Letter to SBA Administrator Carranza on EIDL (May 9, 2020)

Summary

A letter dated May 9, 2020 from United States Senators Charles E. Schumer, Benjamin L. Cardin and Jeanne Shaheen to Jovita Carranza, Administrator of the U.S. Small Business Administration, about the implementation of the Economic Injury Disaster Loan (EIDL) Program. The senators object to SBA's decision to limit EIDL loans to $150,000, stating that the CARES Act allows small businesses to borrow up to $2 million, and to its closing of the application portal to non-farm small businesses. The letter states that SBA had processed fewer than 50,000 applications totaling less than $10 billion despite receiving $2.775 billion in administrative funds, and criticizes a cap of $1,000 per employee on EIDL Emergency Grants. It requests reversal of the $150,000 limit, reopening the program to non-farm applicants and regular reporting to Congress.

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                                  WASHINGTON, DC 20510-3203


                                         May 9, 2020


The Honorable Jovita Carranza
Administrator
U.S. Small Business Administration
409 3rd Street SW
Washington, D.C. 20416

Dear Administrator Carranza:

We write to you with significant concerns regarding the implementation of the Economic Injury
Disaster Loan (EIDL) Program. This is an existing program that was able to immediately deliver
needed capital to businesses, yet throughout the response to the COVID-19 pandemic, SBA has
repeatedly made it harder for EIDL to serve struggling small businesses looking to SBA for the
capital they need to stay afloat.

One such example of this mismanagement is the recent decision to limit EIDL to $150,000,
completely disregarding current law and Congress’ clear intent that, in accordance with the
CARES Act, small businesses be allowed to borrow up to $2 million to respond to the COVID-
19 pandemic. This unauthorized policy change will leave the estimated four million pending
EIDL applicants in limbo after expecting that SBA would process their loans in a timely manner
for the amount permitted under the law.

Prior to instituting a cap, the average approved loan for EIDL borrowers was over $200,000. If
loan requests remain consistent, the new $150,000 cap means that the majority of businesses in
the EIDL queue will have to turn elsewhere to obtain the assistance they need to keep their
businesses running. Worse, it means that, unbeknownst to those borrowers, they have been
waiting in vain for weeks for loan amounts that will never come.

SBA’s decision to close its application portal to all non-farm small businesses is also concerning.
Of course, we agree that farms and other agricultural businesses need immediate assistance,
which is why we pushed for and secured a change in eligibility in the Paycheck Protection
Program and Healthcare Enhancement Act (interim COVID-19 act) to allow them to access
EIDL after calls for SBA to do so went unanswered. With that said, we also provided $50 billion
in lending authority in the interim COVID-19 act to support $366 billion in new loans to be
made available to all eligible small businesses, not just the newly eligible farms and agricultural
businesses. This appropriations level was based on SBA’s own data indicating that it would be
sufficient to help not only the estimated four million businesses that had previously applied, but
additional applicants seeking to access this program as well.

Furthermore, in the first round of EIDL funding, SBA abruptly instituted a $15,000 cap on
disbursements of approved loans. This policy was quietly rescinded given its many problems.
Even without that misguided policy, SBA’s disbursement of approved funding has been
significantly delayed. Despite receiving $2.775 billion in administrative funds for
implementation and oversight, the latest data from SBA shows that the agency had processed
fewer than 50,000 applications totaling less than $10 billion. This means SBA has disbursed less
than 3% of available funds to small businesses that are in desperate need of immediate
assistance.

We are also disappointed with SBA’s administration of the EIDL Emergency Grants, which
received an initial $10 billion appropriation in the CARES Act and an additional $10 billion in
the interim COVID-19 Act after funding ran out. These grants were intended to provide
assistance to EIDL applicants within three days to help them address immediate needs while
their loan applications were pending. Yet SBA made the decision to cap grants at $1,000 per
employee, thereby severely reducing the number of businesses that could receive the full
$10,000 prescribed by Congress and limited how effective the grants could be.

Compounding this situation, SBA has been inexcusably opaque when communicating its policies
on EIDL. Beyond this most recent decision to cap loans at $150,000 without notifying the public,
or even to acknowledge the policy once it had been unearthed by the media, it has consistently
failed to update the four million EIDL applicants on the status of their loans. Similarly, it has not
provided Congress with regular updates on the number of applicants served and the total
amounts disbursed, which is one reason we introduced a transparency and oversight bill this
week. The latest information Congress has received as of today was from April 28, nearly a week
and a half ago. We understand and appreciate the pressures the agency is under and the
unprecedented mobilization of resources, but despite these tremendous challenges, one thing that
SBA has no excuse for is its stubborn refusal to communicate transparently with the public or
with Congress and for its complete disregard of Congressional intent in the delivery of this
critical assistance.

To begin to rectify these problems and uphold the intent of EIDL, we request an immediate
reversal of SBA’s recent policy to limit EIDL loans to $150,000. We also request that SBA open
the program up to non-farm applicants. If SBA is concerned about opening up EIDL due to a
lack of funds, the Administration should send Congress a request with a funding level they need
to do so. To assist in that effort, we request SBA provide Congress regularly with the
information necessary to assess demand for EIDL so that we can ensure the program receives
adequate support.

Transparency and communication must improve. Anything less is a disservice to the millions of
small businesses that have invested their effort, their time, and their hope seeking to obtain
meaningful and effective federal support.

                                          Sincerely,




Charles E. Schumer                    Benjamin L. Cardin                     Jeanne Shaheen
United States Senator                 United States Senator                  United States Senator


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