ICYMI: Congress Shifts to EIDL Oversight – SBE Council Testifies Before House Small Business Committee

By at 15 June, 2020, 1:53 pm

By Karen Kerrigan

Efforts to re-tool the Paycheck Protection Program (PPP) have overshadowed the need to address problems with the Economic Injury Disaster Loan (EIDL) program. As widely reported by the media and by small business owners attempting to access EIDL funding, the program experienced many snags during its launch and throughout implementation over the past few months. On June 10, the U.S. House Small Business Committee hosted a virtual hearing where small business owners spoke about their EIDL challenges.

I was invited to provide testimony at the hearing – “The Economic Injury Disaster Loan Program: A View from Main Street” – where I shared the experiences of SBE Council members and small business owners in navigating the EIDL application process, communicating with the Small Business Administration (SBA) about their applications and the program in general, and the confusion and frustration with shifting rules and procedures.

Make no mistake, as I noted in my testimony, the SBE Council members who received EIDL funding and loans are very grateful for this capital. And, as I noted in my opening statement, small business owners fully recognized that the SBA was given a huge job managing unprecedented EIDL demand.

Millions of applications overwhelmed the SBA portal, resulting in crashes and communication problems, which is why Congress may want to consider the use of sophisticated fintech platforms in the future in order to deliver capital with speed and efficiency. Speed was the promise of the EIDL program, which did not meet this expectation among others discussed at the hearing.

[BIPARTISAN LETTER ON EIDL: Read a June 9 bipartisan letter sent to SBA Administrator Jovita Carranza from House Small Business Committee Chairwoman Nydia Velazquez (D-NY), Ranking Member Steve Chabot (R-OH) and other members of the committee requesting specific information on the EIDL program.

From the launch of the program up to now, we’ve heard from SBE Council members and small business owners about their EIDL experiences. General EIDL issues of concern and disappointment for small business owners include:

● What’s the status of my EIDL application? Lack of communication from SBA, excessive time spent on hold and phone, and conflicting information received from SBA customer reps   

●  The arbitrary $1k per-employee cap on the “$10,000” Advance/Grant

●  The puzzling $150,000 loan cap (as advertised, the maximum is $2 million) and confusion about how loan amounts were determined

●  The “agriculture only” window for applications

●  Constraints on EIDL loan recipients as written in the loan agreement

The discussion with committee members was positive and productive, as they received compelling insight and stories from three small business owners. As I reported in my testimony, the EIDL program was well designed for many types of small businesses, especially given the fact that PPP was too restrictive or not an appropriate fit for many businesses. Small business owners dove into the application process with high hopes.

Several points I covered during Q&A period included:

Implement the program as advertised: It would have been far better for the SBA to operationalize the program in the way EIDL was advertised ($2 million maximum loan, $10K grant) rather than attempting to parcel out a little money to as many applicants as possible. It would have been better to deplete the limited funds appropriated by Congress under the program’s original design and request additional funds after the money ran out.

Lean on the private sector: Look to outsource or develop a public-private partnership for processing EIDL loans in the future.

More information is better. Transparency in communications and program changes is/was needed. Small business owners just want the facts so they can make decisions. In the case of EIDL loans, many said they would have refocused their efforts on other sources of capital had  they known restrictions were being placed on maximum loan amounts (at $150k). In addition, many small business owners said they had no idea how their loan size was determined.

Data drives decisions. While some information has become available on EIDL loans, more data and information are needed so that Congress can make informed decisions about the future of the program.

If Congress is to provide more funds for the program, those who received smaller advances than what was advertised and anticipated should be made whole.

You can watch the video recording of the hearing here.  

SBE Council will continue to provide input to Congress, and provide continual feedback on EIDL to advance needed reforms and changes to the program.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.


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