SBA: COVID-19 disaster loan applications not met as program runs out of money


Thousands of small businesses and nonprofits had applications pending for COVID-19 disaster loan funds from the US Small Business Administration when the program ran out of money this month, a an SBA official said Wednesday.

Patrick Kelley, who oversees the SBA’s COVID-19 economic disaster loan program, told a congressional committee that “there were 9,000 requests for reconsideration that were pending on May 6” when funding was exhausted.

May 6 was the deadline set by the SBA for borrowers to apply for additional loan funds and to reconsider loan applications that were denied earlier. A day later, the agency notified borrowers that the funding was gone, according to an email notification obtained by Newsday.

In Washington, Kelley told the House Small Business Committee that there was little chance that pending applications would be met because the only money available would come from borrowers who turned down a loan offer.

Many demands would not be met even if the program was overflowing with money.

“Eight times out of 10, someone asks for a reconsideration [of a loan application rejection]they are denied” by the SBA, Kelley said, answering questions from committee member Rep. Andrew Garbarino (R-Sayville).

U.S. Representative Andrew Garbarino (R-Sayville) speaks during a House Small Business Committee meeting Wednesday, May 18, 2022.

Credit: James T. Madore

Kelley also said the 3.6 million COVID EIDL loans issued in 2020, or 93% of the total, did not require the borrower’s income to be verified using federal tax returns due to regulations. established by the administration of then-President Donald Trump. Income verification was instituted by President Joe Biden’s administration last year and used to make 300,000 loans.

“This required tax income verification applies to [borrowers] as of 2020 who request a loan increase, and 50% of the time they have been denied the increase” for lack of proof of eligibility, Kelley said.

The SBA encouraged 2020 and early 2021 borrowers to apply for larger loans, as Trump had reduced the maximum loan amount from $2 million per applicant to $150,000 to ensure funds were not not exhausted. Biden reinstated the largest loans after Congress authorized more COVID EIDL funding.

The loans have a term of up to 30 years and an interest rate of 3.75% for businesses and 2.75% for non-profit organizations.

More than 3.9 million COVID EIDL loans, totaling $378.4 billion, have been issued nationwide since the coronavirus hit more than two years ago. In New York state, there are 339,354 loans, totaling $37.6 billion, the second largest in the nation after California, according to SBA data as of April 28.

On Tuesday, Garbarino joined 16 other Republicans in a letter calling on SBA Administrator Isabella Casillas Guzman to explain how the COVID EIDL program was shut down and how the agency communicated with loan applicants and borrowers.

Garbarino told Newsday, “Small business owners deserve better than to have the rug pulled out from under them with little warning or explanation.”

On May 12, the Long Island Association business group wrote to key congressional leaders asking for more loan funding.

LIA CEO Matt Cohen said Congress should “allocate or redirect funds so that the SBA can continue its review of pending loan increase requests or reconsideration of previously denied requests. This would allow the SBA to complete the COVID EIDL program for businesses that still need support,” he said.


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