Small business loans could become the target of fraud, and a government watchdog is already trying to stop it
Behind the scenes, conversations have started with law enforcement partners across the country to ensure that the expansion of Small Business Administration loans goes to those intended to receive the funding, according to a spokesperson. word of the Office of the Inspector General.
Treasury Secretary Steven Mnuchin said in an interview with Fox Business on Monday that the small business loans included in the stimulus package in the amount of nearly $ 350 billion would be available as of Friday. And, while pledged to cut checks at “lightning speed,” the SBA’s Office of the Inspector General is working to educate consumers, lenders and the forces of the order on the signs to look for to eradicate fraudsters.
But the sheer volume of money flowing out the door is a challenge. For an agency that distributed $ 28 billion in 2019, distributing $ 350 billion in a matter of months will be unprecedented in scale, especially given the tight schedule.
The SBA will benefit from an influx of technical support to help streamline the lending process. “The SBA has hired Microsoft and Amazon to help the agency implement the paycheck protection program,” said a source familiar with the matter, who called it an “unprecedented public-private partnership.”
This week, the IG office released guidelines for consumers, warning of ways the new loan program could be targeted for fraud.
“The Office of the Inspector General recognizes that we are facing an unprecedented time and is alerting the public to potential fraud schemes related to economic stimulus programs proposed by the US Small Business Administration’s response to the novel coronavirus pandemic “, says the document. “Scammers have already started targeting small business owners in these economically difficult times.”
The document included a warning that small business owners should not pay anything up front. And, “if someone offers a high interest bridge loan in the meantime, suspect fraud.”
The office has started work on a report that will lay out the potential vulnerabilities of previous disaster relief loan programs – and the clues they leave for investigators this time around.
Groups like the Chamber of Commerce and the National Federation of Independent Businesses also educate their members on how to apply for loans and how to protect their assets from potential bad actors.
“This is a very scary and real problem,” said Tom Sullivan, vice president of small business policy at the US Chamber of Commerce. “It is our responsibility to tell small businesses: don’t respond to an offer of financial assistance that is not initiated by yourself … If you don’t start the conversation, then be really, really careful. . “
The $ 350 billion about to be disbursed under the payment protection program will allow small businesses to apply for loans to keep staff on the payroll. Money can also go to small business owners to pay for rent and utilities. Loans can be canceled if small business owners meet certain requirements, including keeping staff on the payroll without reducing their wages.
From Capitol Hill, assistants work closely with administration to ensure the infrastructure is up to the challenge.
“There is work in progress to avoid any potential problems,” a GOP aide familiar with the construction of the program told CNN. “Everything has enormous reach and everything about everything is unprecedented right now.”
In light of the urgent needs, Congress also authorized the SBA to expand the number of eligible lenders that can participate in the program, meaning that banks that are not typically on the SBA’s Preferred Lender List and do not have no experience in the administration of SBA loans will now be allowed to.
“They are developing a simple and streamlined standard application and among all the partners around 3,000 people in the private sector are supporting this,” the familiar source said. Rocket Mortgage, the source added, will specifically help with disaster loans that come directly from the SBA and go to business owners.
“The balance here is speed versus perfection,” Sullivan said. “You don’t have time to wait for perfection to keep your doors open, the lights on, and your employees paid.”
We still wonder if $ 350 billion will be enough. Business groups argue the need will only continue as door-to-door orders continue across the country.
“There are very few who are not feeling the impact,” said Holly Wade, director of research and policy analysis for the National Federation of Independent Business. “They are in desperate need of an injection of cash. The demand for these loans is huge. It will be the challenge to facilitate the massive demand.”