I have the same issue. After testing a lot I figured out the problem, but unfortunally have no solution.
If you add a new backup destination and choose SFTP you can enter 
Name
IP Address
Username
Password
Port
Path
Unfortunally every try I did ends with âwrong passwordâ. After study logfiles on Server and destination I figured out, that the given username is completely ignored!
Backup trys ever with username ârootâ and ignores the entered username.
This is a big bug! Most professional backup destinations are only usable with a username. You never ever get the ârootâ account.
So please: Fix it!
Best regards,
Kai