The Small Business Administration (SBA) will begin collection activities on delinquent pandemic-era loans under $100,000 after facing pressure from Republican lawmakers for multiple years.
The SBA was previously only collecting on defaulted Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (EIDL) loans, both implemented to support business owners and their employees during the COVID pandemic, equal to or more than $100,000. However, Republican congressional members within the House and Senate small business committees have been calling for more aggressive and widespread collections activity for multiple years in an effort to recover taxpayer expenses and combat fraud.
The SBA initially declined to revise its policies despite facing political pressure, citing a 2022 report that found the costs of collections on business loans worth less than six figures, which conclude in the referral of the debt portfolio to the Treasury Department, would outweigh the return, resulting in an even larger bill for taxpayers. The most recent data provided by the agency estimated the combined value of delinquent pandemic-era business loans with values below $100,000 totaled $30 billion.
In a December letter, SBA administrator Isabel Casillas Guzman notified Congress that the agency would expand its collection activities to include sub-$100,000 defaulted PPP and EIDL loans, noting that new data had made it clear such a change was warranted. “I am writing to inform you that with this latest analysis, and using recent, updated data, SBA’s debt collection forecast for the PPP and COVID-19 EIDL portfolio now show a likely positive return to the taxpayer with a referral to the Department of Treasury, the final step of collection.”
Guzman also noted that loan recipients suspected of fraudulent activity were always referred to law enforcement regardless of the amount of their loan. However, not all fraudulent, delinquent, or defaulted loans will result in repayment. The SBA and IRS have both implemented several solutions to assist business owners who may have been scammed into taking out a loan or are facing difficulties in paying back their debts. Visit the SBA’s website here to learn more about the agency’s debt forgiveness or relief options.
