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GAO-21-589 — Economic Injury Disaster Loan Program: Additional Actions Needed to Improve Communication with Applicants and Address Fraud Risks (July 2021)
Record facts
| Court | U.S. Government Accountability Office |
|---|---|
| Filed | 2021-07-01 |
Summary
A report to congressional addressees by the United States Government Accountability Office, GAO-21-589, issued July 2021, on communication with applicants and fraud risks in the Economic Injury Disaster Loan program. It reports that between March 2020 and February 2021 SBA provided about 3.8 million EIDL loans and 5.8 million grants totaling $224 billion. It finds applicants cited a lack of information and uncertainty about application status, and that SBA data showed 5.3 million duplicate applications. On fraud risk it states that SBA had approved at least 3,000 loans totaling about $156 million to businesses its policies made ineligible as of September 30, 2020, and that more than 20,000 suspicious activity reports were filed between May and October 2020. GAO recommends a comprehensive communications strategy for disaster response programs and states SBA agreed.
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ECONOMIC INJURY
DISASTER LOAN
PROGRAM
Additional Actions
Needed to Improve
Communication with
Applicants and
Address Fraud Risks
Report to Congressional Addressees
July 2021
GAO-21-589
United States Government Accountability Office
United States Government Accountability Office
Highlights of GAO-21-589, a report to
congressional addressees
July 2021
ECONOMIC INJURY DISASTER LOAN
PROGRAM
Additional Actions Needed to Improve
Communication with Applicants and Address Fraud
Risks
What GAO Found
Economic Injury Disaster Loan (EIDL) applicants and recipients varied in terms of
business size, years in operation, and industry, based on GAO’s analysis of
Small Business Administration (SBA) data from March 2020 through February
2021:
•
Business size. A majority of EIDL applicants (about 81 percent) and
EIDL recipients (about 86 percent) were smaller businesses (10 or fewer
employees).
•
Years in operation. A majority of EIDL applicants (about 63 percent)
had been in operation for less than 5 years. However, businesses in
operation for more than 5 years received the majority of total EIDL loan
dollars and had higher approval rates compared to newer businesses.
•
Industry. Businesses in the personal services and transportation
industries made up the largest share of applicants, while those in the
legal services and lodging industries were approved for loans at the
highest rates (see figure).
Top Loan Applicants and Approval Rates by Business Industry
In addition, small businesses in counties with higher median household income,
better internet access, and more diverse populations generally received more
loans per 1,000 businesses and larger loans.
EIDL applicants have faced a number of challenges, according to applicants and
other business stakeholders GAO interviewed between August 2020 and
February 2021. For example, applicants from five discussion groups and several
stakeholders cited lack of information and uncertainty about application status as
major concerns. In addition, until February 2021, SBA did not provide important
information to potential applicants, such as limits on loan amounts and definitions
of certain program terms. Lack of important program information and application
status put pressure on SBA’s resources and negatively affected applicants’
experience. For example, SBA’s customer service line experienced call surges
that resulted in long wait times, and SBA’s data showed that 5.3 million
applications were duplicates. SBA’s planning documents describe in general
View GAO-21-589. For more information,
contact William B. Shear at (202) 512-8678 or
ShearW@gao.gov.
Why GAO Did This Study
Between March 2020 and February
2021, SBA provided about 3.8 million
low-interest EIDL loans and 5.8 million
grants (called advances) totaling $224
billion to help small businesses
adversely affected by COVID-19.
Borrowers can use these low-interest
loans and advances to pay for
operating and other expenses.
The CARES Act includes a provision
for GAO to monitor funds provided for
the COVID-19 pandemic. This report
examines, among other objectives, the
characteristics of program applicants
and recipients; the challenges EIDL
applicants experienced and the extent
to which SBA has addressed them;
and the steps SBA has taken to
address risks of fraud and provision of
funds to ineligible applicants.
GAO reviewed documents from SBA,
an EIDL contractor, and two of its
subcontractors. In addition, GAO
analyzed loan application data,
conducted five discussion groups with
applicants, and interviewed staff from
SBA, six Small Business Development
Centers, and six business
associations. GAO also analyzed
socioeconomic, demographic, and
geographic data on EIDL program
participants.
What GAO Recommends
GAO recommends that SBA develop a
comprehensive communications
strategy that includes guidelines for the
type and timing of information to be
provided to potential and actual
applicants of its disaster response
programs. SBA agreed with the
recommendation.
terms the public outreach to be conducted following disasters, but they do not
detail the type or timing of the information to be provided. Developing and
implementing a comprehensive communication strategy that includes these
details could improve the quality, clarity, and timeliness of information SBA
provides to its applicants and resource partners following catastrophic disasters.
GAO’s ongoing review of the EIDL program related to COVID-19 has found that
the program is susceptible to providing funding to ineligible and fraudulent
applicants. For example, as GAO reported in January 2021, SBA had approved
at least 3,000 loans totaling about $156 million to businesses that SBA policies
state were ineligible for the EIDL program, such as real estate developers and
multilevel marketers, as of September 30, 2020. In addition, GAO found that
between May and October 2020, over 900 U.S. financial institutions filed more
than 20,000 suspicious activity reports related to the EIDL program with the
Financial Crimes Enforcement Network. Further, GAO’s analysis of 51
Department of Justice cases involving fraud charges for EIDL loans as of March
2021 found that these cases involved identity theft, false attestation, fictitious or
inflated employee counts, and misuse of proceeds.
Over the course of its COVID-19 response, SBA has made some changes to
address these risks. For example, beginning in June 2020, SBA took actions to
improve loan officers’ ability to withhold funding for applicants suspected of fraud.
However, SBA has not yet implemented recommendations GAO has previously
made to address EIDL program risks.
•
In January 2021, GAO recommended that SBA conduct data analytics
across the EIDL portfolio to detect potentially ineligible and fraudulent
applications (GAO-21-265). SBA did not agree or disagree with this
recommendation. However, in May 2021, SBA officials stated the agency
was in the process of developing analysis to apply certain fraud
indicators to all application data.
•
In March 2021, GAO recommended that SBA (1) implement a
comprehensive oversight plan to identify and respond to risks in the EIDL
program, (2) conduct and document a fraud risk assessment, and (3)
develop a strategy to address the program’s assessed fraud risks on a
continuous basis (GAO-21-387). SBA agreed with all three
recommendations. In May 2021, SBA officials stated that the agency had
started to assess fraud risk for the program.
Fully implementing these recommendations would help SBA to safeguard billions
of dollars of taxpayer funds and improve the operation of the EIDL program.
Page i
GAO-21-589 Economic Injury Disaster Loan Program
Letter
1
Background
4
SBA Took Steps to Address Processing Challenges but Lacks a
Comprehensive Communications Strategy
13
Program Participants Generally Found the EIDL Program Helpful
26
SBA Has Begun to Address Eligibility and Fraud Concerns but
Has Not Fully Implemented GAO Recommendations
28
Smaller and Older Businesses Received Larger Loans and Were
Approved at Higher Rates, and Wealthier Communities
Received More Funding
41
Conclusions
60
Recommendation for Executive Action
60
Agency Comments and Our Evaluation
61
Appendix I
Objectives, Scope, and Methodology
64
Appendix II
Socioeconomic and Demographic Characteristics of EIDL Applicants
and Recipients
72
Appendix III
Analysis of EIDL Lending Outcomes for Selected Metropolitan
Statistical Areas by ZIP Code
82
Appendix IV
Comments from the Small Business Administration
87
Appendix V
GAO Contact and Staff Acknowledgments
91
Tables
Table 1: Key Legislation Affecting the Economic Injury Disaster
Loan (EIDL) Program in Response to COVID-19
5
Table 2: Economic Injury Disaster Loan Program Eligibility Criteria
and Validation
35
Table 3: Economic Injury Disaster Loan Approval Rates by
Business Size, March 2020–February 2021
42
Contents
Page ii
GAO-21-589 Economic Injury Disaster Loan Program
Table 4: Average Economic Injury Disaster Loan (EIDL) Amount
and Percentage of Total Loan Dollars, by Business Size,
March 2020–February 2021
42
Table 5: Economic Injury Disaster Loan (EIDL) Approval Rate,
Average Loan Amount, and Percentage of Total Loan
Dollars, by Age of Business, March 2020–February 2021
43
Table 6: Top 10 Industries by Number of Economic Injury Disaster
Loan (EIDL) Applicants, March 2020–February 2021
44
Table 7: Top 10 Industries by Economic Injury Disaster Loan
Approval Rate, March 2020–February 2021
44
Table 8: Top 10 Industries by Economic Injury Disaster Loan
Average Loan Amount, March 2020–February 2021
45
Table 9: Economic Injury Disaster Loan (EIDL) Applications, Loan
Size, and Share of Total Loan Dollars, by County
Unemployment Rate
72
Table 10: Economic Injury Disaster Loan (EIDL) Applications,
Loan Size, and Share of Total Loan Dollars, by County
Share of Households Receiving Public Assistance Income
74
Table 11: Economic Injury Disaster Loan (EIDL) Applications,
Loan Size, and Share of Total Loan Dollars, by County
Poverty Rate
76
Table 12: Economic Injury Disaster Loan (EIDL) Applications,
Loan Size, and Share of Total Loan Dollars, by County
Foreign-Born Population
78
Table 13: Economic Injury Disaster Loan (EIDL) Applications,
Loan Size, and Share of Total Loan Dollars, by County
Households with Limited English Proficiency
80
Figures
Figure 1: Timeline of the Economic Injury Disaster Loan Program
in Response to COVID-19
9
Figure 2: SBA Processing of Economic Injury Disaster Loans and
Advances
11
Figure 3: Weekly SBA Processing and Disbursement Center
Staffing Levels, March 20, 2020–February 26, 2021
15
Figure 4: Economic Injury Disaster Loans (EIDL) Cumulative
Application Volume and Percentage of Applications
Processed, March 15, 2020–February 27, 2021
16
Figure 5: Number of Economic Injury Disaster Loan Applications
and Average Processing Times, by Month Application
Accepted, March 2020–February 2021
17
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 6: SBA Customer Service Line Average Wait Times and
Call Volumes, Week of March 15, 2020, through Week of
February 14, 2021
19
Figure 7: SBA Customer Service Center Staffing Levels, March
20, 2020–February 26, 2021
20
Figure 8: Department of Justice Fraud Charges Related to the
Economic Injury Disaster Loan Program, as of March
2021
30
Figure 9: Economic Injury Disaster Loan (EIDL) Lending
Outcomes by Median Household Income
47
Figure 10: Economic Injury Disaster Loan (EIDL) Lending
Outcomes by Household Internet Access
49
Figure 11: Economic Injury Disaster Loan Program Lending
Outcomes by County Minority Population
51
Figure 12: Economic Injury Disaster Loan Program Lending
Outcomes for Urban and Rural Counties
53
Figure 13: Economic Injury Disaster Loan Program Lending
Outcomes for Tribal Lands
55
Figure 14: Approved Economic Injury Disaster Loans (EIDL) Per
1,000 Small Businesses by County, March 2020–
February 2021
57
Figure 15: Economic Injury Disaster Loan (EIDL) Amount per
Small Business Employee by County, March 2020–
February 2021
58
Figure 16: Approval Rate for Economic Injury Disaster Loans
(EIDL) by County, March 2020–February 2021
59
Figure 17: Economic Injury Disaster Loan Program Lending
Outcomes by County Unemployment Rate
73
Figure 18: Economic Injury Disaster Loan Program Lending
Outcomes by County Share of Households Receiving
Public Assistance Income
75
Figure 19: Economic Injury Disaster Loan Program Lending
Outcomes by County Poverty Rate
77
Figure 20: Economic Injury Disaster Loan Program Lending
Outcomes by Foreign-Born Population Percentage
79
Figure 21: Economic Injury Disaster Loan Program Lending
Outcomes by County Share of Households with Limited
English Proficiency
81
Figure 22: Approval Rates for Economic Injury Disaster Loans in
the New York-Newark-Jersey City Metropolitan Statistical
Area for Selected Indicators, March 2020–February 2021
83
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 23: Approval Rates for Economic Injury Disaster Loans in
the Chicago-Naperville-Elgin Metropolitan Statistical Area
for Selected Indicators, March 2020–February 2021
84
Figure 24: Approval Rates for Economic Injury Disaster Loans in
the San Jose-Sunnyvale-Santa Clara Metropolitan
Statistical Area for Selected Indicators, March 2020–
February 2021
85
Figure 25: Approval Rates for Economic Injury Disaster Loans in
the New Orleans-Metairie Metropolitan Statistical Area for
Selected Indicators, March 2020–February 2021
86
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GAO-21-589 Economic Injury Disaster Loan Program
Abbreviations
COVID-19
Coronavirus Disease 2019
DOJ
Department of Justice
EIDL
Economic Injury Disaster Loan
FAQ
frequently asked questions
Federal Reserve
Board of Governors of the Federal Reserve System
FinCEN
Financial Crimes Enforcement Network
MSA
metropolitan statistical areas
OIG
Office of Inspector General
SBA
Small Business Administration
SBDC
Small Business Development Center
USDA
U.S. Department of Agriculture
ZCTA
ZIP code tabulation area
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Page 1
GAO-21-589 Economic Injury Disaster Loan Program
441 G St. N.W.
Washington, DC 20548
July 30, 2021
Congressional Addressees
Coronavirus Disease 2019 (COVID-19) has adversely affected most of
the more than 30 million small businesses in the United States through
decreased revenue or business closures. To assist small businesses and
nonprofits affected by the pandemic, Congress appropriated funding and
eased borrowing requirements for the Economic Injury Disaster Loan
(EIDL) program. The EIDL program, which is administered and
implemented by the Small Business Administration (SBA), provides low-
interest loans to help borrowers meet obligations or pay ordinary and
necessary operating expenses. In addition, Congress appropriated
funding to create grants—known as advances—for EIDL applicants;
these advances do not have to be repaid. The program provided about
$230 billion in loans and advances to small businesses and nonprofits
between March 2020 and May 2021.
We were asked to review how SBA administered the EIDL program in
response to the COVID-19 pandemic. In addition, the CARES Act
includes a provision for us to monitor and oversee the use of funds made
available to prepare for, respond to, and recover from the COVID-19
pandemic.1 For this report, we examined (1) challenges SBA and EIDL
applicants experienced as part of SBA’s implementation of the EIDL
program in response to COVID-19 and the extent to which SBA has
addressed these challenges; (2) the EIDL program’s effects on its
participants, including the effects of loan limits SBA put in place; (3) steps
SBA has taken to address risks of fraud and provision of funds to
ineligible applicants; and (4) the characteristics of program applicants and
recipients. The EIDL loan program existed prior to the pandemic, but
Congress has made legislative changes to modify the program in
response to COVID-19, including the addition of EIDL advances. This
report focuses on SBA’s implementation of EIDL since the start of the
pandemic.2
1Pub. L. No. 116-136, § 19010, 134 Stat. 281, 579-80 (2020).
2We regularly issue government-wide reports on the federal response to COVID-19. For
the latest report, see GAO, COVID-19: Continued Attention Needed to Enhance Federal
Preparedness, Response, Service Delivery, and Program Integrity, GAO-21-551
(Washington, D.C.: July 19, 2021). Our next government-wide report will be issued in
October 2021 and will be available on GAO’s website at https://www.gao.gov/coronavirus.
Letter
Page 2
GAO-21-589 Economic Injury Disaster Loan Program
To address the first objective, we reviewed relevant legislation and SBA’s
guidance, policies, procedures, contracts, and other material for the EIDL
program. In addition, we reviewed SBA data on EIDL program processing
times, staffing, and Customer Service Center call wait times. To assess
the reliability of these data, we interviewed SBA officials. We determined
these data were reliable for the purpose of reporting on SBA’s loan
processing volumes and times, staffing levels, and Customer Service
Center call wait times and call volumes. We also interviewed officials from
SBA’s Office of Disaster Assistance.
In addition, we interviewed representatives from a nongeneralizable
sample of six state or regional Small Business Development Centers
(SBDC), the national association representing SBDCs, two associations
representing small businesses nationwide, and four industry-specific
business associations.3 Collectively, we refer to the SBDCs and
associations as stakeholders. We selected the SBDCs based on a few
factors, including that the Census Bureau’s Small Business Pulse Survey
showed that the state or region in which they are located experienced a
large negative impact from the pandemic and had a high share of small
businesses receiving EIDL funding.4 We chose industry-specific
associations that reflect industries that were substantially affected by the
pandemic and had large numbers of EIDL borrowers, based on our
review of the Census Bureau’s Small Business Pulse Survey and SBA
loan data.
We also held five discussion groups with EIDL program applicants to
learn about their experience with the program—two groups of applicants
that were declined for loans and three groups that were approved. Each
group consisted of four to six participants, and we spoke with 22 EIDL
applicants in total. Discussion groups are intended to generate in-depth
information about the reasons for participants’ views on specific topics.
While we report our findings by the number of discussion groups in which
a topic was discussed, this does not necessarily mean that there was a
consensus or agreement among all discussion group participants on a
3SBA partially funds SBDCs, which offer counseling, training, and technical assistance to
current and prospective small businesses.
4The Small Business Pulse Survey measures the effect of changing business conditions
during the pandemic on small businesses, including whether small businesses received
EIDL funding.
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GAO-21-589 Economic Injury Disaster Loan Program
given topic. The opinions expressed by the participants represent their
points of view and may not represent the views of all EIDL applicants.
To address the second objective, we obtained information from SBA
about the number of borrowers affected by the loan limits SBA put in
place. We interviewed SBA representatives and the stakeholders noted
above about the impact of these limits and the impact of the program. We
also asked participants in the discussion groups described above about
these topics.
To address the third objective, we reviewed prior GAO reports and
reports from SBA’s Office of Inspector General and SBA’s independent
financial statement auditor. We interviewed SBA officials about their
controls for ensuring eligibility and addressing fraud risk. We also
obtained written responses and other documentation from SBA’s EIDL
contractor and subcontractors about the services they provided and their
interactions with SBA. To characterize fraud cases and schemes used to
obtain EIDL funds, we analyzed 51 fraud-related cases based on
information provided in Department of Justice (DOJ) and federal court
documents from May 2020 to March 2021.
To address our fourth objective, we analyzed SBA data on loan
applications submitted between March 14, 2020, and February 28, 2021.
We combined these data with county-level data from the Census Bureau
and Department of Agriculture to examine the socioeconomic,
demographic, and geographic characteristics of the counties in which
approved and denied applicants were located. For four metropolitan
statistical areas, we also combined SBA’s EIDL applicant data with
Census Bureau data at the ZIP code tabulation area level to examine the
socioeconomic and demographic characteristics of ZIP code tabulation
areas in which applicants and borrowers were located.5 We reviewed
documentation related to the data used and determined that the data
were reliable for describing the characteristics of the communities in
which EIDL applicants were located. For more information about our
objectives, scope, and methodology, see appendix I.
5The Census Bureau defines metropolitan statistical areas as having at least one
urbanized area of 50,000 or more population, plus adjacent territory that has a high
degree of social and economic integration with the core as measured by commuting ties.
ZIP code tabulation areas are generalized areal representations of U.S. Postal Service
ZIP code service areas, which are not areal features but a collection of mail delivery
routes.
Page 4
GAO-21-589 Economic Injury Disaster Loan Program
We conducted this performance audit from July 2020 to July 2021 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
The Small Business Act authorizes SBA to make EIDL loans to eligible
small businesses and nonprofit organizations located in a disaster area.
In response to COVID-19, Congress provided additional funding for the
existing EIDL program to support small businesses through several
legislative actions and temporarily changed certain EIDL program
application requirements that were in place under the Small Business Act
(see table 1). On March 6, 2020, Congress deemed COVID-19 a disaster
under the Coronavirus Preparedness and Response Supplemental
Appropriations Act of 2020, making financial obligations that could not be
met as a result of COVID-19 an eligible expense for the EIDL program. At
that time, SBA had about $1.1 billion in loan credit subsidy available to
support about $7–$8 billion in disaster loans.6 On April 16, 2020, SBA
announced that this funding had been exhausted. On April 24, 2020,
Congress provided $50 billion in loan credit subsidy, which would support
about $470 billion in EIDL loans.
6Loan credit subsidy covers the government’s cost of extending or guaranteeing credit
and takes into consideration the estimated cash flows to and from the government. Loan
credit subsidy represents the estimated long-term cost of providing loans and takes into
account expected future loan performance, including loan repayments, prepayments,
defaults, recoveries, and the timing of these events. The loan credit subsidy cost was
13.62 percent and 8.92 percent for fiscal years 2020 and 2021, respectively. For fiscal
year 2020, this means that the estimated cost was $13.62 per $100 of disaster loans
provided.
Background
Legislative Changes to
EIDL in Response to
COVID-19
Page 5
GAO-21-589 Economic Injury Disaster Loan Program
Table 1: Key Legislation Affecting the Economic Injury Disaster Loan (EIDL) Program in Response to COVID-19
Legislation and date enacted
Appropriation
amount
Key provisions and changes
Coronavirus Preparedness and
Response Supplemental
Appropriations Act of 2020
March 6, 2020
None
•
Deemed COVID-19 a disaster under the Small Business Act, making
economic injury caused by COVID-19 eligible for EIDL loans
CARES Act
March 27, 2020
$10 billion for EIDL
advances
•
Authorized the Small Business Administration (SBA) to provide
eligible applicants with EIDL advances of up to $10,000 that do not
need to be repaid
•
Removed the requirement that applicants must not be able to obtain
credit elsewhere
•
Expanded eligibility for the EIDL program
•
Restricted SBA from obtaining federal tax transcripts as part of the
EIDL application process
Paycheck Protection Program and
Health Care Enhancement Act
April 24, 2020
$10 billion for EIDL
advances and $50
billion for loan
subsidies
•
Expanded EIDL eligibility to agricultural enterprises previously
ineligible
Consolidated Appropriations Act,
2021
December 27, 2020
$20 billion for
targeted EIDL
advances
•
Removed restriction that SBA cannot obtain federal tax transcripts as
part of the EIDL application process
•
Extended deadline to apply for EIDL loans and advances by 1 year,
from December 31, 2020, to December 31, 2021
•
Provided targeted advances up to the full amount of $10,000 to
certain eligible businesses and nonprofits that have not more than
300 employees, are located in low-income areas, and have
experienced greater than 30 percent loss in income
American Rescue Plan Act of
2021
March 11, 2021
$10 billion for
targeted EIDL
advances and $5
billion for
supplemental
targeted EIDL
advances
•
Provided additional funding for targeted advances of up to $10,000 for
the same entities eligible under the Consolidated Appropriations Act,
2021
•
Provided an additional $5,000 in supplemental targeted advances for
eligible entities in low-income communities that suffered economic
loss of greater than 50 percent and employed not more than 10
employees
Source: GAO analysis of legislation. | GAO-21-589
In addition to funding for loans, Congress provided funding for EIDL
advances—grants that do not need to be repaid—which were previously
not an element of the EIDL program. In March and April of 2020,
Congress authorized SBA to provide $20 billion in advances of up to
$10,000 to EIDL applicants, even if they did not qualify for a loan. In
implementing this provision, SBA limited the advances to $1,000 per
employee up to a total of $10,000. Funding for the advances was
depleted in July 2020. In December 2020 and March 2021, Congress
provided a total of $30 billion for targeted EIDL advances and $5 billion
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GAO-21-589 Economic Injury Disaster Loan Program
for supplemental targeted EIDL advances available for businesses that
meet specific criteria, including being located in low-income communities
and meeting certain thresholds for economic loss and number of
employees.7
Small businesses eligible to borrow from the EIDL program in response to
COVID-19 include small agricultural cooperatives, Employee Stock
Ownership Plans, tribal concerns, sole proprietorships, independent
contractors, and agricultural enterprises.8 Eligible small businesses
consist of those that have no more than 500 employees or are defined as
small according to SBA size standards.9 Most private nonprofit
organizations are also eligible. Loan, advance, and targeted or
supplemental targeted advance recipients can use the funds to cover
expenses such as payroll, rent, utilities, and fixed debt payments, among
other normal operating expenses.
7A low-income community is defined as a census tract where the poverty rate is at least
20 percent, or in the case of a tract not located within a metropolitan area, where the
median family income does not exceed 80 percent of the statewide median family income.
For census tracts in metropolitan areas, the median family income for the tract must not
exceed 80 percent or greater of the statewide median family income or the metropolitan
area median family income. For areas not within census tracts, equivalent county divisions
will be used for the purpose of determining poverty rates and median family income.
Additionally, a population census tract with population of less than 2,000 shall be treated
as a low-income community if the tract is within an area of high poverty and
unemployment designated under 26 U.S.C. § 1391, and is contiguous to one or more low-
income communities. For a census tract within high migration rural counties to be defined
as a low-income community, the median family income must not exceed 85 percent of the
statewide median family income. Economic loss is defined as the amount by which the
gross receipts of the covered entity declined during an 8-week period between March 2,
2020, and December 31, 2021, relative to a comparable 8-week period immediately
preceding March 2, 2020, or during 2019. For seasonal businesses, SBA shall determine
the economic loss as appropriate.
8Most agricultural enterprises were not eligible for targeted EIDL advances or
supplemental targeted EIDL advances.
9Applicants to the targeted EIDL advances must have not more than 300 employees, and
applicants for the supplemental targeted EIDL advances must have not more than 10
employees. SBA’s Table of Size Standards matches industries to the North American
Industry Classification System to specify the largest a business can be and still qualify as
a small business. Based on SBA’s size standards, qualifying as a small business can be
based on the number of employees or gross receipts. However, the CARES Act made all
small businesses with 500 or fewer employees eligible for EIDL.
EIDL Program Terms in
Response to COVID-19
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GAO-21-589 Economic Injury Disaster Loan Program
For EIDL loans, recipients have a repayment period of up to 30 years,
and SBA deferred repayment for all EIDL loans until 2022.10 For EIDL
loans in response to COVID-19, SBA set the interest rate at 3.75 percent
for businesses and 2.75 percent for nonprofits. Interest accrues on the
outstanding balance of the loan during deferment.
The loan amount SBA offers to the EIDL applicant depends on the
amount of the applicant’s economic injury, as well as on loan limits that
SBA put in place.11 Economic injury is the change in the applicant’s
financial condition attributable to the effect of a disaster, resulting in the
inability of the applicant to meet its obligations or to pay ordinary and
necessary operating expenses. SBA calculated the economic injury using
gross revenue and cost of goods sold between January 31, 2019, and
January 31, 2020, two pieces of information requested on the EIDL
application. SBA initially calculated economic injury related to COVID-19
by presuming 6 months of lost gross profit. For example, a business with
$120,000 in annual revenue and $60,000 in cost of goods sold has
$60,000 in annual gross profit, or $5,000 per month.12 The economic
injury for this business would be $5,000 multiplied by six, or $30,000.
From March 16, 2020 through May 3, 2020, SBA limited the maximum
loan amount to $500,000, even if the calculated economic injury
exceeded that amount. From May 4, 2020, through April 5, 2021, SBA
limited the maximum loan amount to $150,000. SBA previously told us
that this decision was made in order to provide more loans to small
businesses.13 Beginning on April 6, 2021, SBA increased the loan limit
back to $500,000, revised its economic injury calculation to presume 24
10For loans made in calendar year 2020, the first payment due date was extended from
12 months to 24 months from the date the loan was executed. For loans made in 2021,
the first payment due date was extended from 12 months to 18 months from the date the
loan was executed.
11The statutory maximum for an EIDL loan is $2 million, but SBA can set a lower
maximum amount.
12In February 2021, SBA defined the cost of goods sold as the direct costs of producing
the goods sold by a company, including the cost of materials and labor directly used to
create the goods. It excludes indirect expenses, such as sales force and distribution costs.
SBA used different information to determine economic injury for agricultural enterprises
and nonprofits. SBA asked these applicants to provide operating expenses for the 12
months prior to the disaster. To calculate 6 months of economic injury, SBA divided the
12-month operating expenses by two.
13See GAO, COVID-19: Opportunities to Improve Federal Response and Recovery
Efforts, GAO-20-625 (Washington, D.C.: June 25, 2020).
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GAO-21-589 Economic Injury Disaster Loan Program
months of lost gross profit, and began to accept requests for loan
increases. Using the same example of a business with a gross profit of
$5,000 per month, the calculated economic injury under the revised
economic injury calculation would be $120,000 ($5,000 multiplied by 24)
rather than $30,000. After SBA makes a loan offer, the applicant can
select an amount that is lower than the offered amount.14
SBA’s Office of Disaster Assistance is responsible for administering the
EIDL program in response to COVID-19, primarily through the following
offices:
•
The Office of Disaster Assistance Headquarters creates policies,
procedures, and guidelines for all office operations and coordinates
with Congress.
•
The Customer Service Center is a single nationwide point of contact
for SBA disaster loans. It provides a call center, email response, and
disaster application mailings.
•
Field Operations Centers coordinate disaster field operations and
publicize the Office of Disaster Assistance’s disaster lending
programs before and after disasters.
•
The Processing and Disbursement Center screens all applications,
reviews and processes those that are complete for approval or
declination, closes all approved loans, and disburses loan proceeds.
To implement the EIDL program in response to COVID-19, SBA took
several key steps, including declaring businesses in specific areas
eligible, implementing a new system for processing applications, and
creating a new application website (see fig. 1). At times, SBA temporarily
stopped receiving and processing applications because of program
changes, legislative changes, and exhaustion of funding.
14SBA stated that if a borrower accepts a loan for less than the full amount offered, the
borrower would have up to 2 years after the date of the loan was executed to request
additional funds.
SBA’s Office of Disaster
Assistance
SBA’s Implementation of
the EIDL Program in
Response to COVID-19
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 1: Timeline of the Economic Injury Disaster Loan Program in Response to COVID-19
SBA declared disaster areas eligible for the EIDL program. After
Congress deemed COVID-19 a disaster, SBA began to declare states
and territories eligible for EIDL loans beginning on March 16, 2020.15 The
declarations allowed SBA to begin using about $1.1 billion of its existing
disaster loan credit subsidy to make EIDL loans. By March 21, 2020, SBA
had declared all states, U.S. territories, and the District of Columbia to be
disaster areas eligible for EIDL funding.
SBA implemented a new system for processing COVID-19 EIDL
applications. SBA had an existing disaster loan processing system in
15SBA changed its requirement that a state or territory provide documentation certifying
that at least five small businesses have suffered substantial economic injury as a result of
the disaster, with at least one business located in each declared county or parish. Under a
new criterion, states and territories are required to certify that at least five small
businesses within the state or territory have suffered economic injury, regardless of where
businesses are located.
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GAO-21-589 Economic Injury Disaster Loan Program
place at the start of the pandemic. However, that system did not have the
capacity to handle the number of EIDL applications SBA received in
response to COVID-19. SBA turned to an existing contractor, RER
Solutions, for a system to provide automated initial recommendations to
approve or decline EIDL applications and flag applications with issues for
further review by SBA.16 RER Solutions had an existing subcontractor—
Rocket Loans—that supported SBA’s existing systems used to provide
disaster loans to individuals for home and personal property repairs. To
process EIDL loans, Rocket Loans added a second-tier contractor—
Rapid Finance—to use Rapid Finance’s underwriting system to perform
data validation and conduct automated checks for potential fraud and
eligibility as part of the application review process.17 We describe these
checks further below.
SBA created new EIDL application forms and a new loan application
website. In late March 2020, SBA released a streamlined loan
application. The streamlined application did not require applicants to
provide documents previously required for EIDL loan applications,
including profit and loss statements and a copy of the most recent federal
income tax return. Working with Rapid Finance, SBA also implemented a
new application website that included an option for loan applicants to
apply for advances.
EIDL temporarily stopped accepting applications as a result of
exhaustion of funding and legislative changes. On April 15, 2020,
SBA stopped accepting new applications and announced the following
day that the $10 billion in funding for advances and the $1.1 billion in
disaster loan credit subsidy had been exhausted. After the passage of the
Paycheck Protection Program and Health Care Enhancement Act on April
24, 2020, SBA resumed accepting applications on May 4, 2020, but only
from agricultural enterprises. SBA resumed accepting applications from
all eligible applicants on June 15, 2020. On July 11, 2020, SBA
announced that funding for EIDL advances had been exhausted and
subsequently removed the option to request EIDL advances from the
application website.
16SBA modified the original contract from $100 million to $600 million on April 17, 2020,
and again to $750 million on August 12, 2020. SBA also extended the term of the contract
as part of the modification.
17RER Solutions told us that the company receives 51 percent of the contract’s funding
while the subcontractors combined receive 49 percent.
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GAO-21-589 Economic Injury Disaster Loan Program
SBA processed EIDL loans and advances differently (see fig. 2).
Applicants that applied to the EIDL program before July 2020 (prior to the
depletion of funding for advances) could apply for advances and loans on
the same application. SBA approved and declined advances solely based
on automated validation of certain applicant information. To approve and
decline loans, SBA combined automated validation and further manual
review by SBA staff.
Figure 2: SBA Processing of Economic Injury Disaster Loans and Advances
Note: This figure does not depict processing of targeted or supplemental advances.
Rapid Finance’s underwriting system accesses various third-party
databases and public domain information to identify certain indicators of
potential fraud and to validate bank account information. Examples of
potential fraud indicators the system identifies include suspicious online
behavior, high-risk internet protocol addresses, bank account ownership
that does not match the business, and owner information that cannot be
validated. Additionally, the system compares application responses to
SBA’s eligibility criteria, such as type of business activity and the date on
EIDL Loan and Advance
Processing Steps
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GAO-21-589 Economic Injury Disaster Loan Program
which the business was established.18 SBA automatically approved or
declined applicants for advances that passed fraud and eligibility
validations without further action.19 To determine eligibility for loans, the
system also pulls credit reports to validate whether the applicant meets
the minimum credit score, has an open bankruptcy, or has delinquent
child support. The validation system does not automatically approve loan
applications but does automatically decline loan applications that do not
meet the minimum credit score. The system records fraud alerts and
other alerts identified through the validation process for further review by
SBA staff.
SBA loan officers at the Processing and Disbursement Center are to
review fraud and other alerts recorded by the automated validation
system and approve or decline the application based on whether they can
mitigate the alerts through research or obtain information from applicants.
Supervisory officials—team leaders—review the loan officers’ decisions
and make the final decision. In cases where the system does not identify
any alerts and therefore does not require the loan officers to mitigate
them, the team leaders are to review the application and approve the
loan.
Applicants that pass the automated validation process for loans receive
invitations to create an account for an online loan portal, where the
applicant can select the desired loan amount up to the amount of the
calculated economic injury or the maximum loan limit. Applicants that
were automatically declined do not have access to this online loan portal.
Declined loan applicants may request that SBA reconsider their
applications. Additionally, approved applicants may also file a
reconsideration request for SBA to increase the loan amount up to the
loan limit set by SBA.20
18Certain business activities are ineligible for EIDL loans and advances. These include, for
example, applicants engaged in illegal activities, political or lobbying activities, and
production of products or services determined to be obscene. Additionally, businesses
must have been established on or before January 31, 2020.
19This process differs for targeted and supplemental advances, which we discuss later in
the report. Additionally, we provide more information on fraud and eligibility checks later in
the report.
20Approved applicants that selected a loan amount less than the amount SBA offered may
appeal for increases. Additionally, approved applicants that believe their economic injury
should be higher may also appeal for increases.
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GAO-21-589 Economic Injury Disaster Loan Program
A key challenge to implementing the EIDL program in response to
COVID-19 was the historically high volume of applications SBA received,
according to agency officials. Between March 15, 2020, and February 27,
2021, SBA accepted about 17.9 million EIDL applications and processed
17.7 million of them. Of the processed applications, SBA approved about
3.8 million loan applications totaling about $203.5 billion, declined about 6
million applications, withdrew about 2.6 million applications, and found 5.3
million applications to be duplicates.21 Additionally, between March 29,
2020, and July 15, 2020, SBA approved about 5.8 million EIDL advances
for about $20 billion and declined about 2.5 million requests for advances.
For comparison, from SBA’s inception in 1953 until its COVID-19
response in March 2020, SBA approved a total of about 2.2 million
disaster loans for $67 billion, according to one SBA official.
Our review of SBA’s weekly summary processing reports showed that
SBA missed its goal of approving or declining 85 percent of the COVID-
19 loan applications within 60 days.22 As of February 27, 2021, SBA
processed about 63 percent of the approved applications within 60 days
and about 90 percent of the declined applications within 60 days. The
cumulative average processing times were longer for approved loans (47
days) than for declined loans (22 days). The shorter processing time for
declined loans may be the result of automatic declines, such as when an
applicant does not meet the minimum credit score.
21SBA officials told us the agency withdraws applications because of applicant
nonresponse (after 120 days without a response) or applicant requests to withdraw.
22SBA has four response levels that correlate staffing levels with the anticipated number
of applications and processing goals. The pandemic triggered a level IV response, which
indicates that SBA anticipates more than 500,000 applications and has a processing goal
of more than 4 weeks.
SBA Took Steps to
Address Processing
Challenges but Lacks
a Comprehensive
Communications
Strategy
High Volume of
Applications Led to Longer
Processing Times Early
On, but SBA Took Steps to
Address Them
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GAO-21-589 Economic Injury Disaster Loan Program
The average processing time for advances was shorter than that for
loans, and SBA did not establish a processing goal for the advances.
SBA’s summary processing reports showed that the cumulative average
processing time for all advance applications was about 18 days, with an
additional average disbursement time of 7 days for all approved
advances. SBA processed advances using only automated validation,
resulting in shorter processing times.
To process the large volume of applications, SBA worked with Rapid
Finance to modify its existing validation system and increased processing
staff:
•
Modifying an existing automated validation system to help
process EIDL applications. SBA asked Rapid Finance to modify its
existing software and hardware to incorporate SBA’s requirements
related to fraud checks and eligibility criteria, rather than building a
new validation system specifically for SBA. An SBA official stated that
the agency began processing EIDL applications using this new
system on April 7, 2020. Prior to implementing the new system, SBA
officials told us loan officers manually reviewed all applications. SBA
officials stated that the daily number of applications processed was
616 prior to the use of the validation system and 45,050 after the use
of the system.
•
Increasing staff and establishing processing time goals. SBA
data for March 20, 2020, to February 12, 2021, show that staffing for
the Processing and Disbursement Center increased five-fold from late
March 2020 to its peak in December 2020 (see fig. 3). SBA officials
told us the center initially drew detailees from other SBA offices and
other federal agencies to help provide support. Additionally, SBA used
contractors to quickly ramp up staffing starting from the end of April
2020. SBA officials said the use of detailees and contractors allowed
SBA time to recruit and hire new employees. In April 2020, SBA
projected it would need about 6,900 staff at the center to handle 5
million EIDL applications. The center reached this level of staffing in
September 2020. SBA officials stated that fully staffing the center
helped SBA address the increased volume of work. Loan officers
were expected to approve or decline at least four loan applications per
hour, and team leaders were expected to review and confirm loan
officers’ decisions on 10 to 12 loan applications per hour.
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 3: Weekly SBA Processing and Disbursement Center Staffing Levels, March 20, 2020–February 26, 2021
SBA’s data show that backlogs in processing loan applications and
application processing times declined between March 2020 and February
2021.
•
Application backlog. SBA’s summary processing report data for loan
applications show that initial surges of applications resulted in a
processing backlog (see fig. 4). By mid-April 2020, when SBA stopped
accepting new applications due to exhaustion of funds, SBA had
received about 5.5 million applications and processed about 12
percent of them.23 The number of new applications then declined
because SBA limited the program to agricultural enterprises, but it
increased again when SBA reopened the program to all eligible
businesses in mid-June 2020. By July 11, 2020, when SBA
announced that the funding for advances had been exhausted, SBA
had received about 10.9 million applications and processed 68
percent of them. SBA’s data show that the number of new loan
applications decreased starting in mid-July. Subsequently, SBA
reduced its backlog of loan applications.
23This total includes all applications SBA received, which may have been approved,
declined, withdrawn, or found to be duplicates.
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 4: Economic Injury Disaster Loans (EIDL) Cumulative Application Volume and Percentage of Applications Processed,
March 15, 2020–February 27, 2021
Note: The figure reflects the status of the applications at the time SBA generated the data.
Processing status may change over time. For example, SBA could reactivate a withdrawn application
and approve or decline the application later.
•
Application processing times. Our analysis of SBA’s applicant data
from March 2020 through February 2021 showed that applicants who
applied early experienced the longest processing times, up to 76 days
on average for approved applicants and 58 days on average for
declined applicants.24 In particular, applicants who applied in March
and April 2020 experienced longer processing times compared to later
applicants (see fig. 5).
24We analyzed the processing times for applications that SBA funded after approval; see
app. I for more information.
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 5: Number of Economic Injury Disaster Loan Applications and Average Processing Times, by Month Application
Accepted, March 2020–February 2021
Note: Data for number of days to process applications for approved loans include only applications
that SBA funded after approval. Number of applications includes applications that were funded or
were waiting to be funded after approval, or were declined, under processing, or withdrawn.
Some applicants experienced long wait times when calling SBA’s
customer service line, according to SBA’s data for its Customer Service
Center from March 21, 2020, through February 20, 2021. For example,
the daily maximum time that callers were placed on hold between March
2020 and July 2020 reached a high of 4 hours and 10 minutes.25
Participants from three of five discussion groups we held, as well as a
25We obtained this information from the SBA Office of Inspector General’s report
published in October 2020. See Small Business Administration, Office of Inspector
General, Inspection of Small Business Administration’s Initial Disaster Assistance
Response to the Coronavirus Pandemic (Washington, D.C.: Oct. 28, 2020). SBA officials
told us that the agency does not currently keep track of maximum call times.
Some Applicants
Experienced Long Wait
Times on SBA’s Customer
Service Line as Call
Volumes Exceeded SBA’s
Expectations
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GAO-21-589 Economic Injury Disaster Loan Program
majority of the stakeholders, told us that applicants experienced long wait
times to speak to an SBA customer service representative.26
SBA received about 10.8 million calls between March 2020 and February
2021. As shown in figure 6, the weekly average wait time ranged from 11
seconds to 39.5 minutes, with an overall average wait time of 7 minutes.
Additionally, SBA’s data show that abandoned calls made up about 15
percent of all calls. About 69 percent of the abandoned calls occurred
between the weeks of June 14, 2020, and July 12, 2020, when SBA
received the highest volume of calls. This timing coincided with SBA
reopening the EIDL program to all eligible applicants on June 15, 2020,
and SBA announcing that funding for EIDL advances was depleted on
July 11, 2020. SBA officials told us that a majority of customer service
calls SBA received were applicants checking on their application status.27
However, SBA officials also said that as application processing time
decreased, the number of such calls declined. SBA officials told us that
due to the high volume of calls related to the pandemic, the Customer
Service Center did not project call volumes for fiscal year 2020.
26We conducted five discussion groups with a total of 22 EIDL program applicants. Two of
these groups consisted of applicants declined for loans, and three groups consisted of
applicants that were approved. Each group consisted of four to six participants. The
opinions expressed by the participants represent their points of view and may not
represent the views of all EIDL applicants. We refer to the six SBDCs and seven
associations we spoke with collectively as stakeholders. We use the terms “few,”
“several,” “a majority,” and “almost all” to characterize stakeholder responses. We define
“few” as 1–3 responses, “several” as 4–6 responses, “a majority” as 7–10 responses, and
“almost all” as 11–13 responses.
27SBA’s customer service representatives may be able to provide information about
applications depending on the stage of the application.
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 6: SBA Customer Service Line Average Wait Times and Call Volumes, Week of March 15, 2020, through Week of
February 14, 2021
Note: The customer service calls were primarily, but not exclusively, related to COVID-19.
SBA’s data show that the volume of calls exceeded the capacity of the
Customer Service Center in late March 2020 and in mid-June 2020 (when
the program reopened to all eligible applicants) (see fig. 7). In April 2020,
SBA projected that its Customer Service Center would need about 1,650
staff. SBA reached this level of staffing in late June 2020. However, SBA
officials told us that SBA adjusted staffing at the center based on actual
incoming calls. SBA first used contractors to provide support and then
increased its own staff, primarily through new hiring. SBA maintained a
higher level of customer service staffing after June 2020, and the volume
of calls declined beginning in late July 2020. As a result, average wait
times and the percentage of abandoned calls also subsequently declined.
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 7: SBA Customer Service Center Staffing Levels, March 20, 2020–February 26, 2021
As SBA began to implement the EIDL program in response to COVID-19,
its initial communications with potential applicants and other stakeholders
excluded key information about program terms, creating confusion among
applicants. SBA also did not communicate information about application
status to applicants in a timely manner. SBA’s current disaster-related
plans do not provide a comprehensive strategy for addressing these
communication issues.
SBA communicated EIDL program information, such as eligibility criteria
and how to apply, to potential applicants using various channels.
However, SBA’s outreach and published information during the initial
months of its COVID-19 response did not provide certain key information
about the program effectively or in a timely manner.
SBA distributes information about the EIDL program through media, its
website, and other channels. For SBA’s COVID-19 response, the
agency’s Field Operations Centers disbursed information about the
program by hosting webinars, coordinating with media contacts, and
interacting with trade associations, chambers of commerce, and resource
SBA’s Communication
about Program Terms and
Applicants’ Status Created
Confusion and
Uncertainty, and SBA
Lacks a Comprehensive
Communications Strategy
SBA’s Initial Communication
Excluded Key Information
Page 21
GAO-21-589 Economic Injury Disaster Loan Program
partners (such as SBDCs). SBA officials also created a frequently asked
questions (FAQ) document for SBA’s website to provide details about the
EIDL program in response to COVID-19, including eligibility criteria, steps
in the application process, and reasons for declining an application.
However, SBA officials said SBA did not publish the FAQ until September
2020 because of delays in reviewing the document internally. Prior to the
publication of the September 2020 FAQ, SBA’s website information was
limited to the purpose of the program, eligible entities, and loan terms.
SBA communicated changes to advance and loan limits through some
channels but not others, sometimes several months after these changes
occurred:
•
Advance limits. SBA revised the limits on advances to $1,000 per
employee and a maximum of $10,000 per applicant on April 7, 2020,
and informed EIDL applicants that had applied about the revised limit
by email on April 13, 2020. SBA also provided the revised advance
limits during webinars. However, SBA did not communicate this
information on its website or within the EIDL application. SBA included
the limits on advances in a press releases issued on June 15, 2020,
but as of early July 2020—almost 3 months after SBA revised the
advance limits—SBA’s website still did not include this information.28
•
Loan limits. SBA lowered the maximum EIDL loan amount to
$150,000 beginning on May 4, 2020. However, SBA did not provide
this information on its website, in its press releases, or within the EIDL
application. The first time SBA broadly announced the $150,000 loan
maximum was in February 2021 when it updated its FAQ document.
Prior versions of the FAQ stated that the maximum loan amount was
6 months of working capital and did not specify a maximum amount.
Almost all stakeholders we interviewed said that SBA did not make
information about limits it imposed on advances and loans available to
applicants in a timely manner. Several stakeholders said this caused
confusion and frustration for small businesses. For example, a
representative from one business association said that some small
business owners did not understand why they received less than they
28In the June 15, 2020, press release, SBA announced that it would resume accepting
applications from all eligible applicants and included information about the limit on
advances. SBA announced on July 11, 2020, that funding for the advances had been
exhausted.
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GAO-21-589 Economic Injury Disaster Loan Program
expected, and a representative from an SBDC said some applicants
viewed the program as false advertising.
SBA also did not provide other key information to help applicants estimate
their potential loan amount. Specifically, the EIDL application form
requests that applicants provide the dollar amounts for 12 months of
gross revenues and cost of goods sold. These amounts are part of the
calculation SBA uses to determine an applicant’s economic injury and
ultimately the loan amount SBA could offer the applicant. However, as of
April 2021, SBA had not clarified in its application, on its website, or in its
most recent FAQ how it uses gross revenues and cost of goods sold to
calculate the loan amount that it could offer.
Discussion group participants and stakeholders we spoke with provided
mixed views about the clarity of information presented on the EIDL
application. Participants from each of the five discussion groups said that
the application was clear and straightforward. However, a few participants
from three of the five discussion groups and a majority of the
stakeholders said some applicants did not understand certain financial
terms on the application, such as the cost of goods sold. These
stakeholders told us this resulted in some applicants providing incorrect
information on their applications and deterred others from applying.
Providing incorrect information may result in declined applications or
inaccurate estimates of applicants’ economic injury.
In February 2021, 11 months after the CARES Act revised the EIDL
program in response to COVID-19, SBA defined “cost of goods sold” in its
updated FAQ and provided a link to an Internal Revenue Service website
for further information.29 However, the link takes the applicant to a
webpage with over 30 links on a variety of topics, none of which are
labeled “cost of goods sold.”30
After submitting their applications, EIDL applicants did not receive clear
information from SBA about their application status—whether by email,
from SBA’s online loan portal, or from its Customer Service Center.
Applicants generally apply online on SBA’s website. As discussed earlier,
if the application successfully passes the validation process, SBA sends
applicants an email inviting them to access the loan portal. In the loan
29https://www.irs.gov/businesses/small-businesses-self-employed.
30One of these links leads the applicant to another webpage that has a link labeled “cost
of goods sold.”
Stakeholders Cited a Lack of
Information about Application
Status and Processing Times
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GAO-21-589 Economic Injury Disaster Loan Program
portal, applicants can view their application status for the first time (for
example, their screen would display a status such as “application is being
processed”). Alternatively, applicants who fail the validation process
would receive an email informing them that SBA has declined their
application. This email either declining the application or inviting the
applicant to access the loan portal is generally the first communication
applicants receive from SBA about the status of their application.
Applicants may call SBA’s Customer Service Center to check the status
of their application, but the information the center’s representatives can
provide may be limited and may depend on the stage of application
review. Prior to an application undergoing the automated validation
process, customer service representatives would not be able to access
system information about the application. After an application has
completed the validation process, customer service representatives can
inform an applicant if SBA has approved or declined the application, if the
applicant has to take additional steps to move the application forward, or
if the application is under review. For applications under review, SBA’s
training guide directs customer service representatives not to provide
more detailed information on application status. SBA officials told us this
was because the agency could not share certain information with the
applicant. Participants from three discussion groups said that customer
service representatives could not provide more than general information
about the status of their applications.
Participants from all five discussion groups and several stakeholders we
spoke with cited lack of information and uncertainty about application
status as major concerns for applicants. Participants from all five
discussion groups told us they wanted to know if they had submitted their
application successfully and about the progress of their application
throughout the entire application process. A few stakeholders said status
information would have helped applicants make business decisions that
were contingent on the EIDL application outcome, such as whether to
apply for other funding. One discussion group participant explained that
knowing in advance when she could expect to receive funds would have
helped her decide if she should identify other funding sources to pay for
her inventory. Participants from one discussion group also told us that
they reapplied to the program because SBA did not confirm the receipt of
their applications or did not provide clear directions when it made
application processing changes. SBA data show that 5.3 million of the
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GAO-21-589 Economic Injury Disaster Loan Program
17.9 million EIDL applications SBA accepted from March 15, 2020, to
February 27, 2021, were duplicates.31
SBA officials acknowledged that not knowing their application status
alarmed applicants, particularly early in the pandemic when applicants
had to wait several weeks. Additionally, they said that because SBA
quickly built the EIDL application website specific to the COVID-19
response, the website did not incorporate the functionality to provide
applicants with confirmation emails and status updates.
SBA tracks high-level information that could provide approximate
processing times for various stages of the application process, but it has
not made this information publicly available to applicants, such as through
its website. SBA also collects detailed data on loan applications, including
the number of applications submitted, approved, and declined, and
develops weekly statistics such as the average number of days to
approve and decline applications. Similarly, SBA develops processing
time statistics for other EIDL-related funding and actions, including for
reconsiderations of declined applications and requests for loan increases.
The nature and scale of the COVID-19 pandemic have presented
unprecedented challenges for SBA’s operations, including its
communications. Unlike prior disasters, which were regional and episodic,
the pandemic is nationwide and SBA has operated in disaster recovery
mode for over a year—longer than it has for past disasters. As SBA
continues to implement the EIDL program in response to COVID-19, clear
and timely communication with applicants remains important.
SBA has taken some steps to improve its communication efforts. For
example, in contrast to SBA’s implementation of the EIDL loans in
response to COVID-19, its implementation of targeted advances included
a FAQ document detailing eligibility requirements, targeted advance
program criteria, and the eligible amount. Additionally, SBA publicized its
decision to increase the maximum loan limit to $500,000 through a press
release on March 24, 2021, and announced the effective date. However,
SBA has not yet provided information on processing times related to EIDL
loans. For example, while SBA has begun processing appeals for loan
31Some duplicates may have occurred because of early changes in the program. SBA
updated its website to include an option to request advances on March 29, 2020. SBA
informed applicants that applied for a COVID-19 EIDL loan prior to March 30, 2020, that
they had to reapply in order to obtain the advances. SBA’s data showed that as of March
28, 2020, SBA had received about 93,500 applications.
SBA Has Communication
Plans but Lacks a
Comprehensive
Communications Strategy
Page 25
GAO-21-589 Economic Injury Disaster Loan Program
increases to the limit of $500,000, it has not yet provided information on
processing times for such appeals.
Federal internal control standards state that management should
externally communicate the necessary quality information to achieve the
entity’s objectives. Management is to select appropriate methods to
communicate externally and, in doing so, to consider the intended
audience, the availability of information for the audience when needed,
and the costs of communicating the information, including the resources
used to communicate.32 Additionally, the Paperwork Reduction Act has a
broad requirement that an agency disseminate information in a manner
that is efficient, effective, and economical.33
SBA has two plans to guide its predisaster preparation and post-disaster
response efforts, including communications:
•
Disaster Preparedness and Recovery Plan. SBA’s 2019 Disaster
Preparedness and Recovery Plan identifies roles and responsibilities
for functional areas, such as public communications, as part of the
disaster assistance response. The plan outlines how SBA is to
publicly communicate with its target audiences—such as disaster
survivors, government officials, media outlets, and resource
partners—about the agency’s recovery operations and services. The
plan also broadly outlines the type of information to provide disaster
survivors, such as how to contact SBA and its offices to obtain
assistance in applying for disaster loans.
•
Outreach and Marketing Plan. SBA’s Office of Disaster Assistance
maintains an Outreach and Marketing Plan for State, Local, and Tribal
Leadership and Emergency Personnel, which provides broad
guidance for raising stakeholder awareness about SBA’s disaster
assistance programs. These stakeholders consist of federal, state,
local and tribal entities; resource partners; and media contacts.
32GAO, Standards for Internal Control in the Federal Government, GAO-14-704G
(Washington, D.C.: Sept. 10, 2014).
33The Paperwork Reduction Act of 1995 requires agencies to minimize the paperwork
burden on individuals and small businesses and maximize the utility of information
collected by agencies. Pub. L. No. 104-13, 109 Stat. 163 (codified, as amended, at 44
U.S.C. §§ 3501-3521).
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GAO-21-589 Economic Injury Disaster Loan Program
However, these plans do not identify the type of information that
applicants would need in order to understand and participate in disaster
loan programs, guidelines on what information to provide to potential
applicants and when to provide it, and considerations for how applicants
could access the information in a manner that is efficient, effective, and
economical. The lack of existing guidelines may have amplified the
communications challenges applicants faced when combined with the
magnitude and longevity of the pandemic response.
The scope of the COVID-19 pandemic may have exceeded the bounds of
what SBA has previously experienced, but by developing a more
comprehensive strategy for communicating with disaster relief program
participants, SBA would be better prepared in the future to respond to
longer-term, large-scale disasters. Such a strategy could help ensure
SBA more consistently communicates with program participants in a
clear, timely manner, facilitating program implementation. In turn, this
could also reduce demand on SBA’s resources—for example, by
providing timely information on application status, SBA could reduce the
number of applicants who contact the Customer Service Center or
reapply.
As previously discussed, SBA decreased the loan limit from $500,000 to
$150,000 in May 2020 in order to assist more small businesses, which
increased the number of EIDL borrowers with unmet financial needs. For
the initial $500,000 loan limit SBA had in place from March 16, 2020,
through May 3, 2020, SBA data show that the agency approved about
7,000 EIDL loans in the amount of $500,000 for applicants with an
economic injury greater than $500,000, which indicates that these
borrowers may have had some degree of unmet need. As of April 1,
2021, SBA had approved 567,553 EIDL loans in the amount of $150,000
for applicants with an economic injury greater than $150,000, which
represents about 15 percent of all applicants approved between March
15, 2020, and April 3, 2021. As mentioned previously, SBA began to
accept requests for loan increases on April 6, 2021.
Participants from our three discussion groups consisting of approved loan
applicants and stakeholders we interviewed expressed mixed views on
Program Participants
Generally Found the
EIDL Program Helpful
Loan Limits Affected More
Borrowers after SBA
Decreased the Limit in
May 2020
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GAO-21-589 Economic Injury Disaster Loan Program
the effect of the loan limit. For example, discussion group participants
said that they accepted a smaller loan amount than SBA offered to cover
expenses for a short duration, which indicates that the limit did not affect
the program’s ability to meet their short-term needs. However, several
stakeholders said that loan amount was insufficient for some businesses,
particularly larger businesses and especially as the pandemic continued
beyond 6 months.
Discussion groups and stakeholders identified various reasons for
applicants’ interest in EIDL loans and advances:
•
Program provides needed funds for operating expenses.
Businesses were interested in using the EIDL program for continued
operating expenses, such as rent and utilities, and new operating
expenses, such as personal protective gear and technology to
facilitate online operations, according to a majority of the stakeholders
and participants from four discussion groups.
•
Program terms are attractive. Loan terms—including the low
interest rate, long repayment period, and flexibility in how businesses
could use EIDL loans—made the program attractive, according to
participants from three discussion groups and a majority of the
stakeholders.
•
Credit with similar terms not available elsewhere. The lack of
available lending or difficulty in obtaining credit elsewhere, such as
from a bank, led some applicants to apply to EIDL, according to
participants from two discussion groups and several stakeholders. For
example, a few stakeholders noted businesses faced restrictive
underwriting criteria because of the uncertainties of the pandemic.
Participants in three discussion groups consisting of approved EIDL
applicants and a majority of the stakeholders told us that the EIDL
program has been beneficial for small businesses (other stakeholders did
not comment on the impact of the program). Discussion group
participants provided examples of how they used loans, such as paying
business partners for goods and maintaining relationships with business
partners, pivoting their business models (such as toward online sales),
and helping the business to cover expenditures. Representatives from all
six SBDCs said EIDL loans helped to keep businesses open, in part by
providing them with funding to pay for operating and other expenses.
Participants from our two discussion groups of EIDL applicants whose
loans were declined provided examples of how the declination negatively
Stakeholders Said EIDL
Loan Terms Are Attractive
and the Loans Have Been
Helpful to Businesses
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GAO-21-589 Economic Injury Disaster Loan Program
affected their business and personal finances. For example, they accrued
debt with interest rates higher than EIDL or used retirement or other
savings to keep their businesses open, laid off personnel, or cut back on
certain spending. However, they also said that funding obtained
elsewhere—such as forgivable loans from the Paycheck Protection
Program—mitigated the negative impact.34
Finally, several stakeholders noted that some businesses may not be
interested in new loans because of their unwillingness to incur debt and
the longer-term uncertainty associated with the pandemic. One declined
loan applicant told us that she was only interested in the advances and
did not want to take on a large loan.
We and others have identified potentially fraudulent and ineligible
applicants within the EIDL program. Additionally, fraud schemes identified
by law enforcement officials and our analysis of EIDL fraud-related court
cases charged by the Department of Justice (DOJ) point to significant risk
of fraud in the program.
As we reported in January 2021, SBA had provided about 5,000
advances totaling about $26 million to potentially ineligible businesses in
three types of industries—adult entertainment, casino gambling, and
marijuana retail—as of July 14, 2020.35 In addition, SBA had approved at
least 3,000 loans totaling about $156 million to businesses that SBA
policies state were ineligible for the EIDL program, such as real estate
developers and multilevel marketers, as of September 30, 2020. In
34Loans from the Paycheck Protection Program, another SBA program, may be fully
forgiven if they meet certain conditions, including that at least 60 percent of the loan
forgiveness amount be for payroll costs.
35See GAO, COVID-19: Critical Vaccine Distribution, Supply Chain, Program Integrity, and
Other Challenges Require Focused Federal Attention, GAO-21-265 (Washington, D.C.:
Jan. 28, 2021).
SBA Has Begun to
Address Eligibility and
Fraud Concerns but
Has Not Fully
Implemented GAO
Recommendations
EIDL Program Is at High
Risk of Funding
Fraudulent and Ineligible
Applicants
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GAO-21-589 Economic Injury Disaster Loan Program
October 2020, SBA’s Office of Inspector General (OIG) reported that it
found strong indicators of fraud, such as loans going to potentially
fraudulent accounts; loans to applicants with the same internet protocol
address, email address, bank account, or mailing address; and loans to
potentially ineligible businesses. In December 2020, SBA’s independent
financial statement auditor noted discrepancies including more than one
loan or advance approved and disbursed to the same borrower. The
auditor also identified over 6,000 disbursed EIDL loans (over $212 million
total) issued to potentially ineligible borrowers.
Our review of aggregate data from the Financial Crimes Enforcement
Network (FinCEN) also indicated potential fraud in the EIDL program. Our
January 2021 report found that between May and October 2020, over 900
U.S. financial institutions filed more than 20,000 suspicious activity
reports related to the EIDL program with FinCEN.36 These reports
identified multiple types of potentially suspicious activity related to EIDL,
such as indicators of identity theft, the rapid movement of funds, and
forgeries.
In addition, law enforcement officials have reported systemic patterns of
fraud across investigations involving EIDL loans. We reported in March
2021 that officials at SBA OIG and the Federal Bureau of Investigation
told us they had identified systemic patterns of potential fraud including
identity theft, false attestations on loan documents, fictitious and inflated
employee counts, and misuse of proceeds.37 Additionally, a senior official
with SBA OIG told us that, as of January 2021, SBA OIG had opened
over 260 investigations related to CARES Act loans, including EIDL
36See GAO-21-265. Institutions are required to electronically file a suspicious activity
report when a transaction involves or aggregates at least $5,000 in funds or other assets,
and the institution knows, suspects, or has reason to suspect that the transaction meets
certain criteria qualifying as suspicious. Banks are also required to file a report for known
or suspected criminal violations involving insider abuse of any amount, as well as
violations aggregating $5,000 or more when a suspect can be identified, and $25,000 or
more without a potential suspect. See, e.g., 31 C.F.R. § 1020.320. See also 12 C.F.R. §§
21.11(c)(1)-(3), 163.180(d)(3)(i)-(iii) (OCC); 12 C.F.R. § 208.62(c)(1)-(3) (Federal
Reserve); 12 C.F.R. § 353.3(a)(1)-(3) (FDIC). Although the filing of a suspicious activity
report does not necessarily mean that fraud has occurred, law enforcement agencies
query these reports and use them to support investigations, such as those related to EIDL
fraud.
37See GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters Its
Second Year, GAO-21-387 (Washington, D.C.: Mar. 31, 2021).
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GAO-21-589 Economic Injury Disaster Loan Program
loans—at least three times the number of investigations the office would
typically open in a year.
In our analysis of 51 DOJ cases involving fraud charges for EIDL loans as
of March 2021, we identified characteristics similar to those identified by
SBA OIG and Federal Bureau of Investigation. Specifically, across the 51
cases in which DOJ filed fraud-related charges, we found that 19 involved
identity theft, 39 involved false attestation, 39 involved fictitious or inflated
employee counts, and 29 involved misuse of proceeds.38 These cases
included charges of bank fraud, wire fraud, false statements, money
laundering, and identity theft (see fig. 8).
Figure 8: Department of Justice Fraud Charges Related to the Economic Injury
Disaster Loan Program, as of March 2021
Note: A case could include multiple charges, so these categories are not mutually exclusive.
The 90 defendants in these 51 cases sought at least $15.4 million and
received at least $12.2 million in EIDL funds. In 29 of the 51 cases,
defendants allegedly spent EIDL funds on ineligible purchases, such as
real estate, automobiles, cryptocurrency, and luxury goods. Defendants in
six cases allegedly diverted at least $860,000 in EIDL funds overseas,
38As of March 2021, 13 of the 51 cases were closed. Of the 13 closed cases, 12 reached
conclusion through a guilty plea and one was dismissed. Thirty-eight cases remained
ongoing. We identified similar characteristics among closed and ongoing cases.
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GAO-21-589 Economic Injury Disaster Loan Program
including transfers to the Dominican Republic, Ghana, Singapore, South
Korea, Taiwan, Uganda, and the United Kingdom.
EIDL funds also allegedly went to fake and nonoperating businesses.
Specifically, across the 51 cases, 18 involved funds going to fictitious
entities, and 14 cases involved funds going to shell companies, which do
not have employees or business operations (see text box for illustrative
examples).39
Illustrative Examples of Fraud against the Economy Injury Disaster Loan Program (EIDL)
Ineligible business received disaster funds. A defendant who pleaded guilty to fraud against the EIDL program had falsely
claimed eligibility for an EIDL loan, despite (1) his business not operating prior to the pandemic, (2) his criminal history, and
(3) listing an ineligible address for his business. Although the defendant claimed to have operated a retail apparel business
since 2015, he did not register it with his state until 2020. The defendant also falsely certified that he had no prior convictions
despite being on parole. Lastly, the defendant listed his business address as a UPS store located in a strip mall, despite the
EIDL application specifying that the primary business address could not be a post office box. The Small Business
Administration disbursed $196,900 in EIDL funds to the defendant.
Defendant used shell companies and stolen personal information to obtain pandemic assistance. Another defendant
applied for an EIDL loan for a shell company that had no operations or employees. The defendant used his mother’s name
to apply for an Employer Identification Number for the shell company. On the application, he falsely represented that the
business had been operating since 2017 and had multiple employees and gross receipts of over $1,500,000. In total, the
defendant applied for $750,000 and the Small Business Administration issued $299,800 in EIDL funds.
Source: GAO analysis of public federal court documents. | GAO-21-589
Our analysis indicated that many defendants were alleged to have
committed other crimes in addition to EIDL fraud. For example, 30 of the
51 cases also involved alleged fraud against the Paycheck Protection
Program, and eight cases involved alleged fraud against other pandemic-
related programs, such as unemployment insurance fraud (see text box
for illustrative example). Some cases also involved allegations of other
crimes, such as romance scams, business email compromise schemes,
and health care fraud.40
39Applicants in these examples applied for EIDL loans between March 2020 and July
2020.
40Romance scams occur when a criminal adopts a fake online identity to gain a victim’s
affection and trust. The scammer then uses the illusion of a romantic or close relationship
to manipulate or steal from the victim.
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GAO-21-589 Economic Injury Disaster Loan Program
Fraudster Targeted Multiple Federal Programs
A defendant pleaded guilty to fraud against the Economic Injury Disaster Loan (EIDL) program and other federal pandemic
relief programs. On his EIDL application, the defendant fraudulently inflated the number of employees and salary information
for his business, which provided goods and services to federal agencies. The defendant also targeted the Paycheck
Protection Program, another Small Business Administration pandemic relief program. In total, the defendant received over
$1 million in pandemic relief funds and spent those funds on ineligible expenses.
The defendant also pleaded guilty to making false statements for falsely claiming his business had N95 masks available to
sell to other federal agencies seeking to purchase personal protective equipment. In addition, the defendant pleaded guilty to
theft of government funds for attempting to obtain veterans’ benefits by falsely claiming to have served in the U.S. Marine
Corps.
Source: GAO analysis of public federal court documents. | GAO-21-589
Fraud against the EIDL program can have broad and serious effects on
the government, the economy, and individuals. In addition to the financial
losses and lost program delivery potential from unknown fraud, the
government bears the burden of investigating and prosecuting the alleged
fraud, which redirects resources law enforcement agencies could use to
combat other crimes. Additionally, fraud resulting from internal control
failures can have a reputational effect on government services, negatively
affecting the public’s trust in government. Fraud can also affect the
broader economy. Fraud against public programs can distort markets by
giving fraudsters unfair advantages, diverting fraudulently obtained
money into the economy, and undermining efforts to maintain the integrity
of the financial system. Finally, experiencing fraud, such as identity theft,
can be a traumatic experience for victims, causing financial losses as well
as serious psychological and emotional harm.
Over the course of its COVID-19 response, SBA has made some
changes to enhance its application review process and to identify
potential fraud. These changes applied to both the automated validation
system and the manual review process. SBA officials told us that some of
the changes resulted from interactions with SBA OIG and that others
resulted from loan officers who raised awareness about issues. For
example:
•
Validating application inputs. SBA made several changes to
validate applicant information. For example, in May 2020, SBA
changed the application such that the applicant must check each
eligibility criterion before being able to proceed, added validation of
bank account routing numbers, and added a function to identify
mismatches between ZIP codes and states. In July 2020, SBA began
to validate the types of tax identification numbers associated with the
SBA’s Application Review
Process for EIDL-Related
Programs Changed over
Time to Address Fraud
and Other Risks
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GAO-21-589 Economic Injury Disaster Loan Program
types of entity. In August 2020, SBA began to revalidate bank account
information whenever the loan applicant changes this information.
•
Changing the application review process. SBA OIG found that until
August 2020, applications that did not contain certain fraud alerts
flagged by the automated validation system were being approved by
team leaders in batches and with little to no additional review by the
team leaders.41 However, these applications contained other issues
that SBA did not review, such as the inability to confirm business
registration. After August 2020, SBA stopped approving loans in
batches and began requiring SBA staff to review all applications prior
to approval and to mitigate all system alerts. SBA data showed that
between April and August 2020, SBA approved about 3.2 million
applications.
•
Addressing suspected fraud. Beginning in June 2020, SBA took
actions to improve loan officers’ ability to withhold funding for
applicants suspected of fraud. SBA set up teams to address
suspected EIDL fraud, identity theft complaints, and financial
institution inquiries, among other things, and added staffing to those
teams. In particular, SBA created an email account for loan officers to
report potential fraud internally to a team that reviews these cases
and refers them to SBA OIG. SBA also created a reporting
mechanism for victims of identity theft to request release from EIDL
loan debt, as well as internal processes to review and validate those
requests and refer those cases to SBA OIG.42
SBA has also made changes to the loan application review process in
response to new legislation. SBA officials told us the CARES Act’s
restriction on using applicants’ tax information presented a challenge for
41Small Business Administration, Office of Inspector General, Inspection of Small
Business Administration’s Initial Disaster Assistance Response to the Coronavirus
Pandemic.
42In May 2021, SBA OIG made five recommendations to SBA related to identity theft and
the EIDL program. The recommendations related to (1) developing a process to maintain
and track all identity theft complaints; (2) developing a process to provide status updates
to each complainant alleging identity theft; (3) completing and formalizing a process to
restore identity theft victims to their conditions prior to the fraud; (4) developing a process
to remove any fraudulent loans and fees; and (5) reviewing over 150,000 loan billing
statements sent to EIDL borrowers that had been returned to SBA to resolve any that
involved identity theft and refer fraudulent loans to SBA OIG. As of the report’s publication
in May 2021, SBA had addressed the recommendation related to review of loan billing
statements. Small Business Administration, Office of Inspector General, SBA’s Handling
of Identity Theft in the COVID-19 Economic Injury Disaster Loan Program (Washington,
D.C.: May 6, 2021).
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GAO-21-589 Economic Injury Disaster Loan Program
validating applications. The agency had relied on self-certification of
applicant information and the controls put in place as part of the
automated validations and manual review. The Consolidated
Appropriations Act, 2021 removed this restriction. SBA officials told us
that beginning in April 2021, the agency had started incorporating tax
information as part of its validation process for loan applications to
confirm that businesses existed on or before January 31, 2020, a
requirement for program eligibility, and to verify business revenue.
For targeted and supplemental advances, SBA built on the automated
validations and manual review processes that existed for loan
applications but incorporated additional requirements specific to targeted
and supplemental advances. For example, to confirm eligibility, SBA
began calculating applicants’ income losses to ensure that applicants met
legislative criteria for income loss, and it created a map to confirm that
applicants reside in low-income areas. SBA obtains specific tax return
information to confirm that applicants existed on or before January 31,
2020, and that applicants meet the income loss criteria imposed by
legislation. Additionally, in March 2021, SBA began to use the
Department of the Treasury’s Do Not Pay service to verify recipients’
eligibility for payment in order to reduce improper payments.43
SBA continues to rely on applicant self-certification for certain eligibility
criteria (see table 2), as allowed by the CARES Act. The EIDL application
informs applicants they are self-certifying under penalty of perjury.
43The Department of the Treasury’s Do Not Pay service is an analytics tool that helps
federal agencies detect and prevent improper payments made to vendors, grantees, loan
recipients, and beneficiaries. Agencies can check multiple data sources to make payment
eligibility decisions.
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GAO-21-589 Economic Injury Disaster Loan Program
Table 2: Economic Injury Disaster Loan Program Eligibility Criteria and Validation
Eligibility criteria
Loans
Advances
Targeted and
supplemental
advances
Applicant must meet employee size limits.
Self-certification
Self-certification
Self-certification
Applicant cannot be a state, local, or municipal government
entity, or a member of Congress.
Self-certification
Self-certification
Self-certification
Applicant cannot be engaged in illegal activity or production of
products or services that have been determined to be obscene
by a court. Applicant also cannot be primarily engaged in political
or lobbying activities; present live performance of a prurient
sexual nature; or derive more than one-third of gross annual
revenue from legal gambling activities. Additionally, businesses
whose purpose for being is gambling are not eligible.a
Self-certification
Self-certification
Self-certification
Business must have been established on or before January 31,
2020.
Self-certification until
April 2021;
thereafter, validation
using tax information
Self-certification
Validation using tax
information
Applicant cannot be engaged in lending or investment,
speculative activities, multilevel sales distribution, real estate
development or investment, or life insurance. Applicant also
cannot earn more than one-third of its gross revenue packaging
Small Business Administration (SBA) loans, have a business
considered as a hobby, or be a pawn shop that derived more
than 50 percent of prior year’s income from interest.
Self-certification
Criteria not
applicable
Self-certification
Business owners with 50 percent or more ownership interest
must not be more than 60 days delinquent on child support.
Self-certification,
credit report
validation for child
support delinquency
Self-certification
Self-certification,
credit report
validation for child
support delinquency
Applicant must meet certain character requirements, including
not having a felony within the last 5 years involving fraud,
bribery, embezzlement, or a false statement in a loan application
or an application for federal financial assistance. Additionally,
applicant must not be currently incarcerated.
Self-certification
Criteria not
applicable
Self-certification
Applicant must be a U.S. citizen, noncitizen national, or qualified
alien.
Self-certification
Criteria not
applicable
Self-certification
Applicant must be at least 18.
Self-certification
Criteria not
applicable
Self-certification
Applicant must not be debarred from contracting with the federal
government or receiving federal grants or loans.
Self-certification
Criteria not
applicable
Self-certification
Applicant must meet certain SBA criteria related to franchises.
Self-certification
Criteria not
applicable
Self-certification
Applicant must meet a minimum credit score.
Credit report
validation
Criteria not
applicable
Criteria not
applicable
Applicant must not have open bankruptcy.
Credit report
validation
Criteria not
applicable
Criteria not
applicable
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GAO-21-589 Economic Injury Disaster Loan Program
Eligibility criteria
Loans
Advances
Targeted and
supplemental
advances
Applicant’s economic injury must not be zero or negative.
Self-certification until
April 2021;
thereafter, validation
using tax information
Criteria not
applicable
Criteria not
applicable
Source: GAO analysis of Small Business Administration documents. | GAO-21-589
aThe restriction against businesses whose purpose for being is gambling applies to loans and
targeted and supplemental targeted advances, but not advances.
GAO, SBA OIG, and SBA’s financial statement auditor have made
recommendations to address weaknesses in SBA’s controls that may
have led SBA to approve and disburse funds to potentially ineligible or
illegitimate entities. SBA has not yet addressed many of these
recommendations.
As discussed earlier, in January 2021, we reported that our analysis of
SBA data showed that the agency approved EIDL loans and advances for
potentially ineligible businesses. We therefore recommended that SBA
develop and implement data analytics across EIDL loans and advances
made in response to COVID-19 as a means to detect potentially ineligible
and fraudulent applications.44 Data analytics can be used to detect
potential fraud and can include a variety of techniques, such as data
mining, data matching, and predictive analytics, to identity particular types
of behavior. SBA neither agreed nor disagreed with this recommendation.
In May 2021, SBA officials stated the agency was in the process of
developing analysis to apply certain fraud indicators to all application
data. These data include applicants’ physical address, internet protocol
address, email address, phone numbers, bank accounts, and tax
identification numbers.
Additionally, in March 2021, we reported that SBA did not have a
comprehensive plan to proactively assess controls and mitigate risks in
the EIDL program in a timely manner and that SBA had not conducted a
formal fraud risk assessment for the program.45 We recommended that
SBA
44GAO-21-265.
45GAO-21-387.
A Number of
Recommendations by
GAO and Others to
Address EIDL Fraud Risks
Remain Unaddressed
GAO Findings and
Recommendations
Page 37
GAO-21-589 Economic Injury Disaster Loan Program
•
implement a comprehensive oversight plan to identify and respond to
risks in the EIDL program to help ensure program integrity, achieve
program effectiveness, and address potential fraud;
•
conduct and document a fraud risk assessment for the EIDL program;
and
•
develop a strategy that outlines specific actions to address assessed
fraud risks in the EIDL program on a continuous basis.
SBA agreed with the recommendations, stating that it would work to
implement a comprehensive oversight plan for EIDL and ensure that a
fraud risk assessment for EIDL is completed and that fraud risks are
monitored on a continuous basis. In May 2021, SBA officials told us that
the agency had begun the process of assessing fraud risk for its CARES
Act programs, including EIDL. Officials also told us that SBA had not yet
designated an anti-fraud entity to lead fraud risk management activities
across the agency, but that it plans to do so by the end of fiscal year
2021.
In October 2020, SBA OIG reported weaknesses in SBA’s controls that
could have led SBA to disburse payments to ineligible entities.46 These
findings include that SBA did not adequately address alerts raised by the
contractor’s automated validation system and that SBA provided duplicate
loans to applicants. SBA OIG made 10 recommendations to SBA. Among
other things, SBA OIG directed SBA to review (1) loans with bank
account number changes; (2) duplicate loans made to the same internet
protocol addresses, email addresses, business addresses, and bank
accounts; and (3) advances to determine the recipients’ eligibility and
legitimacy. SBA OIG also directed SBA to cancel all ineligible loans and
recover funds from ineligible applicants. Additionally, SBA OIG directed
SBA to strengthen its verification controls. In its report, SBA OIG stated
that SBA partially agreed with nine recommendations and disagreed with
one. The report stated that SBA took corrective actions to implement
46Small Business Administration, Office of Inspector General, Inspection of Small
Business Administration’s Initial Disaster Assistance Response to the Coronavirus
Pandemic.
SBA OIG Findings and
Recommendations
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GAO-21-589 Economic Injury Disaster Loan Program
seven of the recommendations and that additional actions would be
needed to address the remaining three recommendations.47
In December 2020, SBA’s independent financial statement auditor
identified, among other deficiencies, two material weaknesses in internal
controls related to EIDL concerning (1) approval of EIDL loans and
advances and (2) oversight of the contractor that maintains the EIDL
application system.48 As stated above, the auditor noted duplicate
payments and payments to potentially ineligible borrowers. The auditor
also stated that SBA did not adequately design and implement controls
for the evaluation and monitoring of the contractor that developed and
maintains the EIDL applications system. Specifically, SBA did not assess
the contractor’s controls relevant to the processing of EIDL loans and
advances, including the operating effectiveness of its validation controls,
such as duplicate application checks, bank account verification, and
business owner identity checks. The auditor noted that the deficiencies
were primarily caused by SBA prioritizing the implementation of CARES
Act provisions and related legislation as quickly and efficiently as possible
over designing and implementing effective internal control processes. In
the case of EIDL, this included quickly distributing loans and advances
without adequately designing and implementing controls to help ensure
borrower eligibility and accurate recording of transactions.
The auditor made seven recommendations to SBA to address these two
material weaknesses. Among other things, the auditor recommended that
SBA (1) review the EIDL portfolio and determine which transactions were
made to ineligible recipients; (2) implement controls to detect or prevent
47SBA disagreed with the OIG’s recommendation to check employee identification number
dates for EIDL to flag erroneously approved loans and advances as improper payments.
SBA did not fully resolve two recommendations. To close those recommendations, SBA
OIG stated that SBA should (1) cancel ineligible loans that were not disbursed, recover
funds from all loans already disbursed, and flag those loans for the improper payments
estimates process, and (2) provide evidence that the agency reviewed approved loans to
determine if there are undisbursed funds remaining that should be suspended until the
business establishment date is verified and the applicant is deemed eligible.
48Small Business Administration, Office of Performance Management and the Chief
Financial Officer, Agency Financial Report, Fiscal Year 2020 (Washington, D.C.: Dec. 18,
2020). A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and
corrected, on a timely basis. A deficiency in internal control exists when the design or
operation of a control does not allow management or employees, in the normal course of
performing their assigned functions, to prevent, or detect and correct, misstatements on a
timely basis.
Financial Statement Auditor
Findings and
Recommendations
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GAO-21-589 Economic Injury Disaster Loan Program
loans from being approved for ineligible applicants; (3) train loan officers
and supervisory loan officers to execute their responsibilities using
established guidance and standard operating procedures; and (4)
enhance its review and evaluation of contractor controls.
The auditor also reported a material weakness in SBA’s entity-level
controls, citing that SBA management did not properly design and
implement overall effective management controls to account for new and
expanded programs, such as EIDL, under the CARES Act and related
legislation. The auditor issued five recommendations to improve entity-
level controls, including that SBA hold accountable individuals
responsible for overseeing management’s design, implementation, and
operation of SBA’s internal control system; developing and implementing
monitoring controls; and documenting internal controls related to
implementing the CARES Act and related legislation.
SBA disagreed with the material weaknesses related to approval of EIDL
loans and advances and SBA’s entity-level controls and partially agreed
with the material weakness related to EIDL contractor oversight. SBA
neither agreed nor disagreed with the recommendations. In May 2021,
SBA officials stated that the agency had reviewed the findings identified in
the financial statement auditor’s report and had been working with RER
Solutions to implement the recommendation related to contractor
oversight. In particular, officials stated that the contractor had engaged a
firm to develop a report for the controls relevant to the processing of EIDL
loans and advances.49 SBA officials stated that this report will allow SBA
to evaluate the adequacy of the contractor’s controls related to
processing EIDL loans and advances.
SBA relies on RER Solutions—the prime contractor—to oversee and
evaluate subcontractor performance. SBA officials said they focus on
whether RER Solutions meets performance requirements and do not
have insight into how the company evaluates subcontractors’
performance. A representative from RER Solutions told us that given the
urgency of the pandemic, the company’s evaluations of subcontractors
have been on an informal basis as issues have arisen.
While SBA does not directly oversee the subcontractors, SBA officials
said that the agency worked closely with the subcontractors to implement
EIDL program requirements. For example, SBA provided program
49SBA’s contract with RER Solutions did not require such a report.
SBA’s Oversight of the
Contractor Used to
Process Loans and
Advances
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requirements, such as eligibility criteria, to Rapid Finance. Additionally,
SBA officials told us the agency selected certain fraud checks from a
suite of Rapid Finance’s options. Similarly, representatives from RER
Solutions and the subcontractors told us SBA requested certain changes
or additions to Rapid Finance’s validation system and provided guidance
through frequent emails and conference calls. Additionally, a
representative from RER Solutions told us SBA officials interacted directly
with Rapid Finance—such as through daily calls—to ensure its platform
met SBA’s needs. As part of ongoing program implementation, SBA
officials said RER Solutions and the subcontractors continue to hold daily
calls with SBA.
SBA’s contract requires that RER Solutions provide certain documents,
including documents that specify expected risk and risk mitigation and
project plans. However, SBA officials told us that due to the urgency of
the pandemic, the agency has not requested certain documents specified
in the contract. Rather, SBA receives other documentation from RER
Solutions that is not specified in the contract. Specifically, RER Solutions
provides a work plan that records the progress of work tasks and goals
and technical issues. Additionally, RER Solutions provides SBA with
daily, weekly, and monthly reports that monitor application intake and
processing.50 A representative from RER Solutions told us that the
company and the subcontractors have provided these reports and other
additional information as requested by SBA, beyond the requirements
specified in the contract. SBA officials said that such reports help SBA to
determine whether the contract meets performance requirements stated
in the contract and whether the contractor is maintaining efficiency and
effectiveness.51
50RER Solutions and Rapid Finance both stated that Rapid Finance produces these
reports.
51SBA’s contract with RER Solutions states that the contractor is to provide
recommendations to approve or decline applicants within 10 minutes of receiving data
from the application. However, SBA staff make all final decisions related to applications.
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Our analysis of the 12.5 million nonduplicate EIDL loan applications
received between March 2020 and February 2021 showed that EIDL
applicants and loan recipients varied in terms of business size (measured
by the number of employees), years in operation, and industry.52
Generally, the smallest and oldest businesses were most successful in
obtaining loans.
Businesses with fewer than 10 employees, which make up about 94
percent of the businesses in the United States, also made up the majority
of EIDL applicants. Most loan applicants (81.1 percent), as well as the
majority of approved applicants (86.3 percent), had fewer than 10
employees. SBA approved loans for businesses with 10 or fewer
employees at a higher rate than for larger businesses (see table 3).
Businesses with over 500 employees had a lower approval rate.
52The data consisted of about 3.7 million approved applications, 6 million declined
applications, 2.6 million withdrawn applications, and 123,000 other applications, such as
applications SBA is currently processing. Where we describe all applicants, we analyzed
the data for all applicants. We analyzed approval rates using only the data for approved
and declined applications. We analyzed the characteristics of approved applicants using
only the data for approved applications. For the purposes of this analysis, approved loans
consist of applications that SBA has funded or for which SBA is obligating or has obligated
funds.
Smaller and Older
Businesses Received
Larger Loans and
Were Approved at
Higher Rates, and
Wealthier
Communities
Received More
Funding
Characteristics of EIDL
Applicants and Loan
Recipients Varied
Business Size
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GAO-21-589 Economic Injury Disaster Loan Program
Table 3: Economic Injury Disaster Loan Approval Rates by Business Size, March 2020–February 2021
Business size
Approval rate (percentage)
0–10 employees
38.5
11–49 employees
35.3
50–500 employees
34.6
501 or more employees
11.2
Overall
38.2
Source: GAO analysis of Small Business Administration data. | GAO-21-589
Larger businesses generally received larger loans than smaller
businesses, but businesses with 10 or fewer employees received a
majority of EIDL loan dollars (see table 4). The average approved loan
amount was greatest for businesses with between 50 and 500 employees
($144,320), although it was less for the largest businesses. Several
factors may have affected the loan amounts business received, including
SBA’s calculation of economic injury for businesses using gross revenue
and cost of goods sold, applicants self-selecting the loan amount, and the
$150,000 loan limit SBA had in place from May 2020 through April
2021.53
Table 4: Average Economic Injury Disaster Loan (EIDL) Amount and Percentage of Total Loan Dollars, by Business Size,
March 2020–February 2021
Business size
Average loan amount ($)
Percentage of total loan dollars
0–10 employees
45,793
76.6
11–49 employees
118,467
20.5
50–500 employees
144,320
2.9
501 or more employees
84,999
0.0
Overall
53,593
100
Source: GAO analysis of Small Business Administration (SBA) data. | GAO-21-589
Note: Overall, SBA provided about $200.4 billion in EIDL loans between March 2020 and February
2021. SBA provided loans to 994 businesses with 501 or more employees.
The majority of EIDL applicants had been in operation for less than 5
years (62.5 percent), but older businesses had a higher approval rate and
53SBA increased the loan limit from $150,000 to $500,000 on April 6, 2021. The data
needed to analyze the effect of this increase were not available within our reporting time
frames.
Age of Business
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GAO-21-589 Economic Injury Disaster Loan Program
received larger loans (see table 5). For example, the average loan size
for businesses in operation for less than 5 years was about $40,300,
compared to $65,353 for businesses in operation for between 5 and 10
years. In addition, businesses in operation for more than 5 years received
the majority of total loan dollars.
Table 5: Economic Injury Disaster Loan (EIDL) Approval Rate, Average Loan Amount, and Percentage of Total Loan Dollars,
by Age of Business, March 2020–February 2021
Years in operation
Approval rate
(percentage)
Average loan amount ($)
Percentage of total loan
dollars
2 years or less
23.8
32,290
13.1
Greater than 2 years to 5 years
34.8
47,263
22.1
Greater than 5 years to 10 years
48.7
60,243
22.6
Greater than 10 years
58.0
68,454
42.3
Overall
38.2
53,621
100
Source: GAO analysis of Small Business Administration (SBA) data. | GAO-21-589
Note: Overall, SBA provided about $200.4 billion in EIDL loans between March 2020 and February
2021.
Loan application volume, approval rates, and average loan size varied
widely by industry.54 SBA received the largest number of applications
from businesses in the personal services (such as hair and nail salons
and dry cleaning), transportation, construction and contractors, retail, and
business services industries (see table 6).55 An early study of the
industry-by-industry effects of COVID-19 showed that several of these
industries—including personal services, restaurants and bars, and travel
and transportation—were the most exposed to economic damage.56
54SBA’s EIDL application allowed applicants to select from a list of industry types. For
some industries, such as retail, SBA provided a list of subcategories under a primary
category. For other industries, such as agriculture, SBA did not provide a list of
subcategories under the primary category. We analyzed the primary categories shown on
SBA’s application.
55We excluded from our analysis industries with fewer than 1,000 applications or
applications that did not list a business activity. These applications represented less than
1 percent of all applications.
56Joseph S. Vavra, Shutdown Sectors Represent Large Share of All U.S. Employment
(Chicago, IL: Becker Friedman Institute for Economics at the University of Chicago, Mar.
27, 2020), accessed April 12, 2021,
https://bfi.uchicago.edu/insight/finding/shutdown-sectors-represent-large-share-of-all-us-e
mployment/.
Industry
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Table 6: Top 10 Industries by Number of Economic Injury Disaster Loan (EIDL) Applicants, March 2020–February 2021
Industry
Number of EIDL loan applicants
Percentage of total applicants
Personal services
1,373,434
14.0
Transportation
952,644
9.8
Construction and contractors
887,001
9.0
Retail
856,545
8.8
Business services
694,447
7.1
Miscellaneous services
679,061
7.0
Real estate
590,179
6.0
Health services
551,818
5.6
Agriculture
538,295
5.5
Entertainment services
378,821
3.9
Other industries
2,271,946
23.3
Total
9,774,191
100
Source: GAO analysis of Small Business Administration data. | GAO-21-589
Applicants in the legal services field had the highest approval rate of any
industry (63.2 percent), followed by hotel and lodging, real estate, mining,
and manufacturing (see table 7).57 In contrast, applicants in agriculture
and personal services had the lowest approval rates (20.7 and 27.1
percent, respectively).
Table 7: Top 10 Industries by Economic Injury Disaster Loan Approval Rate, March 2020–February 2021
Industry
Approval rate (percentage)
Legal services
63.2
Hotels and lodging
57.2
Real estate
55.9
Mining and natural resources extraction
51.9
Manufacturing
50.7
Health services
49.9
Religious services
49.9
Insurance
49.5
57To improve data reliability for this analysis, we excluded about 9,900 applications,
including applications for businesses that did not clearly fall under the industry categories
SBA established. As a result, the overall approval rate for industries differs from the
approval rate for the entire population of applicants.
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Industry
Approval rate (percentage)
Automotive sales and gas stations
48.8
Finance
48.0
All industries
38.1
Source: GAO analysis of Small Business Administration (SBA) data. | GAO-21-589
Note: To improve data reliability for this analysis, we excluded about 9,900 applications, including
applications for businesses that did not clearly fall under the industry categories SBA established. As
a result, the overall approval rate for industries differs from the approval rate for the entire population
of applicants.
In terms of average loan size, eating and drinking places (such as bars
and restaurants) received the largest loans ($92,618) (see table 8).
Businesses in personal services received the smallest average loans
($29,323), followed by transportation ($39,172) and real estate ($40,572).
Table 8: Top 10 Industries by Economic Injury Disaster Loan Average Loan Amount, March 2020–February 2021
Industry
Average loan amount ($)
Eating and drinking places
92,618
Manufacturing
85,280
Automotive sales and gas stations
82,177
Wholesale trade
76,980
Hotels and lodging
75,770
Mining and natural resources extraction
75,550
Health services
68,027
Food and beverage stores
66,314
Storage
65,981
Legal services
63,883
All industries
53,634
Source: GAO analysis of Small Business Administration data. | GAO-21-589
Industries with the largest shares of EIDL applicants tended to have large
numbers of businesses with either no employees or one employee. For
example, more than half of applicants in the personal services,
transportation, and business services industries each had one employee
or none. However, in each of these industries, more than half of total loan
dollars went to larger businesses, as larger businesses received larger
loans on average.
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GAO-21-589 Economic Injury Disaster Loan Program
Our analysis of EIDL applicant and Census Bureau data found that small
businesses located in counties with higher median household income and
better internet access generally had better EIDL lending outcomes as
measured by the number of loans per 1,000 businesses, amount of loans
per employee, and approval rates.58 In addition, more diverse
communities, as measured by the share of the county’s minority
population, had more loans per 1,000 small businesses.59 Businesses in
more diverse communities also had larger loan amounts on a per-
employee basis, but lower approval rates. See appendixes II and III for
analysis of other socioeconomic and demographic variables at the county
level and by tabulated ZIP code areas.
EIDL applicants in counties with median household incomes above the
national estimate (about $63,000) had a higher approval rate than those
located in counties with lower median household incomes (see fig. 9).60
Applicants in these counties received larger loans on a per-employee
basis. Additionally, counties with higher median household income had
more loans per 1,000 small businesses.
58We combined SBA’s EIDL applicant data with socioeconomic, demographic, and
geographic data at the county level to examine characteristics of the counties in which
applicants and borrowers were located. We used data from the Census Bureau’s 2015–
2019 American Community Survey to define and compute socioeconomic and
demographic characteristics. We used data from the U.S. Department of Agriculture’s
(USDA) Economic Research Service to classify counties as metro or nonmetro and data
from the Census Bureau to identify tribal lands. We focused on median household income
and internet access as socioeconomic indicators because they may be closely related to
EIDL eligibility and access—for example, SBA requires that business submit applications
online only.
59For the purposes of this analysis, we define “minorities” as the non-White share of a
county’s population.
60According to our analysis of data from the 2015–2019 American Community Survey, the
national 5-year estimate for median household income in the United States based on 2019
inflation-adjusted dollars was $62,843.
Small Businesses in More
Diverse and Wealthier
Communities Received
More Loans
Median Household Income
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 9: Economic Injury Disaster Loan (EIDL) Lending Outcomes by Median
Household Income
Note: According to our analysis of data from the 2015–2019 American Community Survey, the
national 5-year estimate for median household income in the United States based on 2019 inflation-
adjusted dollars was $62,843.
Variation in median household income may have affected EIDL
application outcomes and the distribution of loans across counties.
Research by the Board of Governors of the Federal Reserve System
(Federal Reserve) has found some correlation between income and credit
scores.61 SBA used credit score as a key underwriting criterion to approve
or decline a loan application. Thus, differences in median household
income, and potentially credit scores, might help to explain lower approval
rates in counties with lower median income as compared to counties with
higher median income. Additionally, recent work by the National Bureau
of Economic Research found that pandemic-related business closures
resulted in larger revenue losses for small businesses located in wealthier
ZIP codes because of larger overall declines in consumer spending by
61Rachel Beer, Felicia Ionescu, Geng Li, “Are Income and Credit Scores Highly
Correlated?” FEDS Notes, accessed April 28, 2021,
https://www.federalreserve.gov/econres/notes/feds-notes/are-income-and-credit-scores-hi
ghly-correlated-20180813.htm.
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high-income individuals.62 The larger decline in spending and relatively
higher rate of business closures in more affluent areas may have resulted
in a greater need in those areas. This could, in part, account for
businesses in counties with higher median income receiving more loans
per 1,000 small businesses.
EIDL applicants in counties with better internet access—that is, where the
share of households with no internet access is below the national
estimate (13.9 percent)—had better EIDL lending outcomes as compared
to applicants in counties where that share is above the national estimate
(see fig. 10).63 Applicants in counties with better internet access had
higher approval rates and received larger loans on a per-employee basis.
Additionally, these counties had more loans per 1,000 small businesses.
62Raj Chetty, John N. Friedman, Nathaniel Hendren, Michael Stepner, Opportunity
Insights Team, How Did COVID-19 and Stabilization Policies Affect Spending and
Employment? A New Real Time Economic Tracker Based on Private Sector Data
(Cambridge, MA: National Bureau of Economic Research, 2020). The authors found that
small business revenues fell by 50 percent for businesses located in the richest 5 percent
of ZIP codes, compared to revenue losses of 35 percent for small businesses located in
the poorest 5 percent of ZIP codes. Small business revenue data came from Womply,
which records revenues from credit card transactions for small businesses (as defined by
SBA), and income data for ZIP codes came from the Census Bureau’s 2014–2018
American Community Survey. The analysis compared revenues during a baseline period
prior to the COVID-19 shock (Jan. 4, 2020–Jan. 31, 2020) to the period immediately after
the COVID-19 shock but prior to the stimulus program (Mar. 25, 2020–Apr. 14, 2020).
63According to our analysis of data from the 2015–2019 American Community Survey, the
national 5-year estimate of the share of households without internet access is 13.9
percent.
Internet Access
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Figure 10: Economic Injury Disaster Loan (EIDL) Lending Outcomes by Household
Internet Access
Note: The national 5-year estimate for share of households with no internet access is 13.9 percent,
according to our analysis of data from the 2015–2019 American Community Survey.
Differences in counties’ internet connectivity may be linked to other
socioeconomic and geographic characteristics affecting EIDL application
outcomes. According to the 2018 Census Bureau American Community
Survey, a larger percentage of households in urban areas reported
owning any type of computer and having broadband subscriptions
compared with households in rural areas across almost every region of
the country.64 Differences in internet access across counties may have
influenced who did and did not apply to the EIDL program because the
EIDL application could only be accessed online and the distribution of the
information about the program was generally limited to online forums,
such as webinars, as a result of the pandemic. For example,
representatives of one SBDC noted that many small businesses in their
region were in rural areas and lacked adequate technology infrastructure
to navigate the internet. Accordingly, our analysis found that the absolute
number of total approved and declined applications was higher in
counties with better internet connectivity. The number of loans per 1,000
64Census Bureau, Computer and Internet Use in the United States: 2018 (Washington,
D.C.: 2021). “Any type of computer” includes at least one of the following: desktop or
laptop, smartphone, or tablet or other portable wireless computer. A “broadband” internet
subscription refers to having at least one type of internet subscription other than a dial-up
subscription alone.
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small businesses was also lower in counties with lower rates of internet
access.
As discussed earlier, counties with higher median incomes had higher
approval rates and wealthier areas had larger pandemic-related losses.
Wealthier areas also have better internet connectivity. Specifically, the
Census Bureau found that 99 percent of households earning $150,000 or
more had some sort of computing device, compared to only 77 percent of
households making less than $25,000 per year.65 This may help to
explain similarities in EIDL lending outcomes between communities with
high median household incomes and high rates of internet connectivity.
EIDL lending outcomes were similar for counties where the minority
population made up the majority and counties where the percentage of
minority population was greater than the national percentage of minority
population (27.5 percent) (see fig. 11). Applicants in counties with larger
minority populations had lower approval rates but received larger loan
amounts per employee. Additionally, these counties received more loans
per 1,000 small businesses than counties with smaller minority
populations.
65Census Bureau, Computer and Internet Use.
Community Diversity
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Figure 11: Economic Injury Disaster Loan Program Lending Outcomes by County
Minority Population
Note: According to our analysis of data from 2015–2019 American Community Survey, 27.5 percent
of the U.S. population identifies as non-White (or minority).
Underlying correlations between demographic measures and
socioeconomic indicators at the county level may contribute to differences
in EIDL application outcomes across counties. According to the Census
Bureau’s 2015–2019 American Community Survey, a county’s median
household income was negatively correlated with its share of minority
residents. The American Community Survey also found in 2018 that that
median income among Black and Hispanic Americans was lower than for
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GAO-21-589 Economic Injury Disaster Loan Program
White and Asian Americans.66 As stated earlier, SBA used credit score as
a key underwriting criterion to approve or decline loan applications, and
some correlation exists between income and credit score. According to
the Federal Reserve’s 2018 Small Business Credit Survey, Black and
Hispanic small business owners reported lower credit scores on average
compared to White and Asian small business owners.67 Lower median
income and lower credit scores may help explain why approval rates for
businesses were lower in counties with higher minority shares, especially
counties with larger Black and Hispanic populations.
Differences in access to financing that exist among different
demographics may also contribute to variations in EIDL lending
outcomes. In the 2020 Small Business Credit Survey, the Federal
Reserve found that, compared to White-owned small businesses, a larger
percentage of Black, Hispanic, and Asian-owned businesses self-reported
being in poor financial condition, and a smaller percentage reported
receiving the full amount of funding sought from banks and other sources
of credit.68 Prior to the pandemic, Black and Hispanic small business
owners were also more likely to apply for SBA financing.69 Taken
together, these factors may have increased interest in the EIDL program
in these counties and driven higher levels of program activity, as our
analysis found that counties with larger minority populations had more
total approved and declined EIDL applications than those with smaller
minority populations.
66Census Bureau, Household Income: 2018 (Washington, D.C.: 2019).
67Federal Reserve Bank of Atlanta, Small Business Credit Survey: Report on Minority-
Owned Firms (Atlanta, GA: 2019).
68Board of Governors of the Federal Reserve System, Small Business Credit Survey:
2021 Report on Employer Firms (2021). The 2020 Small Business Credit Survey collected
responses from over 9,600 small businesses throughout the United States. While the
survey respondents are not drawn from a random sample, survey results are weighted by
firm age, industry, number of employees, and geography to ensure that results are
nationally representative. The Federal Reserve conducted the survey in September and
October 2020, approximately 6 months after the onset of the pandemic.
69Federal Reserve Bank of Atlanta, Small Business Credit Survey: Report on Minority-
Owned Firms. The 2018 Small Business Credit Survey collected responses from over
6,600 small businesses throughout the United States. While the survey respondents are
not drawn from a random sample, survey results are weighted by firm age, industry,
number of employees, and geography to ensure that results are nationally representative.
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GAO-21-589 Economic Injury Disaster Loan Program
Our analysis of EIDL applicant, Census Bureau, and other data found that
EIDL program lending outcomes varied by geographic location. We
examined lending outcomes for urban and rural counties and tribal lands,
as well as nationwide trends across geographic regions.
EIDL lending outcomes were mixed for urban and rural counties (see fig.
12).70 Applicants in urban counties had lower approval rates than
applicants in rural counties, but received larger loans on a per-employee
basis. Additionally, urban counties received more loans per 1,000 small
businesses as compared to rural counties.
Figure 12: Economic Injury Disaster Loan Program Lending Outcomes for Urban
and Rural Counties
Underlying correlations between a county’s urban or rural classification
and its demographic and socioeconomic characteristics may contribute to
differences in EIDL lending outcomes across counties. For example,
minority-owned small businesses tend to be more highly concentrated in
70USDA’s Economic Research Service designated each U.S. county as metro or
nonmetro. Metro areas include all counties with urban areas containing 50,000 people or
more. Metro areas also include outlying counties that are economically tied to the central
counties, as measured by the share of workers commuting on a daily basis to the central
counties. Nonmetro counties are outside the boundaries of metro areas and have no cities
with 50,000 residents or more. For the purposes of this report, rural counties are
“nonmetro” counties and urban counties are “metro” counties designated by USDA in
2017.
EIDL Lending Outcomes
Varied by Geography
Urban and Rural Areas
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urban areas relative to White-owned businesses.71 This may explain
similar EIDL lending outcomes for urban counties and counties with larger
shares of minority populations. Differences in rural or urban
characteristics may also contribute to differences in approval rates.
According to the 2016 Small Business Credit Survey, small businesses in
rural areas self-reported higher credit scores on average compared to
businesses in urban areas.72 As discussed previously, credit scores might
help to explain differences in approval rates across counties, as reflected
in higher approval rates for businesses located in rural areas.
Small businesses located on tribal lands had lower approval rates and
smaller average EIDL loans as compared to all U.S. counties (see fig.
13).73 SBA approved 25,606 EIDL loans to small businesses on tribal
lands, which represented less than 1 percent of all EIDL lending.
71Federal Reserve Bank of Atlanta, Small Business Credit Survey: Report on Minority-
Owned Firms.
72Federal Reserve Bank of Richmond, Small Business Credit Survey: Report on Rural
Employer Firms (Richmond, VA: 2017). The 2016 Small Business Credit Survey collected
responses from over 10,300 small businesses throughout the United States. While the
survey respondents are not drawn from a random sample, survey results are weighted by
firm age, industry, number of employees, and geography to ensure that results are
nationally representative.
73We analyzed information for loans to businesses located on tribal lands, regardless of
whether the businesses themselves were Indian-owned. Tribal lands we analyzed
included federally recognized American Indian reservations and off-reservation trust land
areas, state-recognized American Indian reservations, and Hawaiian home lands for
which the Census Bureau publishes data. We were unable to scale EIDL lending
outcomes for tribal areas by the loan amount per employee or number of loans per 1,000
small businesses because data on the number of businesses in tribal areas were
unavailable.
Tribal Areas
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Figure 13: Economic Injury Disaster Loan Program Lending Outcomes for Tribal
Lands
Underlying correlations between demographic measures and
socioeconomic indicators contribute to differences in EIDL lending
outcomes for businesses located on tribal lands. For example, Census
Bureau data have shown median income among American Indians and
Alaska Natives to be lower than for White and Asian Americans, which
may have contributed to lower approval rates for businesses on tribal
lands. Additionally, several factors can make successful business
development on tribal lands more difficult, including limited access to
capital and a lack of technology infrastructure (e.g., telecommunications
lines and internet access).
We found that counties within four geographic regions of the United
States tended to have similar EIDL lending outcomes for certain
measures.74
Of the 1,229 counties with more than the average number of EIDL loans
per 1,000 small businesses, 726 were located in the Census Bureau’s
74For this analysis, we used the Census Bureau’s regional definitions. The Census Bureau
divides the United States into four geographic regions: Midwest, Northeast, South, and
West. Counties differ in size by land area across both states and regions and, thus,
reported results should not necessarily be interpreted as being proportionately, or
disproportionately, allocated across regions
Nationwide Trends in Lending
Outcomes
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GAO-21-589 Economic Injury Disaster Loan Program
South region (see fig. 14).75 The Northeast region had the highest
percentage of counties with more than the average number of loans per
1,000 small businesses (58.1 percent), while the Midwest region had the
smallest percentage of such counties (12.6 percent).76
75The Census Bureau’s South region includes the following states: Delaware, Florida,
Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama,
Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, and Texas. The
region also includes Washington, D.C.
76The Census Bureau’s Northeast region includes the following states: Connecticut,
Maine, Vermont, Massachusetts, New Hampshire, Rhode Island, New York, New Jersey,
and Pennsylvania. The Midwest Region includes the following states: Indiana, Illinois,
Michigan, Ohio, Wisconsin, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota,
and South Dakota.
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Figure 14: Approved Economic Injury Disaster Loans (EIDL) Per 1,000 Small Businesses by County, March 2020–February
2021
Similarly, of the 1,174 counties with above-average loan amounts per
employee, 718 were located in the Census Bureau’s South region (see
fig. 15). The West region had the highest percentage of counties with
above-average loan amounts per employee (56.3 percent), while the
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GAO-21-589 Economic Injury Disaster Loan Program
Midwest region had the lowest percentage of such counties (11.2
percent).
Figure 15: Economic Injury Disaster Loan (EIDL) Amount per Small Business Employee by County, March 2020–February
2021
Of the 1,569 counties with above-average approval rates, 656 were
located in the Census Bureau’s Midwest region (see fig. 16). The West
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GAO-21-589 Economic Injury Disaster Loan Program
region had the highest percentage of counties with above-average
approval rates (82.3 percent), while the South region had the lowest
number of such counties (26 percent).
Figure 16: Approval Rate for Economic Injury Disaster Loans (EIDL) by County, March 2020–February 2021
We also found that the West region had the highest share of counties that
had better EIDL lending outcomes in all three measures. Of the 383
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GAO-21-589 Economic Injury Disaster Loan Program
counties with all three EIDL lending outcome measures (loans per 1,000
small businesses, loan amounts per employee, and approval rates) above
the national average, the West region had the highest number of these
counties (170 counties), while the Midwest region had the lowest number
(42 counties).77
In response to the COVID-19 pandemic, SBA moved quickly under
challenging circumstances to provide EIDL funding to applicants,
benefiting many small businesses. However, SBA did not communicate
with potential and actual applicants key information—such as processing
times and loan limits—and their loan status in an effective, consistent, or
timely manner. SBA has two plans to guide the agency’s communication
efforts about loan programs, but these plans do not cover what
information program participants, including applicants, should receive and
when. Developing a comprehensive strategy for communicating with
potential and actual applicants in the event of a disaster would benefit
both SBA and its program participants. For example, by providing clear
information on the time frames and status of applications, SBA could
reduce applicant confusion and uncertainty. In turn, this could lessen the
burden on SBA’s resources created by applicants submitting duplicate
applications and contacting SBA’s Customer Service Center.
In addition, we and others have found the EIDL program to be susceptible
to the risk of fraud and provision of funding to ineligible applicants, and
have made a number of recommendations to address these risks, such
as to conduct a fraud risk assessment for the EIDL program. SBA has not
fully implemented our recommendations, but officials stated the agency
has begun the process of conducting a fraud risk assessment of the EIDL
program. Fully implementing these recommendations would help SBA to
safeguard billions of dollars of taxpayer funds and improve the operation
of the EIDL program.
The Associate Administrator of SBA’s Office of Disaster Assistance
should develop a comprehensive strategy for communicating with
potential and actual program applicants in the event of a disaster. Such a
strategy should provide guidelines for the types of information and timing
of information to be provided to program participants throughout a
disaster. The types of information to be addressed in the strategy could
77The Census Bureau’s West region includes the following states: Arizona, Colorado,
Idaho, New Mexico, Montana, Utah, Nevada, Wyoming, Alaska, California, Hawaii,
Oregon, and Washington.
Conclusions
Recommendation for
Executive Action
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GAO-21-589 Economic Injury Disaster Loan Program
include processing steps and time frames applicants might experience
through different stages of the loan process. (Recommendation 1)
We provided a draft of this report to SBA for review and comment. In
written comments, reproduced in appendix IV, SBA stated that it agreed
with the report’s recommendation and plans to develop a comprehensive
strategy for communicating with potential and actual disaster loan
applicants, which will include information such as processing steps and
corresponding time frames applicants might experience through different
stages of the loan process. SBA also stated that it is moving operation of
the EIDL program related to COVID-19 from the Office of Disaster
Assistance to the Office of Capital Access in order to better serve small
businesses.
SBA also provided technical comments, which we incorporated as
appropriate.
We are sending copies of this report to appropriate congressional
committees, the SBA Administrator, and other interested parties. In
addition, the report is available at no charge on the GAO website at
https://www.gao.gov.
If you or your staff have any questions about this report, please contact
William B. Shear at (202) 512-8678 or ShearW@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Major contributors to this report are
listed in appendix V.
William B. Shear
Director, Financial Markets and Community Investment
Agency Comments
and Our Evaluation
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GAO-21-589 Economic Injury Disaster Loan Program
List of Addressees
The Honorable Patrick Leahy
Chairman
The Honorable Richard Shelby
Vice Chairman
Committee on Appropriations
United States Senate
The Honorable Ron Wyden
Chairman
The Honorable Mike Crapo
Ranking Member
Committee on Finance
United States Senate
The Honorable Patty Murray
Chair
The Honorable Richard Burr
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate
The Honorable Gary C. Peters
Chair
The Honorable Rob Portman
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Benjamin Cardin
Chairman
The Honorable Rand Paul
Ranking Member
Committee on Small Business and Entrepreneurship
United States Senate
The Honorable Rosa L. DeLauro
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives
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GAO-21-589 Economic Injury Disaster Loan Program
The Honorable Frank Pallone, Jr.
Chair
The Honorable Cathy McMorris Rodgers
Republican Leader
Committee on Energy and Commerce
House of Representatives
The Honorable Bennie G. Thompson
Chairman
The Honorable John Katko
Ranking Member
Committee on Homeland Security
House of Representatives
The Honorable Carolyn B. Maloney
Chairwoman
The Honorable James Comer
Ranking Member
Committee on Oversight and Reform
House of Representatives
The Honorable Nydia Velázquez
Chairwoman
The Honorable Blaine Luetkemeyer
Ranking Member
Committee on Small Business
House of Representatives
The Honorable Richard Neal
Chair
The Honorable Kevin Brady
Republican Leader
Committee on Ways and Means
House of Representatives
The Honorable Elizabeth Warren
United States Senate
The Honorable Ayanna Pressley
House of Representatives
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
For this report, we examined (1) challenges the Small Business
Administration (SBA) and Economic Injury Disaster Loan (EIDL) program
applicants experienced as part of SBA’s implementation of the EIDL
program in response to Coronavirus Disease 2019 (COVID-19) and the
extent to which SBA has addressed these challenges; (2) the EIDL
program’s effects on its participants, including the effects of loan limits
SBA put in place; (3) steps SBA has taken to address risks of fraud and
provision of funds to ineligible applicants; and (4) the characteristics of
program applicants and recipients. The EIDL loan program existed prior
to the pandemic, but Congress has made legislative changes to modify
the program in response to COVID-19, including the addition of EIDL
advances. This report focuses on SBA’s implementation of EIDL since the
start of the pandemic.
To address the first objective, we reviewed relevant legislation and SBA’s
guidance, policies and procedures, training documents, contracts with
vendors, and other material for the EIDL program in response to COVID-
19. We also interviewed officials from SBA’s Office of Disaster Assistance
about the implementation of the program. In addition, we interviewed
representatives from a nongeneralizable sample of six state or regional
Small Business Development Centers (SBDC) located in California,
Illinois, Georgia, New York, Oklahoma, and Puerto Rico about their
clients’ experiences with the EIDL program. We selected these SBDCs
because each of them met at least two of our several criteria: (1) the state
or region in which it is located experienced a large negative impact from
the pandemic based on the Census Bureau’s Small Business Pulse
Survey; (2) it had a high share of small businesses receiving EIDL
funding based on the same survey; (3) a large difference existed between
the percentage of applicants that requested versus received EIDL funding
based on the survey; and (4) it had a high share of minority-owned
businesses.1 We also selected SBDCs that are located in different
geographic regions of the country. We also interviewed America’s
SBDCs, an industry association representing SBDCs.
We also interviewed representatives of two business associations
representing small businesses nationally (the National Federation of
Independent Businesses and National Small Business Association) and
four business associations representing industries in specific sectors
1The Small Business Pulse Survey measures the effect of changing business conditions
during the pandemic on small businesses, including whether small businesses requested
or received EIDL funding. The survey asked small businesses the magnitude of the
effect—positive or negative—of the pandemic.
Appendix I: Objectives, Scope, and
Methodology
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
(Americans for Arts, American Hotel and Lodging Association, National
Association of Realtors, and the National Retail Federation). We identified
these associations through internet searches. We selected the industry-
specific associations because the industries they represent experienced a
larger-than-average negative effect from the pandemic, according to the
Census Bureau Small Business Survey, and had large numbers of EIDL
borrowers (based on our review of SBA loan data).
Collectively, we refer to representatives from SBDCs and associations we
interviewed as stakeholders. We used “few,” “some,” “a majority,” and
“almost all” to characterize stakeholder responses. We define “few” as 1–
3 responses, “several” as 4–6 responses, “a majority” as 7–10 responses,
and “almost all” as 11–13 responses. We conducted these interviews
between August 2020 and February 2021.
We also conducted five discussion groups with EIDL program applicants
and asked them about their experience with the program. Two groups
consisted of applicants whose loans were declined, and three groups
consisted of applicants whose loans were approved. Each group
consisted of four to six participants, and we spoke with 22 EIDL
applicants in total. We recruited these participants through the National
Small Business Association, which emailed its members on our behalf.
Those association members interested in participating responded using a
web form. We conducted the discussion groups in January 2021.
Discussions were guided by a GAO moderator who used a standardized
list of questions to encourage participants to share their thoughts about
and experiences with the EIDL program.
We spoke to these participants using a video conferencing tool. Each
group discussion was digitally recorded and transcribed by an outside
vendor, and we used the transcripts to summarize participants’
responses. An initial coder provided an explanation of the types of
statements that should be assigned to a particular code and assigned a
code that best summarized the statements from discussion group
participants. A separate individual reviewed and verified the accuracy of
the initial coding. The initial coder and reviewer discussed orally and in
writing any disagreements about code assignments and documented
consensus on the final results. Discussion groups are intended to
generate in-depth information about the reasons for participants’ views on
specific topics. While we report our findings by the number of discussion
groups in which a topic was discussed, this does not necessarily mean
that there was a consensus or agreement among all discussion group
participants on a given topic. The opinions expressed by the participants
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
represent their points of view and may not represent the views of all EIDL
applicants.
To identify trends in processing EIDL loans and advances, such as
processing times and volume, we reviewed SBA’s weekly summary
processing reports for loans and advances. For loans, we reviewed
reports dating from March 15, 2020, through February 27, 2021. For
advances, we reviewed reports dating March 29, 2020, through July 15,
2020. We interviewed SBA officials in order to assess the reliability of the
data contained within those reports and determined that they were
reliable for the purpose of reporting on SBA’s loan processing volumes
and times.
To further analyze trends in processing times, we obtained and analyzed
SBA data for individual EIDL loan applications. These data were derived
from about 12.5 million applications submitted to SBA between March 14,
2020, and February 28, 2021. To assess the reliability of these data, we
conducted electronic testing for missing data, outliers, and obvious errors,
and we interviewed SBA officials. We determined that the data were
sufficiently reliable for the purpose of describing application volumes and
processing times. Within the application data, each application was
assigned a processing status depending on the processing stage the
application was in at the time data were produced. Based on information
from SBA, we categorized applications with statuses listed as “funded,”
“funding,” “obligated,” and “obligating” as applications that had been
“approved.”2
To analyze average processing times by the month that applicants
submitted their applications, we analyzed the applications that were
“funded” or declined. We used “funded” rather than the entirety of the
“approved” category to provide a consistent measurement for the
processing time. Using these data, we approximated the processing time
from the time applicants submitted their applications to the time SBA
funded or declined their applications.
To identify trends in customer service calls received, we analyzed SBA’s
weekly data for its Customer Service Center from the week of March 15,
2Applications in these stages have been approved by SBA. Specifically, “obligating”
indicates that SBA has made a final approval for the application; “obligated” means that
the borrower may sign the closing documents; “funding” means that borrowers have
signed closing documents; and “funded” means the funds have been disbursed to the
borrower.
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
2020, through the week of February 14, 2021. The calls from this period
were primarily related to COVID-19. SBA distinguishes COVID-19 calls
from non-COVID-19 calls using certain coding, but COVID-19-related
calls are not always coded as such, according to SBA. To identify trends
in staffing, we analyzed SBA’s weekly staffing data from March 20, 2020,
through February 12, 2021. To assess the reliability of SBA’s call center
and staffing data, we interviewed SBA officials. We determined that these
data were sufficiently reliable for the purpose of identifying trends in
customer service calls and staffing levels.
To address the second objective, we reviewed information from SBA
about when it implemented the loan limits, and we interviewed officials
from SBA’s Office of Disaster Assistance about the loan limits put in
place. Additionally, we obtained information from SBA about the number
of borrowers affected by SBA’s loan limits. We asked discussion group
participants and representatives of SBDCs and business associations
identified above about the effects of the program and loan limits.
To address the third objective, we reviewed prior GAO reports and
reports from SBA’s Office of Inspector General and independent financial
statement auditor.3 We interviewed SBA officials from the Office of
Disaster Assistance and SBA’s contractor about controls in place to
ensure eligibility and to address fraud risk. We also obtained written
responses to questions we submitted to SBA’s contractor and two
subcontractors regarding services they provided in implementing EIDL
and their interactions with SBA, among other things. Additionally, we
reviewed documentation on SBA’s policies, procedures, and training
related to reviewing EIDL applications. We also reviewed documents
related to EIDL program eligibility criteria and modifications made to the
contractors’ validation system.
To characterize fraud cases and schemes used to obtain EIDL funds, we
analyzed 51 fraud-related cases based on information provided in
3See GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters Its
Second Year, GAO-21-387 (Washington, D.C.: Mar. 31, 2021) and COVID-19: Critical
Vaccine Distribution, Supply Chain, Program Integrity, and Other Challenges Require
Focused Federal Attention, GAO-21-265 (Washington, D.C.: Jan. 28, 2021); Small
Business Administration, Office of Inspector General, SBA’s Handling of Identity Theft in
the COVID-19 Economic Injury Disaster Loan Program (Washington, D.C.: May 6, 2021)
and Inspection of Small Business Administration’s Initial Disaster Assistance Response to
the Coronavirus Pandemic (Washington, D.C.: Oct. 28, 2020); and Small Business
Administration, Office of Performance Management and the Chief Financial Officer,
Agency Financial Report, Fiscal Year 2020 (Washington, D.C.: Dec. 18, 2020).
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
Department of Justice (DOJ) and federal court documents from May 2020
to March 2021. We identified the 51 cases included in our analysis by
subscribing to alerts from a legal news subscription site, using the key
phrase “Economic Injury Disaster Loan.” For identified cases, we used an
electronic public access service for U.S. federal court documents to
access and download documents used in the court process, such as
indictments, criminal information, and plea agreements. We conducted a
thematic analysis of case information, using a federal fraud ontology
currently under development at GAO as a schema. This thematic analysis
was structured and organized using WebProtégé, an ontology modeling
tool developed by the Stanford Center for Biomedical Informatics
Research at the Stanford University School of Medicine. We then
analyzed the aggregate data to describe the characteristics of EIDL-
related DOJ cases. To identify illustrative cases of potential fraud and
abuse involving EIDL funds, we selected from a list of cases that had
reached conclusion through guilty plea. We selected cases to achieve
variation across the following criteria: whether the cases involved (1)
eligibility misrepresentation, (2) fraud schemes identified by law
enforcement, and (3) fraud related to COVID-19 or other crimes.
To address our fourth objective, we (1) analyzed SBA data on EIDL loan
applicants to determine applicants’ demographic and other
characteristics; (2) combined these applicant data with Census Bureau
and U.S. Department of Agriculture (USDA) data at the county level to
examine the socioeconomic, demographic, and geographic
characteristics of the counties in which applicants and borrowers were
located; and (3) combined SBA’s EIDL applicant data with Census
Bureau data at the tabulated ZIP code level to examine the
socioeconomic and demographic characteristics of tabulated ZIP code
areas in which applicants and borrowers were located for four
metropolitan statistical areas (MSA).4
We analyzed the characteristics of EIDL applicants using SBA’s data on
EIDL applications from March 14, 2020, through February 28, 2021,
4The Census Bureau defines metropolitan statistical areas as having at least one
urbanized area of 50,000 or more population, plus adjacent territory that has a high
degree of social and economic integration with the core as measured by commuting ties.
ZIP code tabulation areas are generalized areal representations of U.S. Postal Service
ZIP code service areas, which are not areal features but a collection of mail delivery
routes.
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
discussed above. The data covered about 12.5 million applications.5 We
analyzed the number of applicants, the loan approval rate, and the loan
amount by the size of a business (as measured by the number of
employees reported by applicants), the age of the business, and the
business industry reported by the applicant.6 Although we determined that
these data were reliable for our use in describing trends in applicant and
loan recipient characteristics, SBA collected this information from
applicants who self-certified the accuracy of the information provided.
Therefore, the reliability of the data is dependent on the accuracy of the
information provided by the applicants.
We combined SBA’s EIDL applicant data with socioeconomic,
demographic, and geographic data at the county level to examine
characteristics of the counties in which applicants and borrowers were
located.7 We used data from the Census Bureau’s 2015–2019 American
Community Survey to define and compute socioeconomic and
demographic characteristics. Specifically, for socioeconomic
characteristics, we examined median household income, unemployment
rate, poverty rate, percentage of households receiving public assistance
income, and percentage of households without internet access. For
demographic characteristics, we examined the percentage of non-White
residents, the percentage of foreign-born residents, and the percentage of
households with limited English proficiency. For geographic
characteristics, we used 2017 data from USDA’s Economic Research
5The data consisted of about 3.7 million approved applications, 6 million declined
applications, 2.6 million withdrawn applications, and 123,000 other applications, such as
applications SBA is currently processing.
6The SBA data included data on business activity, number of employees, the date the
business was established, whether the loan was approved, and the loan amount. We
created additional variables to facilitate our analysis of the data. Specifically, we created
the variable for the age of business by calculating the length of time between the date that
applicants reported they established their business and January 31, 2020. We chose to
use January 31, 2020, because applicants were generally eligible for EIDL in response to
COVID-19 if they established businesses on or before this date. For industry, SBA’s data
generally consisted of business activities that applicants could select from a list on the
application. However, some business activities did not align with those that appear on the
application. Where possible, we grouped business activities that did not align with those
that appear on the application.
7For the purposes of this analysis, we defined “community” as a U.S. county and a small
business as a business with fewer than 500 employees.
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
Service to classify counties as rural or urban.8 Additionally, we used data
from the Census Bureau to identify tribal lands.9
In our analysis, we examined the relationship between EIDL program
outcomes and county-level socioeconomic, demographic, and geographic
characteristics. Specifically, we analyzed the total number of EIDL
applications, the total number of approved EIDL applications, and the
total number of declined EIDL applications. We also analyzed the loan
approval rate and the total and average loan amounts for approved
applicants.10 Additionally, we used data from two Census Bureau
reports—the Statistics of U.S. Businesses and Nonemployer Statistics—
to determine the number of small business establishments by county and
the number of small business employees by county. We used these data
to compute the number of approved EIDL loans per small business and
the loan amount approved on a per-employee basis.11 We reviewed
documentation related to the data from the Census Bureau and USDA
and determined that the data were sufficiently reliable for our use in
describing the characteristics of the communities in which EIDL
applicants and loan recipients were located.
We combined SBA’s EIDL applicant data with Census Bureau data at the
ZIP code tabulation area (ZCTA) level to examine the socioeconomic and
demographic characteristics discussed above for ZCTAs within which
applicants and borrowers were located for four MSAs. For each MSA, we
8USDA’s Economic Research Service designates each U.S. county as metro or nonmetro.
Metro areas include all counties containing one or more urbanized areas: high-density
urban areas containing 50,000 people or more. Metro areas also include outlying counties
that are economically tied to the central counties, as measured by the share of workers
commuting on a daily basis to the central counties. Nonmetro counties are outside the
boundaries of metro areas and have no cities with 50,000 residents or more. For the
purposes of this report, rural counties are “nonmetro” counties and urban counties are
“metro” counties designated by USDA in 2017.
9We used data from the Census Bureau to define tribal areas, which consist of American
Indian, Alaska Native, and Native Hawaiian areas. These areas contain both legal and
statistical American Indian, Alaska Native, and Native Hawaiian entities for which the
Census Bureau publishes data. The legal entities consist of federally recognized American
Indian reservations and off-reservation trust land areas, state-recognized American Indian
reservations, and Hawaiian home lands. American Indian tribal subdivisions and Alaska
Native Regional Corporations are additional types of legal entities.
10We calculated the loan approval rate using the data for approved and declined
applicants.
11We calculated loans per small business by adjusting for the number of approved,
nonagricultural EIDL loans in a particular county by the total number of small businesses
in a county to facilitate comparison across geographic areas.
Appendix I: Objectives, Scope, and
Methodology
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GAO-21-589 Economic Injury Disaster Loan Program
compared the socioeconomic and demographic characteristics of the
ZCTAs to the national estimates. To select MSAs for analysis, we
established population densities for each MSA and grouped the MSAs
into four size categories: mega, large, medium, and small. From these,
we judgmentally selected four MSAs for further analysis at the ZCTA level
using information about (1) population; (2) percentage of businesses that
requested assistance based on Census Bureau data (a proxy of level of
need for the EIDL program); (3) the difference between the percentage of
businesses that requested assistance versus those that received
assistance based on Census Bureau data; and (4) distribution across the
Census Bureau’s four geographic regions. We conducted analysis for
New York-Newark-Jersey City (mega), Chicago-Elgin-Naperville (large),
San Jose-Sunnyvale-Santa Clara (medium), and New Orleans-Metairie
(small).
Aggregate business statistics from the Census Bureau are unavailable at
the ZCTA level. Therefore, we are unable to scale EIDL lending outcomes
by the number of EIDL loans per 1,000 small businesses and the loan
amount approved on a per-employee basis. We therefore limited our
analysis to loan approval rate for ZCTAs. Additionally, we excluded the
percentage of foreign-born residents from our analysis because no
estimate for the ZCTAs is above the national average.
To provide context for our observations from the data analysis, we
conducted a narrow, limited search for reports and studies related to
certain socioeconomic and demographic variables (median household
income, household internet access, demographic trends, and urban or
rural location). We focused on reports and studies that contained
information about interactions among those variables, the EIDL
application process, and COVID-19. We identified these reports and
studies using a Google search. We restricted our search to scholarly and
government material published within the last 5 years.
We conducted this performance audit from July 2020 to July 2021 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
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GAO-21-589 Economic Injury Disaster Loan Program
This appendix contains information on Economic Injury Disaster Loan
(EIDL) program lending outcomes by unemployment rate, share of
households receiving public assistance income, poverty rate, foreign-born
population, and share of households with limited English proficiency.
Businesses in counties with unemployment rates below or equal to the
national unemployment rate received fewer loans on average and a
smaller overall share of all EIDL dollars (see table 9).1 However, the
average loan size was larger as compared with loans received by
businesses in counties with unemployment rates above the national rate.
Table 9: Economic Injury Disaster Loan (EIDL) Applications, Loan Size, and Share of Total Loan Dollars, by County
Unemployment Rate
Variable
Counties above
national
unemployment rate
Counties below or equal to
national unemployment rate
All U.S. counties
Average number of EIDL applications
3,954
2,150
2,927
Average number of declined EIDL applications
2,524
1,222
1,782
Average number of approved EIDL applications
1,431
928
1,144
Average loan size (in dollars)
50,710
56,721
53,487
Percentage of all approved EIDL loan dollars
51.0
49.0
100
Source: GAO analysis of Small Business Administration (SBA) and Census Bureau data. | GAO-21-589
Note: The total number of counties or similar entities that can be matched to EIDL loan data is 3,139.
According to the Census Bureau, 1,351 counties had rates of unemployment above the national rate,
and 1,788 counties had rates below the national rate.
Figure 17 illustrates EIDL lending outcomes associated with county
unemployment rate, by quartile. Counties falling into the lower
unemployment quartiles had higher loan approval rates and larger
average loan sizes than other counties, although they also had fewer
loans per 1,000 small businesses and smaller loans on a per-employee
basis.
1The national 5-year estimate of unemployment rate was 5.3 percent, according to our
analysis of data from the 2015–2019 American Community Survey.
Appendix II: Socioeconomic and
Demographic Characteristics of EIDL
Applicants and Recipients
EIDL Applicant and
Recipient Outcomes
by County
Unemployment Rate
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
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GAO-21-589 Economic Injury Disaster Loan Program
Figure 17: Economic Injury Disaster Loan Program Lending Outcomes by County Unemployment Rate
Note: We ordered the unemployment rates for all counties from the lowest to the highest value. We
then divided the ordered distribution of counties into four equally sized groups (quartiles). The
counties with the lowest rates fall within the “<25th” quartile while those with the highest rates fall
within the “>75th” quartile. We calculated the average for each lending outcome by quartile.
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 74
GAO-21-589 Economic Injury Disaster Loan Program
Businesses in counties with shares of residents receiving public
assistance income at a level below or equal to the national estimated
share received fewer EIDL loans on average, but they received a larger
overall share of loan dollars (see table 10).2 The average dollar amount of
these loans was slightly smaller than that of loans received by businesses
in counties with larger shares of the population receiving public
assistance income.
Table 10: Economic Injury Disaster Loan (EIDL) Applications, Loan Size, and Share of Total Loan Dollars, by County Share of
Households Receiving Public Assistance Income
Variable
Counties above
national rate
Counties below or equal to
national rate
All U.S. counties
Average number of EIDL applications
3,533
2,620
2,927
Average number of declined EIDL applications
2,144
1,600
1,782
Average number of approved EIDL applications
1,389
1,020
1,144
Average loan size (in dollars)
53,785
53,281
53,487
Percentage of all approved EIDL loan dollars
41.0
59.0
100
Source: GAO analysis of Small Business Administration (SBA) and Census Bureau data. | GAO-21-589
Note: The total number of counties or similar entities that can be matched to EIDL loan data is 3,139.
According to the Census Bureau, 1,055 counties had shares of residents receiving public assistance
income above the national rate, and 2,084 counties had rates below the national rate.
Figure 18 illustrates EIDL lending outcomes associated with county share
of households receiving public assistance income, by quartile. All
measures were generally comparable across quartiles.
2The national 5-year estimate of the share of households receiving public assistance
income was 2.4 percent, according to our analysis of data from the 2015–2019 American
Community Survey.
EIDL Applicant and
Recipient Outcomes
by County Share of
Households
Receiving Public
Assistance Income
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 75
GAO-21-589 Economic Injury Disaster Loan Program
Figure 18: Economic Injury Disaster Loan Program Lending Outcomes by County Share of Households Receiving Public
Assistance Income
Note: We ordered the shares of households receiving public assistance income for all counties from
the lowest to the highest value. We then divided the ordered distribution of counties into four equally
sized groups (quartiles). The counties with the lowest share fall within the “<25th” quartile while those
with the highest share fall within the “>75th” quartile. We calculated the average for each lending
outcome by quartile.
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 76
GAO-21-589 Economic Injury Disaster Loan Program
Businesses in counties with poverty rates below or equal to the national
rate received more and larger loans on average, as well as a larger share
of all EIDL dollars (see table 11).3
Table 11: Economic Injury Disaster Loan (EIDL) Applications, Loan Size, and Share of Total Loan Dollars, by County Poverty
Rate
Variable
Counties above
national rate
Counties below or equal to
national rate
All U.S. counties
Average number of EIDL applications
2,799
3,095
2,927
Average number of declined EIDL applications
1,806
1,752
1,782
Average number of approved EIDL applications
994
1,343
1,144
Average loan size (in dollars)
51,305
55,623
53,487
Percentage of all approved EIDL loan dollars
47.5
52.5
100
Source: GAO analysis of Small Business Administration (SBA) and Census Bureau data. | GAO-21-589
Note: The total number of counties or similar entities that can be matched to EIDL loan data is 3,139.
According to the Census Bureau, 1,788 counties had poverty rates above the national rate, and 1,351
counties had rates below the national rate.
Figure 19 illustrates EIDL lending outcomes associated with county
poverty rate, by quartile. Businesses in the lowest quartile of counties in
terms of poverty rate generally had higher loan approval rates, loan
amounts on a per-employee basis, and average loan sizes. In contrast,
counties in the highest quartile in terms of poverty rate had somewhat
more loans per 1,000 businesses.
3The national 5-year estimate of poverty rate was 12.9 percent, according to our analysis
of data from the 2015–2019 American Community Survey.
EIDL Applicant and
Recipient Outcomes
by County Poverty
Rate
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 77
GAO-21-589 Economic Injury Disaster Loan Program
Figure 19: Economic Injury Disaster Loan Program Lending Outcomes by County Poverty Rate
Note: We ordered the poverty rates for all counties from the lowest to the highest value. We then
divided the ordered distribution of counties into four equally sized groups (quartiles). The counties
with the lowest poverty rates fall within the “<25th” quartile while those with the highest rates fall
within the “>75th” quartile. We calculated the average for each lending outcome by quartile.
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 78
GAO-21-589 Economic Injury Disaster Loan Program
Businesses in counties with foreign-born populations above the national
estimated share of the population received more and larger loans on
average, as well as a larger share of all EIDL dollars (see table 12).4
Table 12: Economic Injury Disaster Loan (EIDL) Applications, Loan Size, and Share of Total Loan Dollars, by County Foreign-
Born Population
Variable
Counties above
national rate
Counties below or equal to
national rate
All U.S. counties
Average number of EIDL applications
23,088
1,482
2,927
Average number of declined EIDL applications
13,624
933
1,782
Average number of approved EIDL applications
9,464
548
1,144
Average loan size (in dollars)
55,112
51,473
53,487
Percentage of all approved EIDL loan dollars
57.0
43.0
100
Source: GAO analysis of Small Business Administration (SBA) and Census Bureau data. | GAO-21-589
Note: The total number of counties or similar entities that can be matched to EIDL loan data is 3,139.
According to the Census Bureau, 210 counties had percentages of foreign-born residents above the
national rate, and 2,929 counties had rates below the national rate.
Figure 20 illustrates EIDL lending outcomes associated with foreign-born
population, by quartile. Businesses in the highest quartile of counties in
terms of poverty rate had higher loan approval rates, loan amounts on a
per-employee basis, and average loan sizes. Counties with more foreign-
born residents also received more loans per 1,000 small businesses.
4The national 5-year estimate of the share of the population born outside of the United
States was 13.6 percent, according to our analysis of data from the 2015–2019 American
Community Survey.
EIDL Applicant and
Recipient Outcomes
by County Foreign-
Born Population
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 79
GAO-21-589 Economic Injury Disaster Loan Program
Figure 20: Economic Injury Disaster Loan Program Lending Outcomes by Foreign-Born Population Percentage
Note: We ordered the percentage of foreign-born population for all counties from the lowest to the
highest value. We then divided the ordered distribution of counties into four equally sized groups
(quartiles). The counties with the lowest percentages fall within the “<25th” quartile while those with
the highest percentages fall within the “>75th” quartile. We calculated the average for each lending
outcome by quartile.
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 80
GAO-21-589 Economic Injury Disaster Loan Program
Businesses in counties with shares of households with limited English
proficiency above the national estimate of 4.4 percent received more and
larger loans on average, as well as a larger share of all EIDL dollars (see
table 13).
Table 13: Economic Injury Disaster Loan (EIDL) Applications, Loan Size, and Share of Total Loan Dollars, by County
Households with Limited English Proficiency
Variable
Counties above
national rate
Counties below or equal to
national rate
All U.S. counties
Average number of EIDL applications
14,465
1,617
2,927
Average number of declined EIDL applications
8,610
1,007
1,782
Average number of approved EIDL applications
5,856
609
1,144
Average loan size (in dollars)
54,686
52,178
53,487
Percentage of all approved EIDL loan dollars
53.3
46.7
100
Source: GAO analysis of Small Business Administration (SBA) and Census Bureau data. | GAO-21-589
Note: The total number of counties or similar entities that can be matched to EIDL loan data is 3,139.
According to the Census Bureau, 320 counties had percentages of households with limited English
proficiency above the national rate, and 2,819 counties had rates below the national rate.
Figure 21 illustrates EIDL lending outcomes associated with county share
of households with limited English proficiency, by quartile. Businesses in
the highest quartile of counties in terms of limited English proficiency had
larger loan amounts on a per-employee basis and average loan sizes.
These counties also received more loans per 1,000 small businesses.
However, loan approval rates across quartiles were similar.
EIDL Applicant and
Recipient Outcomes
by Share of
Households with
Limited English
Proficiency
Appendix II: Socioeconomic and Demographic
Characteristics of EIDL Applicants and
Recipients
Page 81
GAO-21-589 Economic Injury Disaster Loan Program
Figure 21: Economic Injury Disaster Loan Program Lending Outcomes by County Share of Households with Limited English
Proficiency
Note: We ordered the shares of households with limited English proficiency for all counties from the
lowest to the highest value. We then divided the ordered distribution of counties into four equally
sized groups (quartiles). The counties with the lowest shares fall within the “<25th” quartile while
those with the highest shares fall within the “>75th” quartile. We calculated the average for each
lending outcome by quartile.
Appendix III: Analysis of EIDL Lending
Outcomes for Selected Metropolitan Statistical
Areas by ZIP Code
Page 82
GAO-21-589 Economic Injury Disaster Loan Program
We analyzed Economic Impact Disaster Loan (EIDL) lending outcomes
for ZIP code tabulation areas (ZCTA) within four selected metropolitan
statistical areas (MSA): New York-Newark-Jersey City, Chicago-
Naperville-Elgin, New Orleans-Metairie, and San Jose-Sunnyvale-Santa
Clara.1 Because of a lack of aggregate business statistics at the ZCTA
level, we are unable to analyze the number of EIDL loans per 1,000 small
businesses or the loan amount approved on a per-employee basis. We
limited our analysis of ZCTAs to calculating and comparing differences in
loan approval rates across various socioeconomic and demographic
factors.
For each MSA, we examined EIDL loan approval rates for selected
socioeconomic and demographic characteristics by ZCTA.2 We identified
these MSAs based on factors such as varied population densities,
geographic regions, and the number of businesses in each MSA
requesting assistance (see app. I for more information). Based on our
analysis of loan approval rates at the ZCTA level, our findings from the
MSA analysis are generally consistent with those from our county-level
analysis. Thus, our results do not appear to be sensitive to the
geographic unit used.3
The New York-Newark-Jersey City MSA spans 25 counties.4 Between
March 2020 and February 2021, the Small Business Administration (SBA)
approved 361,881 EIDL loans with an average loan amount of $59,171
across 918 ZCTAs within the MSA. Our analysis of the demographic
indicators showed that the approval rates were lower for ZCTAs with
percentages of non-White population and number of households with
1The Census Bureau defines metropolitan statistical areas as having at least one
urbanized area of 50,000 or more population, plus adjacent territory that has a high
degree of social and economic integration with the core as measured by commuting ties.
2ZIP code tabulation areas are generalized areal representations of U.S. Postal Service
ZIP code service areas, which are not areal features but a collection of mail delivery
routes.
3We excluded the indicator for “percentage of foreign-born residents” from the analysis for
MSAs because there was no ZCTA above the 13.6 percent national estimate within the
MSAs we analyzed.
4The counties in the New York-Newark-Jersey City MSA are Duchess County, NY;
Putnam County, NY; Nassau County, NY; Suffolk County, NY; Essex County, NJ;
Hunterdon County, NJ; Morris County, NJ; Somerset County, NJ; Sussex County, NJ;
Union County, NJ; Pike County, PA; Bergen County, NJ; Hudson County, NJ; Middlesex
County, NJ; Monmouth County, NJ; Ocean County, NJ; Passaic County, NJ; Bronx
County, NY; Kings County, NY; New York County, NY; Orange County, NY; Queens
County, NY; Richmond County, NY; Rockland County, NY; and Westchester County, NY.
Appendix III: Analysis of EIDL Lending
Outcomes for Selected Metropolitan
Statistical Areas by ZIP Code
New York-Newark-
Jersey City MSA
Appendix III: Analysis of EIDL Lending
Outcomes for Selected Metropolitan Statistical
Areas by ZIP Code
Page 83
GAO-21-589 Economic Injury Disaster Loan Program
limited English proficiency above the national estimate (see fig. 22). Our
analysis of socioeconomic indicators showed that approval rates were
higher for ZCTAs with median household income above the national
estimate, and lower for ZCTAs with unemployment rate, poverty rate, and
percentage of households with no internet access above the national
estimate.
Figure 22: Approval Rates for Economic Injury Disaster Loans in the New York-Newark-Jersey City Metropolitan Statistical
Area for Selected Indicators, March 2020–February 2021
Note: Traditionally underserved ZIP code tabulation areas consist of areas where the following
indicators are above the national estimate: percentage of non-White population, percentage of
population with limited English proficiency, unemployment rate, poverty rate, and percentage of
population with no internet access. Additionally, traditionally underserved ZIP code tabulation areas
consist of areas where the median household income is below the national estimate. We use
“traditionally underserved” and “traditionally advantaged” to facilitate understanding of the data.
The Chicago-Naperville-Elgin MSA spans 14 counties.5 Between March
2020 and February 2021, SBA approved 126,929 loans with an average
loan amount of $50,236 across 413 ZCTAs within the MSA. Our analysis
of the demographic indicators showed that the approval rates were lower
for ZCTAs with percentages of non-White population above the national
estimate (see fig. 23). Additionally, approval rates were similar for ZCTAs
with numbers of households with limited English proficiency above and
5The counties in the Chicago-Naperville-Elgin MSA are Cook County, IL; DuPage County,
IL; Grundy County, IL; Kendall County, IL; McHenry County, IL; Will County, IL; DeKalb
County, IL; Kane County, IL; Jasper County, IN; Lake County, IN; Newton County, IN;
Porter County, IN; Lake County, IL; and Kenosha County, WI.
Chicago-Naperville-
Elgin MSA
Appendix III: Analysis of EIDL Lending
Outcomes for Selected Metropolitan Statistical
Areas by ZIP Code
Page 84
GAO-21-589 Economic Injury Disaster Loan Program
below the national estimate. Our analysis of socioeconomic indicators
showed that approval rates were higher for ZCTAs with a median
household income above the national estimate, and lower for ZCTAs with
unemployment rates, poverty rates, and percentages of households with
no internet access above the national estimate.
Figure 23: Approval Rates for Economic Injury Disaster Loans in the Chicago-Naperville-Elgin Metropolitan Statistical Area
for Selected Indicators, March 2020–February 2021
Note: Traditionally underserved ZIP code tabulation areas consist of areas where the following
indicators are above the national estimate: percentage of non-White population, percentage of
population with limited English proficiency, unemployment rate, poverty rate, and percentage of
population with no internet access. Additionally, traditionally underserved ZIP code tabulation areas
consist of areas where the median household income is below the national estimate. We use
“traditionally underserved” and “traditionally advantaged” to facilitate understanding of the data.
The San Jose-Sunnyvale-Santa Clara MSA spans two counties.6
Between March 2020 and February 2021, SBA approved 22,047 loans
with an average amount of $67,264 across 69 ZCTAs within the MSA.
Our analysis of the demographic indicators showed that the approval
rates were lower for ZCTAs with percentages of non-White population
above the national estimate (see fig. 24). Approval rates were similar for
ZCTAs with numbers of limited English proficiency households above and
below the national estimate. In addition, our analysis of socioeconomic
indicators showed that approval rates were higher for ZCTAs with median
6The counties in the San Jose-Sunnyvale-Santa Clara MSA are San Benito County and
Santa Clara County.
San Jose-Sunnyvale-
Santa Clara MSA
Appendix III: Analysis of EIDL Lending
Outcomes for Selected Metropolitan Statistical
Areas by ZIP Code
Page 85
GAO-21-589 Economic Injury Disaster Loan Program
household income and levels of internet access above the national
estimate, and lower for ZCTAs with unemployment rates and poverty
rates above the national estimate.
Figure 24: Approval Rates for Economic Injury Disaster Loans in the San Jose-Sunnyvale-Santa Clara Metropolitan Statistical
Area for Selected Indicators, March 2020–February 2021
Note: Traditionally underserved ZIP code tabulation areas consist of areas where the following
indicators are above the national estimate: percentage of non-White population, percentage of
population with limited English proficiency, unemployment rate, poverty rate, and percentage of
population with no internet access. Additionally, traditionally underserved ZIP code tabulation areas
consist of areas where the median household income is below the national estimate. We use
“traditionally underserved” and “traditionally advantaged” to facilitate understanding of the data.
The New Orleans-Metairie MSA spans eight parishes.7 Between March
2020 and February 2021, SBA approved 30,491 loans with an average
amount of $45,917 across 80 ZCTAs within the MSA. Our analysis of the
demographic indicators showed that the approval rates were lower for
ZCTAs with percentages of non-White population above the national
estimate (see fig. 25). Additionally, approval rates were similar for ZCTAs
with numbers of households with limited-English proficiency above and
below the national estimate. Our analysis of socioeconomic indicators
showed that approval rates were higher for ZCTAs with median
household income above the national estimate, and lower for ZCTAs with
7The parishes in the New Orleans-Metairie MSA are Jefferson Parish, LA; Orleans Parish,
LA; Plaquemines Parish, LA; St. Bernard Parish, LA; St. Charles Parish, LA; St. James
Parish, LA; St. John the Baptist Parish, LA; and St. Tammany Parish, LA.
New Orleans-Metairie
MSA
Appendix III: Analysis of EIDL Lending
Outcomes for Selected Metropolitan Statistical
Areas by ZIP Code
Page 86
GAO-21-589 Economic Injury Disaster Loan Program
unemployment rates, poverty rates, and percentages of households with
no internet access above the national average.
Figure 25: Approval Rates for Economic Injury Disaster Loans in the New Orleans-Metairie Metropolitan Statistical Area for
Selected Indicators, March 2020–February 2021
Note: Traditionally underserved ZIP code tabulation areas consist of areas where the following
indicators are above the national estimate: percentage of non-White population, percentage of
population with limited English proficiency, unemployment rate, poverty rate, and percentage of
population with no internet access. Additionally, traditionally underserved ZIP code tabulation areas
consist of areas where the median household income is below the national estimate. We use
“traditionally underserved” and “traditionally advantaged” to facilitate understanding of the data.
Appendix IV: Comments from the Small
Business Administration
Page 87
GAO-21-589 Economic Injury Disaster Loan Program
Appendix IV: Comments from the Small
Business Administration
Appendix IV: Comments from the Small
Business Administration
Page 88
GAO-21-589 Economic Injury Disaster Loan Program
Appendix IV: Comments from the Small
Business Administration
Page 89
GAO-21-589 Economic Injury Disaster Loan Program
Appendix IV: Comments from the Small
Business Administration
Page 90
GAO-21-589 Economic Injury Disaster Loan Program
Appendix V: GAO Contact and Staff
Acknowledgments
Page 91
GAO-21-589 Economic Injury Disaster Loan Program
William B. Shear, (202) 512-8678 or ShearW@gao.gov.
In addition to the contact name above, Marshall Hamlett (Assistant
Director), Weifei Zheng (Analyst in Charge), Vida Awumey, Irina
Carnevale, Chelsea Carter, Marissa Esthimer, Jacob Fender, Daniel
Flavin, Jill Lacey, Andrew Lobel, Ying Long, Marc Molino, Angela Pun,
Jessica Sandler, and Jennifer Schwartz made significant contributions to
this report.
Appendix V: GAO Contact and Staff
Acknowledgments
GAO Contact
Staff
Acknowledgments
(104417)
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