Small Business Administration seeks to claw back up to $4.6 billion in COVID-19 relief loans for employers
The U.S. Small Business Administration is attempting to recover up to $4.6 billion in PPP loans after an independent review found problems. Credit: Alamy Stock Photo/B Christopher
The U.S. Small Business Administration should complete a review of nearly 38,000 questionable pandemic-relief loans and claw back up to $4.6 billion that potentially went to ineligible employers, according to an independent review.
The agency’s inspector general found that only half the review process has taken place of Paycheck Protection Program loans flagged as ineligible for forgiveness for potential fraud, misuse of funds and other reasons, the 15-page review states.
The inspector general also questioned SBA's prioritizing large loans for recovery. That limitation could result in a loss of up to $454 million from about 26,200 smaller loans of $25,000 or less.
“It is imperative that SBA completes its review to promote program integrity and mitigate financial loss by seeking recovery of improper payments for ineligible loans,” Sheldon Shoemaker, deputy inspector general, wrote in a memo to SBA Administrator Kelly Loeffler.
Jihoon Kim, director of financial program operations in SBA’s Office of Capital Access, said the agency will complete the review by Sept. 30 “assuming adequate resources are available.”
SBA also “plans to work with the new administration to develop and implement a recovery plan for all ineligible loans,” Kim said in response to the inspector general’s April review.
The PPP was the federal government’s marquee COVID-19 relief program for employers offering forgivable bank loans of up to $10 million per applicant in return for keeping workers on the payroll. The program began at the pandemic's height in 2020 and eventually provided $813.7 billion in more than 11 million loans in 2020 and 2021.
SBA had forgiven 10.5 million loans totaling about $750 billion as of May 2024, or 92% of the money, according to the inspector general.
On Long Island, $10.5 billion went to more than 84,000 businesses and nonprofits. Three quarters of the loans had been forgiven as of April 2022, according to a Newsday analysis of SBA data obtained under the Freedom of Information Act.
Newsday received a $10 million PPP loan which was fully forgiven.
The inspector general did not identify where the questionable PPP loans were made.
SBA loan specialists assigned a code to the forgiven loans that they suspected shouldn’t have been forgiven because the borrower was ineligible for assistance or used the money for purposes that didn’t qualify for forgiveness. According to the review, 60% or more of PPP funds were supposed to go for employee wages.
The code was assigned to 37,938 loans, or about 0.3% of the total.
The inspector general found SBA hadn’t completed a four-step review process for these loans. SBA countered that all four steps weren’t required in every case.
Kim, the agency official, said, “The post forgiveness review process is still ongoing, and these loan reviews are in-process.”
Kim added that 4,417 loans of $25,000 or less were found to be eligible for forgiveness.
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
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