House Democrats flag nearly $3 billion in problematic small business relief loans

More than $3 billion in loans issued through the coronavirus emergency relief program for small businesses may have gone to firms that already received support or should have been excluded from the program, according to a study released Tuesday by House Democrats.

The Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, established to oversee the federal response to the pandemic, released an analysis of Paycheck Protection Program (PPP) data that raised several red flags.

The PPP was created through the March coronavirus relief bill to provide loans to struggling small businesses that could be entirely forgiven if used for payroll, rent and other essential expenses. The program has approved more than $525 billion in loans to more than 5.2 million businesses with fewer than 500 employees.

While the PPP has been credited with helping millions of businesses and their employees weather the pandemic, early glitches, unclear guidelines and oversight lapses have complicated the full success of the program.

The Democratic analysis released Tuesday, hours before Treasury Secretary Steven Mnuchin was scheduled to testify before the subcommittee, highlighted several potential gaps in PPP oversight and administration by the Treasury Department and Small Business Administration.

The Democratic staff identified 10,568 loans worth more than $1 billion total that were disbursed to a firm that already received a loan. The PPP regulations ban a firm from receiving more than one loan, but allows separate locations of the same franchise to receive individual loans.

Another $2.98 billion was lent to more than 11,000 businesses that were flagged in a federal database for mismatched addresses, using a post box for mail in lieu of a registered physical location, or created after February 15, 2020, which would have excluded them from PPP eligibility, according to the analysis.

And nearly 1,000 loans were disbursed to firms that are either banned from doing business with the federal government or have been cited for integrity and performance issues when working on federal contracts, according to the analysis.

Mnuchin is expected to face intense questioning from House Democrats during his Monday appearance before the special subcommittee. Democrats have also voiced concerns about the lack of PPP access for Black and Latino businessowners and potential preferential treatment given to well established businesses with access to other forms of credit.

Republicans, however, have touted the PPP’s successes and will likely highlight the results of their own analysis to counter Democratic concerns of fraud and oversight lapses. The subcommittee’s Republican staff claimed in a separate study released Tuesday that the program helped prevent 51 million workers from being laid off.