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 Wall Street Journal. 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. Small firms accounted for 47% of the private sector workforce in 2017, the most recent data available, and after being disproportionately hit by the pandemic, they are lagging behind bigger companies as the economy reopens. Nearly one-third of small employers say it will take them more than six months to recover from the pandemic, according to a Census Bureau survey. The SBA was responsible for administering the Paycheck Protection Program, which used private lenders to originate forgivable federal loans to pandemic-hit small businesses. The program, while hitting bumps, received bipartisan praise for issuing $800 billion in loans. One problem was that the Trump administration gave priority to the PPP, to the detriment of the disaster office, said Sen. Ben Cardin (D., Md.), chairman of the Senate Committee on Small Business and Entrepreneurship. The disaster loan programs, he said, “suffered in the implementation speed, as well as the amount of resources small businesses should have been entitled to that they did not receive.”
