Direct Loan Program Survey Results (SIGPR-A-21-003)

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Summary

Direct Loan Program Survey Results, Report Number SIGPR-A-21-003, issued September 23, 2021 by the Special Inspector General for Pandemic Recovery. The report describes the Direct Loan Program under Section 4003 of the CARES Act, which provided $46 billion, and states that Treasury entered into 35 direct loans totaling $21.9 billion, of which $2.7 billion was disbursed, while another 220 companies applied without obtaining a loan. SIGPR surveyed approved applicants on March 25, 2021 and non-approved applicants on July 14, 2021, receiving 56 responses from the second group. Tables compare the groups: 24 of 34 approved applicants and 21 of 56 non-approved applicants rated their experience positively, and most non-approved respondents said they did not know why their application was rejected. Appendices A and B summarize responses question by question.

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Direct Loan Program Survey 
Results 
 
Report Number: SIGPR-A-21-003 
September 23, 2021 
 
 
 

 
  
1 
  
Introduction 
The Special Inspector General for Pandemic Recovery (SIGPR) was established by 
Section 4018 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 
Under the CARES Act, SIGPR has the duty to conduct, supervise, and coordinate 
audits and investigations of the making, purchase, management, and sale of loans, loan 
guarantees, and other investments by the Secretary of the Treasury under any program 
established by the Secretary under Division A of the CARES Act, as well as the 
management by the Secretary of any program established under Division A of the 
CARES Act. SIGPR also has the duties, responsibilities, powers, and authorities 
granted inspectors general under the Inspector General Act of 1978, including broad 
subpoena authority. 
The role and mission of SIGPR is to safeguard the people’s tax dollars appropriated by 
Congress through the CARES Act. SIGPR strives to ensure that the American taxpayer 
gets the best return on investment by efficiently rooting out fraud, waste, and abuse. In 
carrying out its mission, SIGPR’s goal is to treat everyone with respect, to operate with 
the utmost integrity, and to be fair, objective, and independent.  
 
Background 
Section 4003 of the CARES Act authorizes the Treasury to make loans, loan 
guarantees, and other investments to provide liquidity to eligible businesses related to 
losses incurred as a result of the coronavirus pandemic. Sections 4003(b)(1)-(3), 
hereinafter referred to as the Direct Loan Program (DLP), provided $46 billion to help 
stabilize air carriers and related businesses and businesses critical to maintaining 
national security. The DLP consists of two programs – the Air Carrier Loan Program 
(ALP) and the National Security Loan Program (NSLP).  
The breakdown of available funding was as follows: 
1) Up to $25 billion for passenger air carriers; businesses certified to perform 
inspection, repair, replace or overhaul services; and ticket agents; 
2) Up to $4 billion for cargo air carriers; and 
3) Up to $17 billion for businesses critical to maintaining national security.  
Treasury entered into 35 direct loans with qualified borrowers. Although the loans and 
loan guarantees totaled $21.9 billion, only $2.7 billion was disbursed. In addition to the 
35 approved applicants, another 220 companies applied for direct loans but were either 
rejected by Treasury or withdrew their applications. 
Companies were rejected by Treasury for various reasons including credit worthiness, 
insufficient collateral, or late or incomplete applications. Among the companies that 
voluntarily withdrew from consideration, some received funding from another CARES 
Act program.  
Treasury developed underwriting, credit analysis, and approval processes to provide 
urgent assistance to air carriers and other eligible businesses through the ALP. The 
NSLP was modeled after the ALP with a few differences in its underwriting process to 
address the needs of businesses critical to maintaining national security. NSLP 

2 
applicants were required to be designated as a “business critical to maintaining national 
security.” To be considered for a direct loan through the NSLP, a business had to 
demonstrate, at the time of the business’s application, that it was:  
•
Performing under a “DX” priority rated contract or order under the Defense
Priorities and Allocations System regulations;1 or
•
Operating under a valid top secret facility security clearance under the National
Industrial Security Program regulations.2
If an applicant to the NSLP did not meet these eligibility criteria, the applicant business 
could still be considered for a direct loan if the Secretary of the Treasury determined 
that the applicant business was critical to maintaining national security. The Secretary’s 
decision would be based on a recommendation and certification from the Secretary of 
Defense or the Director of National Intelligence.3 Several NSLP applicants were 
rejected due to a lack of documentation verifying their status as a business critical to 
maintaining national security. 
Purpose 
SIGPR is currently examining the Department of Treasury’s administration of the DLP. 
As part of our examination, we surveyed both approved and non-approved loan 
applicants to gain an understanding of how all applicants viewed the program. The 
purpose of this report is to provide the results of SIGPR’s survey of approved and non-
approved DLP applicants.  
Methodology 
SIGPR sent surveys on March 25, 2021, to all 35 DLP approved applicants. Surveys 
were sent via first-class mail and email to the addresses of record provided by each 
business in their respective loan agreement maintained by Treasury. SIGPR 
coordinated with Treasury to ensure that it had the most current contact information for 
all DLP participants. The DLP participants were informed that their responses were 
required under the terms of their loan agreements with Treasury.4 SIGPR received 
responses from all DLP participants except one business that had already repaid its 
loan balance and was acquired by another firm.  
A second survey, designed to solicit input on the experiences of non-approved 
applicants, was sent on July 14, 2021, to the 220 DLP applicants that did not obtain a 
direct loan. The survey was sent electronically using commercially available survey 
software. Responses were voluntary and respondents were informed that the survey 
would close 30 days from the date it was sent. SIGPR received 56 responses (25.5 
percent). 
1 15 C.F.R. 700 
2 32 C.F.R. 2004 
3 DoD OIG is currently examining DoD’s process of certifying NSLP applicants in conjunction with SIGPR. 
4 Each DLP participant’s loan agreement contains an access to records clause, Treasury Access §10.07. 

 
  
3 
  
Multiple choice answers were analyzed statistically. Short Answer responses were 
analyzed for overarching trends and keyword phrases by members of the audit team. In 
some instances, respondents’ answers were not included in our results because we 
determined that those answers did not directly respond to the question being asked or 
were too specific, too infrequent in occurrence, or not actionable. In other instances, 
infrequent responses were included when we determined they had the potential to be 
representative of a larger trend. A selection of that analysis, represented in graph form, 
can be found in Appendices A and B.  
 
Results 
In addition to summarizing the survey results in this publication, we plan to conduct 
further analysis, as warranted, with Treasury officials and both approved and non-
approved applicants. These survey results will also be included as part of SIGPR’s 
overall report of our examination of the Direct Loan Program.  
We identified trends among approved DLP applicants, trends among non-approved DLP 
applicants, and trends across both groups. Table 1 summarizes respondent trends for 
selected questions relevant to DLP applicants that were approved and obtained a direct 
loan. Response data for additional questions to SIGPR’s Direct Loan Program Survey 
can be found in Appendix A.  
 
Table 1 - Selected Responses from Approved Applicants 
Question 
Summary of Trends 
Please describe the nature of any disputes 
with Treasury over any aspects of the 
program.  
Most answers mentioned the treatment of 
collateral. 
Were the terms offered by Treasury equitable 
with similarly situated borrowers? 
Majority of applicants stated that they believed 
Treasury’s terms were fair and equal. 
What was the most significant “covered loss” 
experienced by your company, and why was it 
significant?  
Most respondents stated revenue/sales 
decline. 
If credit was not otherwise available at the 
time of the loan, please explain why.  
The two most common responses were that 
they were denied credit or higher interest rates 
were offered.  
Describe if any loan conditions severely 
impacted business operations?  
The two most common responses were 
maintaining employment requirements and 
that the loan had a positive impact on 
operations. 
Did any term or condition prompt your 
company to consider withdrawing from the 
program?  
The most common response was related to 
collateral requirements. 

 
  
4 
  
Question 
Summary of Trends 
What would make a similar program better in 
the future?  
The most common response was to tailor the 
program to specific business types.  
 
Source: SIGPR Office of Audits analysis of respondent answers to SIGPR’s Direct Loan Program Survey. 
 
Table 2 summarizes respondent trends for selected questions relevant to DLP 
applicants that were either rejected or withdrew their applications. Response data for 
additional questions to SIGPR’s DLP Non-Approved Applicant Survey can be found in 
Appendix B. 
 
Table 2 - Selected Responses from Non-Approved Applicants 
Question 
Summary of Trends 
How did you initially hear about Treasury's 
Direct Loan Program?  
The two most common responses were a 
third party or the news.  
What changes in the way information was 
communicated do you recommend?  
The most common response was more and 
timely communication. 
What modifications do you recommend to 
enable greater participation? 
Respondents recommended improved 
communication, greater flexibility, and 
expanded eligibility. 
Please describe why your application was 
withdrawn or rejected from the Direct Loan 
Program?  
Most respondents stated that they did not 
know why their application was rejected. 
 
Source: SIGPR Office of Audits analysis of respondent answers to SIGPR’s DLP Non-Approved Applicant 
Survey. 
 
Some questions related to each applicant’s experience with the DLP were the same 
across both surveys. Respondents’ answers to those questions, in general, differed 
based on whether the respondent was eventually approved for a direct loan or not 
approved. See Table 3.  
 

 
  
5 
  
Table 3 - Comparison of Responses to Similar Questions for Approved and Non-
Approved DLP Applicants 
Question 
Approved Applicants 
Non-Approved 
Applicants 
Please rate your experience with the 
Direct Loan Program. 
24 of 34 (71 percent) 
provided positive 
responses.a  
21 of 56 (38 percent) 
provided positive 
responses. 
Was the guidance that Treasury provided 
on program requirements clear? 
23 of 34 (68 percent) 
responded that the 
guidance was clear. 
21 of 56 (38 percent) 
responded that the 
guidance was clear. 
Did your company engage in lobbying 
activities related to the Direct Loan 
Program? 
7 of 34 (18 percent) 
responded yes. 
2 of 56 (4 percent) 
responded yes. 
Did your company apply for and/or 
receive any other CARES Act funding? 
26 of 34 (76 percent) 
responded yes. 
47 of 56 (84 percent) 
responded yes 
a Positive responses include: acceptable, somewhat user friendly, and extremely easy and user friendly. 
 
Source: SIGPR Office of Audits analysis of respondent answers to SIGPR’s Direct Loan Program Survey and 
DLP Non-Approved Applicant Survey. 
 
Audit Team 
The surveys and publication were conducted by the individuals listed below: 
Michael Sinclair 
Audit Manager 
Reynaldo Gonzales 
Auditor-In-Charge 
Renata Malionek 
Management Analyst 
 
 

 
 
A-1 
 
Appendix A – Responses from Approved Applicants 
 
The charts in Appendix A summarize respondents’ answers to questions in SIGPR’s 
Direct Loan Program Survey sent March 25, 2021. The survey was sent to all 35 DLP 
participants. SIGPR received 34 responses. The number of responses to each question 
in this appendix is denoted by n. Please note that column chart totals may not add up to 
34 because those associated questions may not have been applicable to some of the 
respondents. Furthermore, a column chart’s total may not equal its associated 
question’s number of respondents because respondents may have: (1) provided more 
than one relevant answer in their response or (2) provided a response that the audit 
team did not consider responsive to the question. 
 
Experience 
 
Please rate your company’s experience 
with the Direct Loan Program.  
n = 34 
Was the guidance that the U.S. 
Department of the Treasury (Treasury) 
provided on program requirements clear? 
n = 34 
 
 
 
 
 

 
 
A-2 
 
Did your company experience any 
disputes with Treasury about any aspect 
of the Direct Loan Program? 
n =34 
Among respondents stating that their 
company experienced a dispute, we 
identified the following trends: 
n = 11 
 
 
 
 
Lobbying Activities 
 
Did your company hire or retain anyone or 
any firms to engage in “lobbying activities” 
(as defined by the Lobbying Disclosure Act 
of 1995) related in any way to the Direct 
Loan Program, regardless of whether that 
person or firm was required to disclose 
those activities under the Lobbying 
Disclosure Act of 1995? 
n = 34 
 
 
 
Loan Terms 
 
Were the terms Treasury offered your 
company (including interest rate, 
collateral, and taxpayer protections) 
equitable with those offered to similarly 
situated borrowers? 
n = 34 
 
 
 
 
 

 
 
A-3 
 
Covered Losses 
 
Direct loans were limited to those 
companies either experiencing or 
anticipating “covered losses.” Did your 
company predict any "covered losses" at 
the time of application? 
n = 34 
To the extent your company predicted 
“covered losses” at the time of application, 
did those predictions come true? 
n = 34 
 
 
 
 
What was the most significant “covered 
loss” your company faced and why was it 
significant? 
n = 32 
 
 
 
Has your company’s financial need for a 
Treasury direct loan changed since the 
loan application was submitted? 
n = 34 
 
 
 

 
 
A-4 
 
Please explain how your company’s 
financial needs have changed. 
n = 17 
 
 
Permissible Uses for Loan Proceeds 
 
Was the guidance that Treasury provided 
on permissible uses of direct loans clear? 
n = 34 
Please explain how the guidance might be 
clearer. 
n = 8 
 
 
 
Has your company used any of the direct 
loan proceeds for non-operating 
expenses? 
n = 34 
 
 
 

 
 
A-5 
 
Credit Availability 
 
Was credit reasonably available to your 
company at the time your company signed 
the agreement with Treasury to borrow 
under the Direct Loan Program? 
n = 34 
Please explain how credit was not 
reasonably available. 
n = 31 
 
 
 
 
Program Conditions 
 
Did any of the loan terms and conditions 
significantly impact your business 
operations? 
n = 34 
Which term(s) and/or condition(s) 
impacted your company and how? 
n = 12 
 
 
 
 
 
 
 
 
 

 
 
A-6 
 
Did any term or condition during the 
application process ever become an 
obstacle that prompted your company to 
seriously consider withdrawing from the 
loan application process? 
n = 34 
Which term(s) or condition(s) became an 
obstacle and why? 
n = 14 
 
 
 
 
 
 
 
 
 
Fund Tracing 
 
Has your company implemented, or does 
it plan to implement, a system for tracing 
how Direct Loan Program proceeds are 
allocated and spent? 
n = 34 
Does your company's system allow for 
separately tracing the funds received 
under each specific CARES Act 
program? 
n = 34 
 
 

 
 
A-7 
 
Recommendations 
 
If the Treasury Department was to offer 
another program similar to the Direct Loan 
Program, what improvements or 
suggestions could make the program more 
appealing? 
n = 16 
 
 
 
 

 
 
B-1 
 
Appendix B – Responses from Non-Approved Applicants 
 
The charts in Appendix B summarize respondents’ answers to questions in SIGPR’s 
DLP Non-Approved Applicant Survey sent July 14, 2021. The survey was sent to 220 
DLP applicants that were either rejected or withdrew their application. SIGPR received 
56 responses. The number of responses to each question in this appendix is denoted 
by n. Please note that column chart totals may not add up to 56 because those 
associated questions may not have been applicable to some of the respondents, or a 
respondent may have elected to not answer a particular question. Furthermore, a 
column chart’s total may not equal its associated question’s number of respondents 
because respondents may have: (1) provided more than one relevant answer in their 
response or (2) provided a response that the audit team did not consider responsive to 
the question. 
 
Experience 
 
How did you initially hear about Treasury’s 
Direct Loan Program? 
n = 56 
Please rate your overall experience with 
the Direct Loan Program. 
n = 56 
 
 
 
 
 
 
 

 
 
B-2 
 
Was the guidance that Treasury provided 
on program requirements clear? 
n =56  
What changes in the way information is 
communicated do you recommend, to 
deliver greater clarity and guidance? 
n = 41 
 
 
 
 
 
Please describe your company’s 
experience with the Direct Loan Program. 
n = 56 
 
 
 
 
 
Lobbying Activities 
 
Did your company hire or retain anyone or 
any firms to engage in “lobbying activities” 
(as defined by the Lobbying Disclosure Act 
of 1995) related in any way to the Direct 
Loan Program, regardless of whether that 
person or firm was required to disclose 
those activities under the Lobbying 
Disclosure Act of 1995? 
n = 56 
 
 
 

 
 
B-3 
 
Program Requirements 
 
Do you believe that Treasury's program 
requirements limited borrower 
participation? 
n = 56 
What modifications do you recommend to 
enable greater participation in the future? 
n = 48 
 
 
 
 
 
 
 
Please describe why your company's 
direct loan application was withdrawn or 
rejected from the Direct Loan Program. 
n = 54 
 
 
 
 

 
 
B-4 
 
Other CARES Act Programs 
 
Did your company apply to any other 
program(s) established by the CARES Act 
(for example, Main Street Lending Program 
or Paycheck Protection Program)? 
n = 56 
Please identify the program(s) and 
respective loan amount(s). 
n = 52 
 
 
 
 
 
 
Recommendations 
 
What other recommendations do you 
suggest, to improve similar direct lending 
programs in the future? 
n = 47 
 
 
 
 
 
 
Do you have any other comments or 
concerns related to the Direct Loan 
Program? 
n = 44

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