U.S. small business bailout program ignored Congress: watchdog

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(Reuters) – The US government’s $ 660 billion program to save small businesses hit by the coronavirus pandemic thwarts Congress’ intent by preventing some borrowers from converting loans to grants and not prioritizing good ones companies, a government watchdog said Friday.

FILE PHOTO: The dome of the United States Capitol is pictured ahead of a vote on additional funding for the coronavirus economic stimulus package, amid the coronavirus disease (COVID-19) outbreak in Washington, United States United, April 21, 2020. REUTERS / Tom Brenner / File photo

“Because (the Small Business Administration) has not provided advice to lenders on prioritizing borrowers in rural and underserved markets, these borrowers, including rural, minority, and women-owned businesses, have failed. -be not received the loans as expected, “said the inspector general. in a 40 page report here, referring to the Paycheck Protection Program, which is part of the $ 2.3 trillion CARES Act.

Adding to the problem, according to the report, the SBA did not collect any demographic data when issuing the loans, so it is unlikely to ever know how many loans were made to underserved borrowers.

The Inspector General said the SBA may request “optional” demographic information when borrowers request cancellation of their loans under the program. But, according to the report, tens of thousands of borrowers may not be able to convert the money into grants as Congress intended.

Under strict US Treasury and SBA loan cancellation terms, businesses that use less than 75% of their loan on payroll may not get the loan canceled. Congress did not specify such a threshold.

The report found that the 75% requirement, combined with the two-year loan term – also not imposed by Congress – could “represent an unforeseen burden on borrowers” given that many small businesses have long-term expenses. ‘higher operations, such as rent, than the head. count the costs.

Democratic Senate Leader Chuck Schumer said the report shows President Donald Trump’s administration “must immediately fix the paycheck protection program to help the real small businesses that have so far failed to fix the paycheck protection program. received the help they need ”.

The report recommended that the Treasury and the SBA examine the potential negative impact of these conditions and update them “if necessary”.

Reuters reported last week that many banks have been asking the Treasury and the SBA for weeks for more details on how to calculate how much of the loan can be forgiven, fearing that companies could end up with debts they are carrying. hadn’t counted.

Meanwhile, more than 40 publicly traded companies took out loans under the program even though they had enough money to cover their expenses for two months.

The SBA has so far approved more than 2.5 million loans totaling $ 536 billion, she said on Friday.

Report by Ann Saphir in San Francisco; Additional reporting by Heather Timmons and Michelle Price in Washington; Editing by Matthew Lewis and Leslie Adler

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