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Democratic lawmakers criticize ‘mismanaged’ SBA loan program in letter to administrator

Senate Minority Leader Charles E. Schumer (D-N.Y.) arrives for a news conference Tuesday on Capitol Hill. (Leah Millis/Reuters)

Three Democratic senators are criticizing the Small Business Administration for slashing the size of its coronavirus disaster loans without telling Congress or small business owners about the change, according to a letter reviewed by The Washington Post.

In a letter dated May 9 to SBA Administrator Jovita Carranza, Sens. Charles E. Schumer (N.Y.), Ben Cardin (Md.) and Jeanne Shaheen (N.H.) said the SBA has mismanaged an important federal aid program designed to help small businesses weather the economic crisis.

Economic Injury Disaster Loans (EIDL) is a long-standing program through which small businesses affected by disasters can receive low-interest loans directly from the government. It is different from the $669 billion Paycheck Protection Program, which works through private banks.

The senators took issue with an earlier decision by the SBA to limit the size of its economic injury disaster loans to just $150,000, a policy change that was not communicated to those applying for loans until it was disclosed Thursday in a Washington Post article. They also criticized an SBA decision to indefinitely limit the applications to agricultural businesses, a policy that had been favored by congressional Republicans. An SBA spokesman declined to comment on the senators’ letter Saturday.

Read the Senate Democrats' letter to SBA administrator Jovita Carranza

“Throughout the response to the COVID-19 pandemic, SBA has repeatedly made it harder for [the disaster loan program] to serve struggling small businesses looking to SBA for the capital they need to stay afloat,” the senators wrote.

They also said the SBA has been “inexcusably opaque” when communicating policy changes related to the disaster loan program. They said Congress has been without any information on the EIDL program for more than a week. They also said small business owners have been in the dark about the status of their own loan applications.

“We understand and appreciate the pressures the agency is under and the unprecedented mobilization of resources, but despite these tremendous challenges, one thing that SBA has no excuse for is its stubborn refusal to communicate transparently with the public or with Congress and for its complete disregard of Congressional intent in the delivery of this critical assistance,” the senators wrote.

EIDL loans are seen as a preferred option for many small businesses because more of the funding can be spent on capital expenses and utilities. The ability to bypass the banking system makes it a promising lifeline for small-business owners that are not well-connected in the banking industry.

But by all accounts, EIDL is moving far more slowly than other coronavirus relief efforts. It was activated for businesses affected by the coronavirus on March 12, several weeks before the other provisions of the $2 trillion Cares Act stimulus package were made available. It was quickly overwhelmed with loan applications as millions of small businesses were forced to shut their doors in March and April. It was given more than $50 billion in new funding in recent relief bills to cover a funding shortfall.

However, the program remains severely backlogged after almost two months in operation. The SBA has released little information about its progress toward addressing the backlog in loan applications, which by all accounts has climbed well over 4 million. The agency’s SBA Today website, which tallies various SBA loan statistics, displayed roughly 83,000 disaster loans processed in 2020 as of Saturday.