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We are meeting today to conduct an important oversight hearing on SBA’s implementation of the Economic Injury Disaster Loan program, or as some call it, the EIDL (pronounced IDLE) program, which was activated on March 12, making it the first economic relief program to assist small businesses adversely impacted by the coronavirus pandemic. 

I’d like to thank Mr. James Rivera, the Associate Administrator for SBA’s Office of Disaster Assistance, for being here today to discuss many of the issues surrounding the implementation of the EIDL program.   

Mr. Rivera, I value your commitment and the hard work of your staff, and I fully understand the extraordinary efforts put forth to respond to this unprecedented crisis.  However, we are holding this hearing today because of some very concerning issues that have hindered relief for thousands of small businesses.   

As you know, we held a hearing last month in which we heard directly from EIDL applicants about their experiences with the program.  One small business owner discussed the negative impact of SBA’s unilateral reduction of the maximum loan size from $2 million to $150,000, a cut of more than 90 percent. 

He, like thousands of small businesses owners across the country, were drawn to the EIDL program, largely due to the ability to use an EIDL loan for more than just payroll.  

Imagine being in the position of thinking this program at a max of $2 million is just what your business needs, only to learn at loan approval that SBA had drastically reduced the loan amount.  This is precisely the kind of information that needs to be conveyed to borrowers ahead of time. 

It makes it a fundamentally different loan product, and for those who needed an amount greater than $150,000, EIDL was rendered irrelevant. 

Throughout the process, SBA showed a lack of understanding of the challenges facing  small businesses related to COVID-19, especially by offering a “one-size-fits-all” $150,000 loan, without offering them an opportunity to apply for a second loan or seek additional funding. 

Small businesses looking to the SBA for help were essentially told “take it or leave it,” regardless of need or size, and then told to “have a nice day.” 

We also heard from a community pharmacist in South Philadelphia who applied for the EIDL loan but was denied due to “unsatisfactory credit history.”  

This is a lifelong entrepreneur, who has struggled with razor-thin margins, and is now saddled with additional burdens due to COVID-19.  

Borrowers, like the community pharmacist, who have been denied for allegedly unsatisfactory credit history have reported that the credit thresholds for approving loans is not clear and borrowers do not know what the limit is, leaving them feeling like the decision was arbitrary. I’m sure it would be helpful to all if SBA simply communicated the credit minimums to small businesses up front. 

I have also heard from small businesses who were denied because of “unverifiable information,” meaning there were items that were reviewed that caused SBA to question the validity of the items.  But the denial letter never detailed the information that was missing, leaving applicants with little insight as to why they were denied.  

Though these decisions can be appealed, that only adds to the delays and expenses of a struggling business owner.  These businesses need relief, and they need it now. 

Even more troubling is the fact that SBA has not communicated well with applicants, nor has it provided them with reliable ways to check the status of their applications. Borrowers are simply told that the loan is “processing.”  The only other updates they receive are whether the loan has been approved or denied. 

Applicants need to know where they stand in the queue so they know how much longer they must wait before receiving financing. 

And given the current economic climate, if they are going to be denied, they deserve to know quickly so that they can explore options for capital elsewhere. 

Finally, there was a long period during which the EIDL application portal was limited to only agricultural small businesses, which is completely at odds with the intent of the Small Business Act and the mission of the SBA, which is to aid, counsel, assist, and protect the interests of ALL small businesses. 

It is particularly troubling to have heard allegations that these loans were being processed before other applications that were already in the queue, and we hope to get a clear answer on that today.  

As the Committee continues its oversight duties, I am looking forward to hearing from Mr. Rivera about how many applications are currently pending in the queue, how much more funding is necessary to meet the loan demand, and what steps SBA is planning to take to ensure small businesses across the country receive the economic relief they need to survive. 

Already, a number of large companies have declared bankruptcy post-COVID-19, and experts say it is not long before this wave of bankruptcies hit small businesses.  We need to be doing more to help avert this outcome. 

With that, I look forward to hearing from Mr. Rivera on the EIDL’s performance in response to COVID-19, and what ODA needs from Congress to fully implement the EIDL program consistent with our intent.