As small businesses across the country clamor to apply for loans under the $2 trillion stimulus package, work is already being done to try and reduce any outbreak of fraud in the program.
Behind the scenes, conversations have begun with law enforcement partners around the country to ensure that the Small Business Administration’s expansion of loans is disbursed to the people intended to receive the funding, according to a spokesman from the Office of the Inspector General.
Treasury Secretary Steven Mnuchin said in an interview with Fox Business Monday that the small business loans included in the stimulus package amounting in nearly $350 billion would become available as soon as Friday. And, as he’s pledged to get checks cut at “lightning speed,” the Inspector General’s office at SBA is working to try and educate consumers, lenders and law enforcement about what signs to look for to stamp out fraudsters.
But the sheer volume of the money going out the door is a challenge. For an agency that gave out $28 billion in 2019, doling out $350 billion in a matter of months will be an unprecedented scale especially given the tight timeline.
The SBA will have an influx of tech support to help it streamline the loan process. “SBA has hired Microsoft and Amazon to help the agency implement the Paycheck Protection Program,” according to a source familiar with the situation, who described it as “unprecedented public-private partnership.”
This week, the IG’s office released guidelines for consumers warning of ways the new loan program could be targeted for fraud.
“The Office of Inspector General recognizes that we are facing unprecedented times and is alerting the public about potential fraud schemes related to economic stimulus programs offered by the U.S. Small Business Administration response to the Novel Coronavirus Pandemic,” the document reads. “Fraudsters have already begun targeting small business owners during these economically difficult times.”
The document included a warning that small business owners should not have to pay anything upfront. And, “if someone offers a high interest bridge loan in the interim, suspect fraud.”
The office has begun work on a report that will lay out potential vulnerabilities in past disaster relief loan programs — and what clues they leave for investigators this time around.
Groups like the Chamber of Commerce and the National Federation of Independent Business are also educating their members about how to apply for the loans and instructing them on how to protect their assets from potential bad actors.
“It is a very scary and a real issue,” said Tom Sullivan, the vice president of small business policy at the US Chamber of Commerce. “It is our responsibility to tell small businesses: do not respond to an offer for financial help that is not initiated by yourself…If you don’t initiate the conversation, then be really, really careful.”
The $350 billion about to be disbursed through the Payment Protection Program will allow small businesses to apply for loans to keep staff on payroll. The money can also go to small business owners to pay rent and utilities. The loans can be forgiven if small business owners meet certain requirements including keeping staff on the payroll without reducing their wages.
From Capitol Hill, aides are working closely with the administration to ensure the infrastructure is ready to handle the challenge.
“There is work going on to head off any potential problems,” one GOP aide familiar with the buildup of the program told CNN. “Everything is massive in scope and everything about everything is unprecedented right now.”
In light of the urgent needs, Congress also allowed the SBA to expand eligible lenders who can participate in the program, meaning that banks that typically aren’t included on the SBA’s preferred lender list and don’t have experience administering SBA loans will now be allowed to.
“They are developing a simple, streamlined standard application and between all of the partners have about 3,000 people supporting this from the private sector,” the source familiar said. Rocket Mortgage, the source added, will be specifically helping with disaster loans that come directly from SBA and go to business owners.
“The balance here is speed vs. perfection,” Sullivan said. “You don’t have the time to wait for perfection to keep your doors open, the lights on and your employees paid.”
There are still questions as to whether $350 billion will even be enough. Business groups argue that need is only going to continue as stay-at-home orders continue throughout the country.
“There are very few who aren’t feeling the impact,” said Holly Wade, the director of research and policy analysis for the National Federation of Independent Business. “They are in desperate need of a cash infusion. The demand of these loans is huge. That will be the challenge in facilitating the massive demand.”