would remove error messages indicating a disqualifying criminal history or delinquent or defaulted federal student loan, based on changes announced by the Biden administration to expand PPP loan access. ABA and the state bankers associations have been advocating for SBA to address the hold codes and error messages to ensure loans are processed before PPP funding lapses.