Small Businesses Still Waiting on SBA Loans
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What problem are small businesses facing with SBA pandemic relief loans?
Here's your money briefing for Monday, August 31st. I'm J.R. Whalen for The Wall Street Journal. Millions of small businesses have gotten some much-needed cash from the Small Business Administration's Paycheck Protection Program, but many more who applied through a similar SBA program are still waiting for the funds to come through.
This program was originally designed for much smaller problems, disasters, you know, hurricanes and earthquakes. So the SBA did not have the capacity to process millions of applications.
So what does the SBA have to say about the delay? Our reporter Yuka Hayashi will tell us what's going on after the break.
A small business administration program that's meant to provide disaster relief was retooled to offer loans to businesses hurt by the pandemic. But a lot of businesses are still waiting on those funds. Our reporter Yuka Hayashi is here to explain. So Yuka, a lot of these businesses caught up in this.
How did the Economic Injury Disaster Loan (EIDL) program differ from the Paycheck Protection Program?
They've been in need of cash for almost six months now.
That's right. A lot of businesses, millions of businesses have actually gotten money, but there are still a lot of them who are still waiting for assistance. The Small Business Administration has had two main loan programs. One is called the Paycheck Protection Program, which is a bigger, more well-known program. They also have a program called Economic Injury Disaster Loan Program. This program has had a lot of issues since its launch, including delays, issues with communications with applicants, serious concerns about fraud warned by the inspector general.
Now, it's the Economic Injury Disaster Loans, or EIDL program, that's at issue here. What's the difference between that and the Paycheck Protection Program?
There are various differences, but the biggest difference, I would say, is that the PPP has banks issuing loans to businesses.
Why did the SBA struggle to process millions of EIDL applications quickly?
The EIDL program is administered by the government itself, and the SBA issues loans directly to businesses.
Yeah, well, no matter where the funds are coming from, this has got to be a painful process for businesses.
That's right. The delays with the EIDL program had to do with the fact that the SBA is the one that issues loans.
How much money has the EIDL program distributed and who has been left waiting?
And this program was originally designed for much smaller problems, disasters, you know, hurricanes and earthquakes. So the SBA did not have the capacity to process millions of applications that just flooded in during the pandemic. So the SBA really had to ramp up very, very quickly in order to catch up with the demand.
How much money has the EIDL program given out so far?
It has issued more than 3.6 million loans, totaling $188 million. In addition to that, the SBA also sent out about $20 billion in grants, free money, to close to 6 million businesses.
Do we know how much loan money is tied up that hasn't gotten into the hands of businesses?
It's not very clear, but there is a recent survey by a big business advocacy group called the National Federation of Independent Business that showed that about one in five businesses have not heard from the SBA about the status of their applications, even though they submitted their applications a while ago.
So what kind of answers are businesses getting from the SBA regarding the delays?
It has been a pretty frustrating experience for a lot of business owners. Things have gotten much better since around mid-June, but until then, there were a lot of applicants for loans who waited for months without getting updates from the SBA. In recent weeks, the SBA says that they have made a lot of improvements. And they do say that the reason why some people still may be waiting is because the applicants themselves may not have responded to requests for more information or responding to a final step to accept the loans.
Now, the SBA needed to outsource the loan distribution process, and the way they did that has come under fire.
Why did the SBA outsource loan processing and what data-privacy concerns arose?
Was that done during the pandemic?
After a very busy hurricane season in 2017, SBA signed a pretty small contract worth $10 million with a small contractor called RER Solutions.
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Chapters
6 chapters
1
What problem are small businesses facing with SBA pandemic relief loans?
0:05–1:11
2
How did the Economic Injury Disaster Loan (EIDL) program differ from the Paycheck Protection Program?
1:11–2:21
3
Why did the SBA struggle to process millions of EIDL applications quickly?
2:21–2:46
4
How much money has the EIDL program distributed and who has been left waiting?
2:46–4:54
5
Why did the SBA outsource loan processing and what data-privacy concerns arose?
4:54–5:55
6
What actions have Congress and the SBA taken in response to delays and communication failures?
5:55–6:50
Speakers
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