CORONAVIRUS

Where the SBA's disaster loans are going, and why Iowa's small businesses are at the lower end of the scale

Small Business Administration Administrator Jovita Carranza attends a White House news conference in April. (Washington
Small Business Administration Administrator Jovita Carranza attends a White House news conference in April. (Washington Post)

After three months during which bureaucratic delays and a lack of communication left millions of business owners wondering when help would arrive, the federal government’s coronavirus disaster-loan program is gaining momentum.

The Small Business Administration had approved just over 1.1 million coronavirus disaster loans as of Saturday, according a recent SBA report — up from about 39,000 in late April.

It has spent $80 billion out of about $365 billion in available loan funds.

But the agency still has a long way to go toward addressing the more than 5 million disaster-loan applications it received as the economic crisis set in.

And questions linger about whether the loan funds — which are part of a separate program from the larger Paycheck Protection Program — are being distributed fairly and effectively.

A state-by-state Washington Post analysis of SBA spending found drastic variation in loan receipts, highlighting how the current effort to bolster the economy with federal funds could contribute to stark inequalities in how wealth is distributed across the United States.

The Post’s analysis is based on loan figures published Saturday by the SBA. The figures were then adjusted based on the number of small businesses in the state.

Because not all small business applied for an Economic Injury Disaster Loans program, known as EIDL, loan — about half did, according to a survey from the National Federation for Independent Business — the average size of each loan is likely to be larger than depicted above.

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About 40 percent of the SBA’s EIDL funding as of Saturday was captured by four states — California, New York, Florida and Texas.

A few states with relatively small economies received an outsized share of the disaster-loan funding after adjusting for the number of small businesses in the state.

Meanwhile, several states that were hit hard by the coronavirus received a relatively low amount of funding through the EIDL, even after adjusting for the number of small businesses in the state.

When adjusted for the size of its small-business community, West Virginia did worse than every other state, for example. Small businesses in West Virginia received 2,781 EIDL loans for a total of $178 million.

In response to questions from the Post, Sen. Joe Manchin, D-W. V., expressed frustration that businesses in his state had received such relatively little funding.

“It is clear there is something very wrong with the distribution of these funds,” Manchin wrote in a statement.

“I will demand the SBA provide an explanation for this unacceptable difference and urge them to correct the unequal distribution of the EIDL funds. West Virginia businesses are struggling to stay afloat during this health care crisis and deserve to be supported at the same level as other small businesses across the nation.”

According to Post analysis of SBA figures, Iowa small businesses received at the lower end of the scale, between about $4,000 and $6,000 per small business.

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Iowa was among six other Midwestern and Intermountain West states, heavily dependent on agribusiness, that fared poorly in the EIDL program’s first three months, possibly because farms were initially excluded.

The SBA has refused to release records showing which businesses received federal coronavirus assistance, even though such information has been released on the agency’s website in the past.

The Post is among 11 news organizations suing SBA for access to the data.

The EIDL program is different from the $660 billion Paycheck Protection Program that is part of the CARES Act. The EIDL loans are handled directly by the government rather than private lenders, making them more appropriate for entrepreneurs who don’t have deep banking-industry connections.

They are favored by many business owners because more of the funding can be spent on bills including rent and utilities.

The EIDL program was activated March 12, several weeks before Congress passed the CARES Act, making it the first federal small business aid program to address the economic crisis.

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Our most important Coronavirus coverage is free to the public.

If you believe local news is essential, especially during this crisis, please donate. Your contribution will support news resources to cover the impact of the pandemic on our local communities.

All donations are tax-deductible.