July 21, 2024

The Biden Administration Pursues Loan Repayments Following Policy Reversal

Shelitha Robertson, PPP, Atlanta attorney, SBA

The federal government will be recovering past-due loan payments following a policy reversal.

The Biden administration has stepped up its efforts to recover business loans distributed during the COVID-19 pandemic.

Previously, the federal government declined to heavily pursue small businesses that had withdrawn funds under the COVID-19 Economic Injury Disaster Loan, also called EIDL. In conjunction with the Paycheck Protection Program (PPP), the EIDL initiative has generated upwards of $1 trillion for borrowers since its inception and helped sustain the country’s economy during the COVID-19 outbreak. However, the Small Business Administration has since changed its tune.

Business owners who had taken out PPP funds could request loan forgiveness, but borrowers under the EIDL program were initially expected to pay off their existing loans. However, in April 2022, the Small Business Administration established a policy that would disregard some past-due reimbursements of $100,000 or less, citing how costly it would be to pursue each delayed payment. Despite this reasoning, the agency’s inspector general, Hannibal Ware, voiced concerns about the decision, alleging that such a rationale might also persuade other COVID-19 EIDL borrowers to forgo paying off their loans. 

Following an investigation, the SBA determined that roughly $30 billion in PPP and EIDL loans of up to $100,000 could be subject to additional sanctions in 2024. These numbers indicate a substantial program loss, about 2.5 percent of their total portfolios. Since the discovery, the U.S. government has heightened its recovery efforts to relieve some of the financial burden on federal taxpayers and crack down on fraud, which has exceeded $200 billion, according to an SBA OIG report. 

The SBA has since announced plans to address these resounding issues in 2024 by referring pandemic borrowers to the Treasury Department following a 60-day grace period ending in early March. The department will be charged with administering penalization, which can include strict sanctions.

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