The Biden government is working harder to get back money loaned to businesses during the COVID-19 crisis, says The Washington Post.
In the past, the government didn’t go after small businesses that took money through the COVID-19 Economic Injury Disaster Loan, or EIDL for short. Together with the Paycheck Protection Program (PPP), the EIDL helped give out more than $1 trillion to people borrowing money since it started, which kept the nation’s economy going during the pandemic.
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But now, the Small Business Administration (SBA) is changing its approach, and not everyone will be happy about it.
Owners of businesses who got PPP money could ask to not pay back their loans, but those who got EIDL loans were supposed to pay them back from the start. But in April 2022, the SBA decided to let go of chasing some debts under $100,000 because it was too expensive to chase every late payment.
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Even so, the SBA’s inspector general, Hannibal Ware, was worried about this decision. He thought it might encourage more borrowers of COVID-19 EIDL loans to avoid paying back what they owe.
After looking into it, the SBA found that about $30 billion in PPP and EIDL loans of up to $100,000 might face extra penalties in 2024. This is a big deal because it’s about 2.5 percent of all the money they lent out. With this in mind, the U.S. government is increasing its efforts to get some of this money back to ease the financial load on taxpayers and tackle fraud, which is reported to be over $200 billion, according to a report from the SBA OIG.
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The SBA plans to take serious steps in 2024 by sending pandemic loan borrowers to the Treasury Department after a 60-day warning period that ends in early March. The Treasury will handle the penalties, which could be severe.