Some consultants say the problems at the SBA, an agency with about 2,800 full-time employees, are due to record operating times after Congress expanded disaster loan programs in response to the coronavirus pandemic. They claim that this is due to a sudden increase in volume. The agency acknowledged that the COVID-19 Disaster Loan Program “was an unprecedented program to launch, scale, and operate in the midst of a pandemic.”
The Economic Injury Disaster Loan Program traditionally supported businesses damaged by hurricanes, earthquakes, and other localized disasters. According to the SBA, from 1953, when the SBA was created, to the onset of the pandemic in 2020, the SBA has made approximately 2.2 million loans worth a total of $67 billion. Then, in the two years following the coronavirus outbreak, the agency approved 3.9 million loans totaling $378 billion, the spokesperson said.
The surge in new loans revealed several operational weaknesses, according to an external review. A 2021 Government Accountability Office report found that SBA communications often left applicants with critical information. An October 2024 Inspector General report said the SBA “has not had effective IT management policies and procedures in place for several years.”
“Congress has never adequately funded this agency,” said Curran, who said his consulting firm has helped about 90 borrowers this year dispute delinquent loans. “We are behind on every level, including technology.” An agency spokesperson denied that these issues were hindering loan processing, saying the SBA’s technology systems were “functioning properly.” .
With most coronavirus disaster loans coming due after an initial deferment period, authorities are reporting unusually high default rates, which executives and consultants interviewed said are likely inflated by mistakes. He says he thinks it’s something.
As of this month, the SBA had referred about 893,000 coronavirus disaster loans to the Treasury Department for recovery, nearly all of which were transferred this year. According to the agency, such inquiries with the Treasury Department will be required if the loan deadline is 120 days late. The SBA subsequently recalled approximately 60,000 of these defaulting loans under forgiveness provisions, which canceled the collection penalties and allowed the SBA to continue repaying the loans for two years.
Still, some borrowers said they spent subsequent months consolidating loans that were incorrectly deemed delinquent.
In the case of herbs, it took more than three years. He said he received a notice from the Treasury Department in February saying the loan had been collected and he was now paying a 30% penalty and thousands of dollars in additional interest. Records show Mr. Herb hired Mr. Curran to collect the loan and sent it back to the SBA, but the agency still hasn’t recovered the full payment made by Mr. Herb more than three years ago. Meanwhile, additional interest continues to accumulate.
In an Oct. 15 email, the SBA acknowledged Mr. Herb’s attempted payment and directed him to contact his bank for more information. Herb said the bank told him the SBA never submitted electronic requests for withdrawals. His bank records show he had enough money in his account to make the payment.
“Paying off a loan shouldn’t be this difficult,” Herb says.
California resident Robert Mabadat said he tried to be proactive in repaying the $500,000 disaster loan that kept his three Fantastic Sam’s hair salons afloat during the pandemic. Payments were scheduled to begin in September 2022, but he asked if his monthly payments could be reduced because he was struggling to make ends meet. However, after following the instructions and making several mailed payments to the Texas SBA office, I learned that the Texas office was closed. He said despite numerous phone calls, the SBA could not tell him which office had the loan or where to mail the payment.
