Small Businesses: COVID Loans Gone Wrong

You're a small business owner who received a federal COVID loan to keep your doors open. Now, you're in a mess because the loan has been sent to collections, even though you've been trying to pay it back. Sounds unfair, right? Well, this is happening to many small business owners. The Small Business Administration (SBA), which handles these loans, has been dealing with a massive increase in workload since the pandemic started. Before COVID, they had about 2. 2 million loans worth $67 billion. After COVID hit, that number skyrocketed to 3. 9 million loans totaling $378 billion in just two years! With such a huge increase, some issues started to show up. A report from the Government Accountability Office found that the SBA wasn't very good at keeping borrowers informed. Another report said their IT systems weren't managed well. Many business owners and consultants think the high default rate on these loans is because of errors, not because borrowers aren't paying. As of this month, almost 893, 000 loans have been sent to collections. That's a lot! One business owner, Harb, has been trying to sort out his loan for over three years. He received a notice that his loan was in collections, with a 30% penalty and extra interest. He hired a consultant to help, but the SBA still hasn't fixed the issue. Another business owner, Robert Mavaddat, tried to be proactive and set up a reduced monthly payment. But after mailing payments to a closed SBA office, he couldn't get answers about where to send his money. The SBA says their systems are working fine, but some people disagree. They think the agency needs more funding and better technology to handle all these loans. It shouldn't be this hard for small business owners to pay back loans.