The Small Business Administration (SBA) faced significant challenges in managing the record surge in workload due to the expansion of the disaster loan program in response to the Covid-19 pandemic. The agency traditionally focused on helping businesses affected by localized disasters, but the scale of the pandemic loans created operational weaknesses, including communication failures and IT management issues. Some consultants believe that Congress has not properly funded the agency, leading to delays in loan processing and technology deficiencies.
As Covid disaster loans come due, the SBA has reported a high default rate, with nearly 893,000 loans referred to Treasury for collections. However, many borrowers dispute the delinquency status of their loans and have faced challenges in resolving issues with repayments. Some borrowers, like Harb and Mavaddat, have experienced difficulties in repaying their loans due to confusion over loan servicing locations and lack of communication from the SBA.
Consultants and business owners interviewed believe that errors and lack of support from the SBA have contributed to the inflated default rate. Despite efforts to rectify the situation, such as recalling defaulted loans and exempting penalties, borrowers continue to struggle to make payments and resolve loan issues. The SBA has acknowledged some of these challenges but maintains that its technology systems are functioning properly.
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