Business

What the SBA Should Do to Fix the EIDL Program

It’s no surprise that the Small Business Administration’s (SBA) Economic Accident and Disaster Loan (EIDL) program has created controversy in recent months. As I wrote before, the SBA raised the EIDL cap to $ 2 million without requiring proof of economic harm. While I understand why this action was taken, I do not understand why proof of economic damage was not required. Yes, that will slow the speed of the money out, but wouldn’t we prefer to be sure that it will go to the right places? To those who need it most rather than those who click the “Send” button first? This move completely contradicts the program’s original intent and hurts businesses that continue to be affected by the pandemic.

A few weeks ago, I met an entrepreneur who bragged about having his best year in business history and just got $ 2 million kicked into his account by the SBA. Unfortunately, this has become all too common in my conversations lately. When I talk to entrepreneurs who have received EIDL funding, I always ask them if they really need the money to survive, and the overwhelming answer is no. No shame, no guilt, just the happiness of having been able to earn money. The funds remain in their bank accounts as their imaginations run wild as to what to do with them. Some of you may be thinking: Are there no restrictions on the use of money? Although you are right, few have chosen to educate themselves about these restrictions before taking the money. I like to see the surprise on the faces of entrepreneurs when I tell them that their plans for the funds are technically illegal. I sympathize that in this crazy world we struggle to find time for things like the fine print, but loan documents detailing the terms of a $ 2 million government loan should be top of the list. your list. Others just don’t care about the restriction and are willing to take the gamble due to the low audit risk.

On the other hand, I know a Vietnam veteran whose business was wiped out by the pandemic. He and most of his team haven’t been paid for a year as they struggled to survive and run their century-old business. He called for the SBA’s EIDL increase half an hour after the program went live and has since been stuck in the quicksand of bureaucracy. Yesterday he was turned down because his credit rating was too low. A credit rating that has steadily declined since he began to fight to keep his business alive. Wouldn’t desperately struggling businesses have lower credit scores after almost 2 years of pandemic? Shouldn’t they be the companies we are targeting aid to?

I recommend that the SBA immediately create a threshold for economic damage and use the remaining available funds for businesses that need the cash rather than those playing with the system. Although the SBA is not currently taking new applications as of December 31st, they are still processing those submitted before the deadline.

The opinions expressed here by the columnists of Inc.com are theirs and not those of Inc.com.

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