October 11, 2021

Delaney Sexton
Contributing Editor

Main Street Monday – SBA Disbursed $4.5 Billion More in EIDL Grants to Sole Proprietors and Independent Contractors than Policy Allowed

“We found SBA did not establish a proper internal control environment at the onset of the program to prevent sole proprietors and independent contractors without employees from receiving Emergency EIDL grants for more than $1,000,” reads the SBA Office of Inspector General’s recent report about the SBA’s EIDL program.

The OIG addresses the number of sole proprietors and independent contractors that claimed to have employees but did not provide an Employer Identification Number. There were sole proprietors and independent contractors who claimed to have up to a million employees but did not include an EIN. Almost 543,000 EIDL grant applications from sole proprietors and over 161,000 independent contractors claimed to have employees but did not provide an EIN. The monetary impact of this totals more than $4.46 billion.

“The absence of an EIN and the number of employees cited on these applications should have alerted SBA loan specialists that the applicant’s self-certified information was flawed and likely erroneous,” states the OIG report.

The OIG recommends that the SBA:
• Review sole proprietors’ and independent contractors’ applications that included numbers of employees but no Employer Identification Number.
• Remedy the $3.5 billion disbursed to sole proprietors and $1 billion disbursed to independent contractors that exceeded the amount allowed by SBA’s policy.

SBA plans to use a third-party contractor to assess EIDL grants that were greater than $1,000 and were dispersed to the sole proprietors and independent contractors who did not provide an EIN on the application. They will form a plan to remedy cases where the applicant provided false information on the EIDL application. Finally, the SBA will consider their options of solving cases by recovering funds by offset, referring the cases to the OIG’s Division of Investigations, or providing supporting documentation when applicable.

OIG Report