Three years after Congress approved a historic amount of aid to keep small businesses from shuttering during the pandemic, the U.S. government is grappling with a new challenge: Getting its money back.

A federal program that provided more than $370 billion, mostly in low-interest loans, is at risk of suffering significant losses, as Washington grapples with hasty decisions made during the Trump administration and newly scrutinized enforcement policies under President Biden.

The trouble centers on the COVID-19 Economic Injury Disaster Loan, known as EIDL, which floated generous aid to cash-starved firms. Approved by Congress with bipartisan support and signed into law by President Donald Trump, the program beginning in 2020 aimed to help companies weather the worst financial crisis since the Great Depression.

That spring, the Small Business Administration raced to approve a flood of applications in record time. In doing so, it made clear to borrowers that much of the money would have to be repaid – unlike other, related emergency initiatives – and some of the EIDL bills came due late last year.

As the loans have entered repayment, however, the SBA has faced growing concerns about its ability to collect the full sums it is owed. Its inspector general already has uncovered tens of billions of dollars in potentially fraudulent loans that should not have been made in the first place. And the watchdog has also quietly opened a probe to determine whether the SBA has chosen not to pursue some borrowers with back-due balances, especially involving unpaid loans less than $100,000.

Loans of that size together add up to about $72 billion, though the SBA has not said how many are in repayment or experiencing any trouble. The uncertainty still has fueled new questions on Capitol Hill: Sen. Joni Ernst (Iowa), the top Republican on the chamber’s small-business panel, wrote the SBA in recent days to express “urgency and significant concern” about its efforts to recoup unpaid EIDL balances.

In the missive, shared with The Washington Post, she added that Congress “has never intended for loans made through the EIDL program to be forgiven.” Ernst demanded key information about the SBA, its loan portfolio, and the extent to which it is reporting problematic borrowers to the Treasury Department.

“This is unacceptable, as is any potential attempt by the SBA to once again forgo collections altogether on a program, it is tasked with managing on behalf of the American people,” she said.

Han Nguyen, a spokesman for the SBA, said in a statement that agency policy “continues to be to collect on every loan,” emphasizing the Biden administration’s commitment to recovering money and pursuing fraud. Nguyen attributed much of the trouble to the 2020 law authorizing EIDL and early decisions under Trump, which limited enforcement and “hurt taxpayers.”

But the SBA declined to answer specific questions about the state of its loan portfolio and detail the ways it pursues some delinquent borrowers, citing a worry that public disclosure could help criminals evade Washington. Broadly, though, Nguyen acknowledged the agency can “cease further collection efforts where the cost of pursuing them exceeds the projected amount recovered.”

The new scrutiny reflects the overwhelming uncertainty in Washington about the fate of its once-generous coronavirus aid. The total $5 trillion in relief funds provided a lifeline to small businesses, hospitals, schools, families, and the rest of the battered U.S. economy, even as the money opened the door for vast waste, fraud, and abuse, as The Post documented in its year-long series, the COVID Money Trail.

The concerns about theft have taken on added significance this year, as Washington focuses anew on federal spending and the rising debt. Biden has called repeatedly for an aggressive effort to combat coronavirus-related fraud, even asking Congress to approve $1.6 billion to help federal law enforcement pursue criminals. But Republicans – who share a desire to prosecute malicious actors, and seek billions in savings – have largely rejected the president’s request. They have focused their attention instead on trying to recoup nearly $100 billion in authorized yet unspent pandemic relief funds.

At the heart of the government’s economic response to the pandemic was about $1 trillion in small-business aid. The stable of loans and grants, administered by the SBA, dwarfed even the agency’s annual budget, creating an immense task for officials while they raced against the clock to get the money to employers in need.

One of those initiatives, the Paycheck Protection Program, provided about $800 billion in loans with generous terms for forgiveness. But its sister program, EIDL, offered loans that would have to be repaid, though the government later deferred the due date.

From the beginning, both programs faced a high risk of fraud, according to the SBA’s inspector general, whose fears in 2020 were realized years later. In many cases, the SBA was not required to do deep digging on applicants’ finances, and the agency in its haste often missed opportunities under Trump to catch criminals who tried to steal money in the names of real people, the watchdog found.

In January, for example, a key federal panel overseeing stimulus spending, the Pandemic Response Accountability Committee, estimated that $5.4 billion in small-business aid went to borrowers with potentially ineligible Social Security numbers. Its report cited key deficiencies in how the SBA under Trump reviewed loan applications since the agency at the time did not consult a federal anti-fraud database known simply as “Do Not Pay.”

The government already has seized more than $1 billion from fraudsters who bilked the EIDL program, and the SBA’s inspector general previously has flagged billions of dollars in additional theft as criminals obtained federal loans using stolen identities and other tactics.

Last week, the same watchdog sounded the additional alarm: It warned the full extent of the government’s losses to remain unknown – and with EIDL, in particular, the inspector general said the amount is unlikely to become clear until more of the bills come due. At that point, the office said it expects an “inevitable wave of defaulted loans” to come to light.

“OIG’s experience from decades of disaster oversight is that such defaults usually are strong indicators of fraud. We believe the fraud landscape will not be fully revealed until the loan terms progress to payments due,” the watchdog agency added in its March 23 budget request.

Some federal officials and lawmakers have signaled new concern with the SBA’s efforts to pursue borrowers who default on their loans.

In testimony to Congress last month, Sheldon Shoemaker, the deputy inspector general, indicated to lawmakers that his office is reviewing “SBA’s decision to end collections on COVID-19 EIDLs under $100,000.” But he did not explain the reason for its scrutiny and declined further comment.

Ernst, meanwhile, said in a letter to the agency sent Wednesday that she had “received reports that SBA intends to forgo collections” on back-due loans of this size, as she demanded information by Wednesday about the state of the agency’s loan portfolio and its current efforts to reach past-due borrowers. That included the SBA’s efforts to refer unpaid loans to the Treasury Department for further enforcement.

The SBA, for its part, said it sends demand letters to borrowers who fail to make payments and takes legal action in some cases to collect money. But Nguyen said the agency “cannot comment” on its referrals to the Treasury Department, noting only that its research shows such a move – which could allow the government, for example, to garnish wages – can be challenged in court and “is not a financially effective technique.”

Otherwise, the agency said there is only so much it can do, citing the fact that the Trump administration’s work to implement the 2020 Cares Act limited the government’s collection powers. The SBA said that included limits on its ability to obtain collateral and personal guarantees from borrowers, which “put the taxpayer’s money at greater risk.”

Some of the suspicions stem from a related decision the SBA made with PPP, its other pandemic loan initiative. In 2022, the agency moved to end collections on $1.1 billion in PPP loans that had been 60 days or more past due, according to the inspector general. It “charged off these loans and made no referral” to the Treasury Department, which manages debt collection programs and can take action to prevent problematic borrowers from obtaining more federal aid.

The inspector general questioned that move and faulted the SBA for its analysis, which concluded it would cost the government too much to collect on those PPP debts. The SBA at the time sharply disputed the report, arguing that the underlying law – the Cares Act – had created a situation that made collections difficult.

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