Millions of small businesses grapple with financial burdens as SBA remains silent

Gregory León, the owner of Amilinda restaurant in Milwaukee, planned to improve the space of his restaurant, increase staff and increase workers’ wages after the Small Business Administration (SBA) informed him that the restaurant would receive all the money it ‘he had lost during the coronavirus pandemic.

Leon had requested a grant from the SBA after shutting down in-person operations for almost a full year – federal funds that would come from the $ 29 billion grant program reserved for improving the restaurant industry after being hit hard by the economic impacts of the pandemic.

But the stimulus money León approved for his restaurant “floats in limbo,” he explained to me, following a series of lawsuits filed against the SBA, which claims the Restaurant Revitalization Fund, a program established as part of President Joe Biden’s $ 1.9 trillion bailout, was discriminatory.

Several white business owners have filed a lawsuit against the SBA because Biden’s relief bill ordered the SBA to only approve applications from women, veterans, and “socially and economically disadvantaged” people. certain racial and cultural groups with financial barriers. Other business owners who do not meet these qualifications may still apply for the fund, but the application needs further consideration.

The judge ruled in favor of the contractors, prompting the agency to stop processing grants for the fund, saying that it “would only resume processing these requests after processing all previously filed non-priority requests, and only if the RRF is not exhausted first.” But this interrupted treatment puts nearly 3,000 applicants in a bind, including León, forcing them to wait weeks, if not months, to receive their approved funding.

So the $ 285,000 that the restaurant was approved to receive from the SBA – or the amount it says the small restaurant lost during the pandemic – will not be processed by the agency until it has finished. not processed requests and “replenished” its money supply for the fund.

“We wanted to make some improvements to the restaurant, such as repairing the air system,” notes León. “We can’t do this. We had planned to hire more staff, so we could open more tables because at the moment all the restrictions are gone in Milwaukee so I could run 100%. What keeps me from functioning at 100% of my capacity is the staff, ”said León. “I’m just careful not to hire more people and increase the payroll when I’m not sure the income that’s going to come in is going to cover that. “

He added, “There are a lot of things we planned to do that we just can’t. For us, at least for me, on a daily basis it’s more like, well, how long am I going to be that dog chasing his tail?

León noted that he had “no idea” that the prosecution was ongoing and that the results “caught us off guard”.

“What’s going to happen now, as far as this money goes, we really don’t know,” León said.

The interrupted payments come as other small businesses across the United States are still struggling to receive financial assistance from the federal government, even more than a year after the economy collapsed. And the fate of their additional monetary assistance is at the discretion of the SBA, one of the smaller cabinet-level agencies, long known as the government. “Sleeping swamp”. Despite the Biden administration’s claims to stand up for the little guy, the SBA appears to be following a path in which it elevates the pursuit of social justice instead of actually helping small businesses. When the Biden administration requested the funding, however, Congress never authorized this pipe-dreaming approach. The result is that the SBA is stuck in a legal quagmire, both putting jobs at risk and failing to create new ones.

When the $ 2.2 trillion Cares Act was passed last year, Congress and the Trump administration charged an agency “with an annual operating budget that is typically less than half of what the Department of Defense spends in one day “, according to the New York Times, to manage a portfolio of nearly $ 1 trillion that would help struggling small businesses. Almost seventy-five percent of small businesses nationwide have pivoted to the SBA amid last year’s abrupt shutdowns, prompting the agency to close new business applications for its pandemic relief effort, the Paycheck Protection Program (PPP), earlier than expected after issuing or guaranteeing loans worth around $ 900 billion. Business owners were outraged by the SBA’s decision, inundating agency directors with complaints and negative reactions.

At first, however, the agency quickly sent federal help to small businesses, taking nearly 12,000 phone calls a day, as the SBA typically responded to a few hundred inquiries before the pandemic hit. As of March 2020, the agency’s PPP has rescued more than eight million businesses, worth around $ 788 billion, and has also issued nearly $ 211 billion in Economic disaster loans, a program that provides funds to organizations during disasters claimed by the federal government.

But these pandemic responsibilities have resurfaced from historic operating deficiencies at the SBA, as millions of small businesses have reported issues with receiving federal funds and connecting with agency representatives on details regarding the status of their application.

There was a remarkable demand for federal relief that overwhelmed the SBA, and many business owners found themselves with no response or long waits. Some business owner inquiries were never dealt with, while others waited hours on the phone to get in touch with an agency employee or experienced technology issues. The SBA even warned that there were massive cases of fraud.

the the Wall Street newspaper noted that “at the heart of many of the problems” is the Disaster Assistance Bureau, an area within the SBA that handles nearly twenty-five percent of the agency’s pandemic loans. He handled the Economic Disaster Lending (EIDL) applications, but the office faced difficult battles when their management and technology were put to the test with the influx of business owners asking for help. .

“SBA disaster loans have always been a disaster,” Véronique De Rugy, a senior researcher at the Mercatus Center at George Mason University and an expert from the SBA told me. “I mean, it’s really, actually, pretty amazing.”

the Center of national interest is one of the millions of companies that have experienced the ineffectiveness of the SBA. Nearly two months after Biden took office, Congress and the administration approved a measure that extended Disaster and pandemic relief programs for small businesses and nonprofits. Months later, trying to communicate with the SBA is like talking into a vacuum. Here is the innocuous statement sent to me by the SBA about its delay in processing applications and distributing funds: “The SBA is deeply committed to getting funds back into the hands of struggling small business owners on as quickly as possible. We are working to meet this challenge – we have already started working on changes to improve the process, including coordinating closely with the IRS to expedite access to tax data; review staffing plans to meet increased demand; and review our processes to ensure we are handling requests effectively. The current pace does not reflect the high standards we strive to meet, but we are optimistic that our dedicated SBA team will be able to meet that expectation. ”

This behavior is not “unique” for the SBA’s disaster office, because there have been several disastrous agency disaster responses. A Example was when Congress tried to implement a program at the SBA that would help small businesses recover from the devastating effects of Hurricane Katrina that wiped out entire neighborhoods and towns. Even with the small business reforms, no loans were guaranteed for small businesses in the seven years after the Katrina crash.

“The real reason behind this is that there is a lot of dependence on the path and a lack of original thinking in government, especially when you are in a time of crisis, and there is only very little time “, notes De Rugy. “They try to use the channels we already have, and unfortunately they tend to ignore the lessons of the past.” “There isn’t a lot of accountability in government. There are a lot of terrible incentives. There is a great dependence on the path, where the government tends to do the same thing over and over again, and in an emergency, to fall back on the things it knows, ”added De Rugy.

Then there’s Isabella Guzman, the SBA chief who declined to be interviewed by the National interest. She inherited an agency with a backlog of inefficient operations and faces the challenge of leading the nation’s deployment by sending federal aid to small business owners. So far, she seems to have done nothing to improve her performance. Instead, as his Twitter account reveals, his main focus seems to be something other than helping a wide range of small businesses as quickly as possible. On June 22, for example, she tweeted: “Proud to help launch the 2nd Cohort of the Small Business Investing Scholars Program – an internship program that strengthens gender, racial and ethnic diversity in our small investment firms.

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