SBA: Funds committed to all eligible borrowers of COVID disaster loans
The federal government has pledged funds to every small business and nonprofit that submitted a qualifying application for the COVID-19 disaster loan program by this month’s deadline, though the money ran out on the same day, the US Small Business Administration told Newsday .
The SBA has or will distribute funds under its COVID-19 Economic Damage Disaster Loan Program to all eligible borrowers if their application is received by 11:59 p.m. on May 6 and has since been approved. Congress does not have to approve additional money.
“Funds have been promised to all valid COVID EIDL applications submitted and met the May 6 deadline,” the agency said, responding to a request for more information after an SBA official testified before Congress.
Patrick Kelley, who oversees the COVID-EIDL program as head of the SBA’s Office of Capital Access, told the House Committee on Small Business last week that “about 61,000 were able to work [loan applications] at close of business on May 6.”
He continued, “All of these editable files … that are eligible for funding have actually been approved for funding and have fund commitments as of Monday, May 16.”
Kelley didn’t give a breakdown of how many of the 61,000 applications were approved or denied. When an SBA spokesman failed to provide the breakdown, Newsday filed a request for data collection under the Freedom of Information Act. The request is pending.
The SBA spokesman confirmed that the 61,000 applications include 9,000 requests for reconsideration of applications that were previously denied.
Many of the reconsideration requests were unsuccessful. “Eight out of 10 cases where someone requests a reconsideration is denied,” Kelley said, responding to questions from Rep. Andrew Garbarino (R-Sayville), a committee member.
An undisclosed number of applications received as of the May 6 deadline were from borrowers applying for additional COVID-EIDL loan funds.
Borrowers who received loans in 2020 and early 2021 were allowed to apply for additional funds because their loans had been approved under then-President Donald Trump’s administration regulations, which reduced the maximum loan amount per applicant from $2 million to $150,000 . President Joe Biden’s administration restored the larger amount of credit after Congress approved more money last year.
Kelley said the 3.6 million COVID-EIDL loans originated in 2020, or 93% of the total, did not require the borrower’s income to be verified against federal income tax returns. Income verification was introduced by Biden last year and used in the approval of 300,000 loans.
Kelley said that when borrowers sought more money in 2020, “they were denied the raise 50% of the time” because the income verification process showed they were not eligible for additional funding.
Since the outbreak of the coronavirus more than two years ago, more than 3.9 million COVID-EIDL loans totaling $378.4 billion have been issued nationwide. In New York state, according to SBA data as of March 28,
The loans have a term of up to 30 years and an interest rate of 3.75% for companies and 2.75% for non-profit organizations.
Correction: All eligible applications for funding from the COVID-19 Economic Injury Loan Program have been or will be honored if received by May 6, the SBA said. A previous version of this story, published on May 19, said some requests would not be honored.