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December 4, 2020

Fraud occurs in US loans for small businesses

National

December 4, 2020

NEW YORK: More than five million companies received loans under the federal government’s signature relief programme for small businesses reeling from the pandemic, but a tiny fraction of those companies gobbled up vast sums of money, newly released data shows.

Detailed loan information released by the Small Business Administration (SBA) late on Tuesday showed that about 600 businesses received loans of $10 million, the largest available under the $525 billion Paycheck Protection Programme (PPP). And a mere 1 percent of borrowers received more than a quarter of the total amount of money disbursed — or around $143 billion in loans of $1.4 million and above, foreign media reported.

The data is the first full accounting of how federal money was spent through the PPP, which offered struggling small companies (generally those with 500 or fewer workers) forgivable loans to help them retain workers and keep up with bills like rent and other expenses. The influx of money was a crucial stabilising force for many businesses fighting to survive amid widespread shutdowns caused by the coronavirus pandemic. But the programme has come under criticism for its poorly defined rules and the hasty and haphazard rollout that has allowed fraudsters to tap into the money.

Also included in the data were details of loans made under the Economic Injury Disaster Loan system, a longstanding SBA programme that was vastly expanded to offer relief to businesses affected by the pandemic. Together, the two programmes spread more than $700 billion to struggling companies in just a few months.

The loan data was released under an order by Judge James E. Boasberg of the US District Court in Washington, who rejected the SBA’s request to keep the information confidential. Previously released PPP. data contained only ranges for larger loan amounts, and no information about loans under $150,000.

Calling the PPP “vast in both size and sweep,” Judge Boasberg wrote in a ruling last month that “the weighty public interest in disclosure easily overcomes the far narrower privacy interest of borrowers who collectively received billions of taxpayer dollars in loans.”

The PPP loans were intended to cover up to two months of payroll costs and a handful of other expenses, and can be forgiven if companies spent the money mostly on retaining workers.

Mr. Boies’s firm previously declined to comment on its loan; Mr. Kasowitz’s firm said the loan helped it preserve hundreds of jobs. Most of the program’s borrowers sought far less: Loans of $150,000 and under accounted for around 87 percent of the loans made through the program, which ended in August, when its congressional authorisation expired. But those loans made up less than 30 percent of the total handed out, about $146 million.

The data also shows how inconsistently the SBA disbursed money through the Economic Injury Disaster Loan, a still-running aid effort that offers companies and nonprofits low-interest loans directly from the government to help them rebuild their battered operations.