In the pandemic shutdown last year, three-quarters of the nation’s small employers turned to the Small Business Administration for help. The portfolio that includes loans issued or guaranteed by the federal agency swelled more than five times to nearly $900 billion.
The extraordinary demand has overwhelmed the SBA, best known for guaranteeing loans to small businesses, and left many entrepreneurs in limbo as they seek to recover. Business owners complain of unprocessed aid applications, waiting hours on the phone with questions that go unanswered and technological glitches. Its inspector general warned of signs of rampant fraud.
At the heart of many of the problems is the Office of Disaster Assistance, a little-known unit that issued nearly a quarter of the agency’s pandemic loan volume. In normal times, the office provides loans after floods and other natural disasters.
Since March 2020, the office has issued roughly $211 billion in pandemic-related Economic Injury Disaster Loans, three times as much aid as in the previous 68 years combined. In total, the office has provided roughly 9.8 million loans and grants totaling more than $230 billion, SBA data show. These pandemic responsibilities would have challenged even the best-run government agency. The office’s difficulties were compounded by the types of management and technological weaknesses identified over the years by government watchdog agencies.
“On the disaster side, we did a terrible job,” said Robert Scott, a former SBA Regional Administrator who spent several weeks in Washington early in the pandemic helping coordinate the agency’s response. “The existing systems in place, the existing leadership in place, just have not adjusted to what is necessary to meet the demand right now.”
