By Andrew Miller
The pandemic put many businesses in a tough spot.
In 2020 the government needed to get money to small businesses fast.
Through the Paycheck Protection Program and COVID disaster loans, the Small Business Administration sent out about $1.2 trillion. Borrowers could certify their own applications as accurate.
Choosing speed over scrutiny came with a price.
The SBA’s inspector general estimated that more than $200 billion went to potentially fraudulent borrowers. That’s at least 17% of everything paid out. In the rush, the agency had weakened or removed the checks meant to keep ineligible applicants out.
According to the Justice Department, some borrowers invented businesses that didn’t exist. Others lied about their payroll and revenue or used stolen identities.
By mid-2023, investigators had recovered nearly $30 billion. The rest was still out there.
On September 14, the SBA announced it had suspended 870,000 borrowers tied to an estimated $39 billion in suspected fraud. It’s the largest action of its kind the agency has taken.
Florida topped the list, with 118,167 suspended borrowers connected to $5.3 billion in loans.
A suspension bars a borrower from future SBA and disaster loans, along with the agency’s other programs. Earlier rounds had already hit five states, and more than 560,000 borrowers had been sent to the Treasury for collection.
Under what the SBA is calling “Operation No Doze,” borrowers are getting final 30-day letters demanding repayment, beginning with about 8,000 in Kansas and Missouri.
Ignoring the letter gets expensive. The government can go after up to twice the amount a borrower took. Debts sent to the Treasury can pick up interest and fees of up to 28%.
The government can also take the money out of tax refunds, federal paychecks, and Social Security benefits.
Waiting it out isn’t an option. Congress extended the statute of limitations on pandemic loan fraud to 10 years.
The money went out in 2020 with few questions asked. The questions are arriving now.
P.S. When it comes to funding your business, we’ll tell you what you’re getting up front, with a real person walking you through it. Let’s talk.