Small businesses will receive more timely decisions about their applications for federal COVD-19 disaster loans now that a backlog of 600,000 forms has been cleared, the head of the U.S. Small Business Administration said.
SBA administrator Isabella Casillas Guzman said, "We’re trying to have a program that’s swift and efficient, and achievable at a national scale. Obviously, very small businesses need support quickly."
Speaking on Wednesday to a virtual meeting of business journalists, Guzman said SBA was inundated with applications for its Economic Injury Disaster Loan program, or EIDL, after President Joe Biden raised the maximum loan amount from $150,000 to $500,000 in April. It had been lowered from $2 million per applicant by then-President Donald Trump due to fears the program would run out of money.
Last month, Guzman restored the $2 million loan cap. The loans are funded by the U.S. treasury.
"We take the efficient distribution of these loans very seriously and actually cleared late this summer a 600,000 backlog of disaster loan requests," she told the Society for Advancing Business Editing and Writing conference. "We’ve been able to streamline and increase our production" of loan decisions.
EIDL approvals also have been slowed by measures put in place by Guzman to root out fraud in the program. She is responding to an October 2020 report from the SBA’s Office of Inspector General which found $78 billion in questionable EIDL loans have been made.
As much as 35% of the $225 billion in pandemic-related EIDL disaster loans and grants approved between April 2020 and June 2021 may be fraudulent, according to a Newsday analysis of SBA data.
"We did find that routine checks were not being done and the door for fraud had been left open due to…the [Trump] administration’s decisions," Guzman said on Wednesday. "We have tried to right that situation and to require that SBA again be allowed to do [income] tax-transcript verification" to ensure EIDL requests are legitimate.
She said the agency is looking at further ways to eradicate fraud.
The deadline to apply for an EIDL is Dec. 31 and applicants must have 500 or fewer employees in most cases. The loans come with an interest rate of 3.75% for small businesses and farms and 2.75% for nonprofits. The term is up to 30 years and repayment may be deferred for two years, though interest will accrue during the deferment period.
Separately, Guzman said more recipients of Paycheck Protection Program loans are using the SBA’s online portal to have their loans forgiven directly by the agency as more banks and other private lenders opt-in to the portal.
PPP loans were made by private lenders and guaranteed by the federal government. SBA introduced the portal to speed the forgiveness process for borrowers of $150,000 or less – who previously had to apply to their lender to write off the loan. Newsday received a $10 million PPP loan in April 2020.
The number of lenders that are permitting borrowers to use SBA’s forgiveness portal has grown from 600 in July to more than 1,400, Guzman said, adding "we’ve already had over a million [forgiveness] applications."