As we’ve discussed several times, small businesses currently face record-high inflation, supply-chain disruptions, workforce shortages, and other disadvantages crippling their ability to …
As we’ve discussed several times, small businesses currently face record-high inflation, supply-chain disruptions, workforce shortages, and other disadvantages crippling their ability to participate in our economy. These challenges come on the heels of Covid closures that rocked Main Street USA more than any large corporation. Unfortunately, bad actors exploited emergency loans intended for small businesses and left taxpayers holding the bag for outrageous fraud schemes.
The Small Business Administration (SBA) assumed an oversized role in the management of emergency relief programs and ultimately revealed its own competency gaps. Through investigation, we have discovered the SBA is fraught with fraud, delays, and mismanagement. We have also discovered the SBA has shifted away from its core mission of serving small businesses to instead advancing the current president’s political agenda. Given the challenges facing small businesses in Missouri and across the country, we must ensure their government agency is working appropriately.
Reform of the SBA begins with examining how it failed to prevent fraud on a massive scale.
In total, fraudsters stole more than $200 billion from taxpayers through Covid relief loans and grants. Over the lives of the SBA’s Paycheck Protection Program and the Economic Injury Disaster Loan, as many as one in five loans were potentially fraudulent. Only a government program would be allowed to operate so poorly. If 20% of your local bank’s loans were fraudulent, they’d be out of business in no time. If it didn’t fail on its own, federal regulators would force the closure of the bank (rightfully so) over massive safety and security concerns.
SBA is working to recoup stolen funds but at a glacial pace. Relying heavily on whistleblowers to report instances of fraud, the administration has approximately 550 active cases with more than 80,000 actionable leads in the queue. Clearly, prevention is much more practical than cleanup.
I serve as the vice chairman of the House Small Business Committee. Last week, the committee passed two bills to prevent future failures. The first prohibits individuals convicted of defrauding any pandemic assistance program from ever taking out a loan from the SBA in the future. The second bill requires the SBA to provide a link on its website directing people to the administration’s Office of the Inspector General (OIG), where people can easily report cases of fraud.
Additionally, if we’ve learned anything from this saga, it’s that the SBA should shrink and hone in on its basic duties, as opposed to taking on more responsibilities and potentially threatening the well-being of our small businesses and economy. I have introduced legislation forbidding the SBA from making direct loans under the 7(a) program, which is the SBA’s primary business loan plan. There is simply no need for the SBA to take on this role. In fact, having the federal government operate as a direct lender through the SBA crowds out the private market and competes with community banks and other financial institutions that are better suited to work in these partnerships.
As I’m writing this, Congress is debating appropriations for FY 2024. The need to get our fiscal house in order is as clear as it’s ever been. The easiest way to save taxpayer dollars is to prevent them from being stolen. The SBA’s $200 billion loss alone put a massive hole in our budget. My colleagues and I will continue working to reform the SBA to improve its focus and service on behalf of small businesses and consumers. When our small businesses are strong, our economy is strong. They are the engine of this nation’s economy, and we need them now more than ever.
CONTACT US: I encourage you to visit my official website or call my offices in Jefferson City (573-635-7232) or Cottleville (636-327-7055) with your questions and concerns. If you want even greater access to what I am working on, please visit my YouTube site, Facebook page, and keep up-to-date with Twitter and Instagram.