SBA Gave Out $4.5 Billion in Needless EIDL Loans in 2020

sba needless eidl loans

The Office of Inspector General found the Small Business Administration (SBA) provided $4.5 billion more in Emergency EIDL grants to sole proprietors and independent contractors. This was much more than these individuals were entitled to.

$4.5 Billion in Needless EIDL Loans Given to Businesses During Pandemic

The inspection report by the Office of Inspector General looked at Emergency EIDL grants to sole proprietors and contractors. And it determined 542,897 sole proprietors claimed more than one employee on their applications. They also received a grant of more than $1,000 while applying for the Emergency EIDL grants without an Employer Identification Numbers (EIN).

The Inspector General goes on to say the absence of an EIN should have alerted the SBA because they should not have claimed any employees. If that was the case, the total for the 543,000 applicants should have been $543 million, which comes out to $1,000 per applicant. However, the SBA approved a total of $4 billion in Emergency EIDL grants. This comes out an over disbursement of $3.5 billion to these sole proprietors.

As for the independent contractors, the Inspector General found 161,197 received a grant of more than $1,000. They also applied without providing an EIN number while claiming more than 1 employee on their COVID-19 EIDL application.

The total for the independent contractors was supposed to be a maximum of $161 million ($1,000 per applicant). However, the SBA over disbursed independent contractors $1.1 billion dollars, which is over by $1 billion.

Absurd Claims by Sole Proprietors and Independent Contractors

In the Inspector General report, 15 sole proprietorships claimed to have a million employees. Not only that, but they didn’t provide an EIN on the application. Another 40 applicants claimed to have more than 100,000 employees and they also didn’t have EIN. And close to 350 claimed they had more than 500 employees also without EIN.

A point of comparison; Amazon employs 1.3 million people. When 15 sole proprietors claimed they had 1 million employees, flags should have been waving wildly. The report says even though this should have alerted the SBA, it did not have controls in place to flag these glaring discrepancies.

Read the SBA Inspector General Inspection Report.

Missed Opportunities

The report concludes by saying the $4.5 billion overage in Emergency EIDL grants to sole proprietors and independent contractors could have been given to small businesses that truly deserved it. Thousands if not millions of eligible small businesses would have benefited from these funds.

Considering there were more than 6 million applicants in the process who were eligible for a grant but had not received one because the funds ran out in early July 2020, it is frustrating, to say the least. The report also says, more than 7.3 million applicants later applied for an EIDL loan. However, they could not request a grant because the funds were exhausted.

Image: Depositphotos

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Michael Guta Michael Guta is the Assistant Editor at Small Business Trends and currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

3 Reactions
  1. I agree because there are a lot of long time small businesses were deemed ineligible because of our zip codes. Smaller amounts could have been distributed so more small businesses could have benefited.

  2. Sometimes I wonder how government agencies can mess things up so badly. Billions of dollars wasted and a good chunk of it would have been caught simply by requiring a valid EIN (and then checking that one thing). Amazing.

  3. This pandemic rearranged things and have created more income disparities. I hope many other government measures to help businesses will soon follow.