There Is A Good Reason Why Small Businesses Still Struggle After Relief Funds Are Gone

According to a Small Business Administration analysis, around $3.7 billion in government help went to fraudsters prohibited from obtaining government funds.

The SBA provided low-interest, fixed-rate, long-term financing to assist businesses in surviving COVID-19 and the recession caused by the lockdown. Thousands of individuals, however, exploited the system as a result of bureaucratic inefficiency. While thousands of honest Americans lost their chance to receive the low-interest financing to save their businesses causing a drought of small businesses to close their doors forever in the last couple of years.

The New York Times reported:

The finding adds to a mountain of evidence chronicling what the Small Business Administration’s inspector general, Hannibal Ware, called an “unprecedented amount of fraud” in the agency’s pandemic relief efforts. In October, Mr. Ware’s office chastised the agency for improperly doling out billions in relief money to self-employed people who made “flawed or illogical” claims of having additional workers on their payroll.

Its Economic Injury Disaster Loan program distributed more than $210 billion last year in loans and grants. The program was organized in a hurry by the Trump administration as millions of businesses temporarily shut down because of the coronavirus and was designed to quickly send out money to help companies keep up on their bills.

Ware’s office released a report explaining that the agency neglected to cross-reference applications against the Treasury Department’s “Do Not Pay” system:

The Do Not Pay system was set up in 2011 to reduce improper payments to people who are dead, convicted of tax fraud or barred from receiving federal contracts, among other red flags. Mr. Ware found 117,135 applicants who got grants and 75,180 recipients who got loans despite matches in the system indicating a “high likelihood” that the payments were improper.

Other reports indicate that the federal government’s enhanced unemployment aid program wasted billions of dollars on fraudulent requests.

Just this last June, Axios found that up to half of all unemployment benefits awarded under COVID-19 — about $400 billion — may have been lost to scams and fraud, the majority of which occurred outside the United States.

“Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security,” Axios explained. Up to 70% of the stolen funds “likely left the country,” flowing to groups based in China, Nigeria, Russia, and other hostile nations. The remainder was likely “stolen by street gangs domestically, who have made up a greater share of the fraudsters in recent months.”