The SBA made $ 4.5 billion in unnecessary EIDL loans in 2020

The Office of Inspector General noted that the Small Business Administration (SBA) provided sole proprietorships and independent contractors with an additional $ 4.5 billion in emergency EIDL grants. That was much more than these people are entitled to.

$ 4.5 billion in unnecessary EIDL loans to businesses during pandemic

The Office of Inspector General’s inspection report looked at EIDL emergency grants for sole proprietorships and contractors. And it found that 542,897 sole proprietorships claimed more than one worker in their claims. They also received a grant of more than $ 1,000 when they applied for the Emergency EIDL grants without an employer identification number (EIN).

The Inspector General adds that the lack of an EIN should have alerted the SBA as they should not have been allowed to call on staff. If it were, the 543,000 applicants would have had a total of $ 543 million, which is the equivalent of $ 1,000 per applicant. However, the SBA approved a total of $ 4 billion in emergency EIDL grants. This results in an inflated $ 3.5 billion payout to these individual owners.

As for the independent contractors, the Inspector General noted that 161,197 received a grant of more than $ 1,000. You also applied without specifying an EIN number while you specified more than 1 employee in your COVID-19 EIDL application.

The total for the independent contractors should not exceed $ 161 million ($ 1,000 per applicant). However, the SBA has paid out over $ 1.1 billion to independent contractors, which has exceeded $ 1 billion.

Absurd claims made by sole proprietorships and independent contractors

In the Inspector General’s report, 15 sole proprietorships stated that they had one million employees. Not only that, they also didn’t include an EIN on the application. Another 40 applicants said they had more than 100,000 employees and did not have an EIN. And almost 350 stated that they had more than 500 employees even without an EIN.

A point of comparison; Amazon employs 1.3 million people. When 15 sole proprietorships claimed they had 1 million employees, they should have waved wild flags. The report says that while this should have alerted the SBA, there were no controls to report these blatant discrepancies.

Read the SBA Inspector General Inspection Report.

Missed Opportunities

The report concludes by stating that the $ 4.5 billion surplus in emergency EIDL grants to sole proprietorships and independent contractors could have been given to small businesses that really deserved it. Thousands, if not millions, of eligible small businesses would have benefited from these funds.

Given that there were more than 6 million applicants who were eligible for a grant but didn’t get one because funds expired in early July 2020, this is frustrating to say the least. The report also says that more than 7.3 million applicants later applied for an EIDL loan. However, they could not apply for a grant because the funds were exhausted.

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