The Small Business Administration may have granted billions of dollars in fraudulent COVID-19 relief loans after relaxing its approval standards in response to an unprecedented amount of applications, the agency’s internal watchdog said in a report published Wednesday.
The SBA “lowered its guardrails” to keep up with the demand and quicken the loan approval process during the economic disaster caused by the coronavirus, according to the agency’s office of the inspector general (OIG). Doing so “significantly” increased the risk of fraud, the OIG reported.
After the U.S. government declared COVID-19 a disaster in early March, the SBA was authorized to provide loans of up to $2 million to small businesses, nonprofits, farms and other eligible entities.
As of July 31, the agency had received over 14 million COVID-19 relief loan applications, according to the report. (By comparison, the SBA averaged about 65,000 applications per year before the pandemic.)
It approved 3.2 million of those applications for a total of $169.3 billion and disbursed 5.8 million COVID-19 relief grants worth $20 billion.
Of those loans, the SBA approved $14.3 billion to accounts that differed from the original bank accounts listed on the loan applications, according to the OIG report. Over $13 billion of those loans were disbursed.
The SBA also approved $63 billion in loans to applicants who used the same information ― IP addresses, email addresses, mailing addresses or bank accounts ― for multiple loan applications. About $58 billion of those loans were disbursed, according to the OIG.
The agency also reportedly granted over $1 billion in loans and grants to potentially ineligible businesses.
“We recognize that some of the loans in these subgroups could be legitimate and for eligible businesses,” the OIG said in its report. “An example would be an accounting or law firm filling out multiple applications for their clients.”
But the SBA should have had a...