SBA’s Handling of Returned COVID-19 Economic Injury Disaster Loan Funds and De-Obligations of Approved Loans

The Office of Inspector General (OIG) is issuing this management advisory to present the results of our review of the U.S. Small Business Administration’s (SBA) processing of Coronavirus Disease 2019 (COVID-19) Economic Injury Disaster Loan (EIDL) funds that were returned to the agency by borrowers, banks, or other sources.

We found significant delays in the decision process related to returned COVID-19 EIDL funds. The majority of these COVID-19 EIDLs were eventually made available to small business owners, including the original borrowers. However, SBA canceled $3.1 billion of these loans, part of the returned COVID-19 EIDL funds, over several months.

SBA also canceled $8.1 billion of undisbursed COVID-19 EIDLs. The agency had not disbursed these loans because of inaccurate applicant information or other reasons, including fraud indicators that had not yet been resolved. The returned and undisbursed COVID-19 EIDLS, totaling $11.2 billion, were canceled after the program closed, so the funds could not be made available to other eligible COVID-19 EIDL borrowers.

On June 3, 2023, the Fiscal Responsibility Act of 2023 was enacted, which rescinded unobligated COVID-19 EIDL subsidy balances.