According to Texas Rep. Roger Williams, the Small Business Administration (SBA) has decided to stop collecting Paycheck Protection Plan loans with a balance less than $100,000.
The PPP was past of the CARES Act, passed in March 2020 in response to the Covid pandemic. By April 2020, the SBA was distributing PPP monies. The program ended May 31, 2021.
In a statement this week, Williams, who chairs the House Committee on Small Business, weighed in on the SBA’s decision.
Williams noted that the PPP program provided about $800 billion in PPP loans to 12 million businesses. But, he said in a statement, “criminal opportunists” used the money illegally and “defrauded this pandemic assistance program.”
“Americans must be assured that these actions by the SBA are not letting bad actors off the hook by failing to scrutinize this large number of loans.”
The SBA’s Oversight of the PPP
Although PPP loans are guaranteed by the SBA, applications and awards for the funds were made through SBA-approved lenders. The lenders are required to make every effort to collect on loans that go into default.
In December 2022, the SBA took action on two third-party companies who worked with PPP lenders. The SBA took the action in response to a report from the House Select Committee, which detailed “serious problems of fraud and self-dealing.”
At that time, the SBA suspended non-lenders Blueacorn and Womply from working with the SBA in any capacity. The SBA also launched a full investigation of the lenders Benworth, Capital Plus, Celtic Bank, Customers Bank, Cross River Bank, Fountainhead, Harvest, and Prestamos, as well as the individuals and other related entities named in the report.
More recently, on March 2, 2023, SBA Administrator Isabella Casillas Guzman issued the following statement:
“Since day one, I’ve pushed my team at the SBA to ensure that protecting the integrity of our essential programs is top priority by implementing new tools to verify applications and substantially mitigating fraud as a result. Under the Biden-Harris Administration, the SBA has referred tens of thousands of potential instances of fraud to the Office of the Inspector General, including those that occurred in 2020.
While we still have work to do, I’m confident that these resources – including the proposed allocation of an additional $100 million for the Office of the Inspector General – will equip our partners to better protect the interests of American taxpayers.”
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More in: PPP Loans
The Small Business Administration (SBA) is being questioned regarding its decision to stop collection efforts on some loans given out through its Paycheck Protection Program (PPP).
The PPP was established to provide financial aid to small businesses affected by the coronavirus pandemic. It has dispensed over $600 billion dollars in loans across the U.S.
However, the SBA’s decision to not pursue collection efforts on certain smaller loans has caused concern, as it opens the door for fraud. The Wall Street Journal has reported that one particular group, targeted buyers and sellers of PPP loans, have benefited from this pause in collections.
The pause only affects loans of $2 million or less that have not been forgiven, which likely accounts for a significant portion of the total bailout money. This move has been met with criticism from some people. They argue that suspending collection on the smaller loans sends the wrong message to those who were more prudent in how they spent their funds, as those people may now be on the hook for more than those who took advantage of the system.
Critics also point out that there is no set timeline for how long collections will be paused, leaving uncertainty over how this decision affects loan forgiveness.
The SBA has yet to respond to the criticism. However, it’s clear that a solution must be found if the bailout is to be successful. Failure to take necessary steps to ensure that funds are taken back from those who abused the system could result in a larger crisis down the line.
For now, the SBA remains under fire for its decision to stop collection on PPP loans. It’s up to the administration to address the concerns and devise a plan to fairly pay back funds—for the sake of small businesses everywhere.