The Small Business Administration (SBA) of the United States has suspended loans to nearly 7,000 Minnesota borrowers suspected of fraud in relation to the federal funds provided to combat the effects of the pandemic. 

This move marks the largest round of suspensions to date since the outbreak of the pandemic. The suspension affects small business entities or individuals accused of benefiting from loans or forgiveness of loans via the PPP or EIDL loans through fraudulent means.

The suspensions will prevent the affected borrowers from accessing any new SBA loans or other forms of assistance while the review of their cases is being conducted. The Office of the Inspector General of the agency, alongside federal law enforcement partners, has been carrying out a comprehensive analysis of data with the aim of detecting abnormal loan applications. 

These include payroll data not matching the provided employment records of the businesses, no businesses at all, and duplicates. This operation in Minnesota is among a number of national attempts at recovering misappropriated funds.

The SBA representatives underscored that the move targets suspected bad actors, and that in itself should not deter the good small businesses from seeking aid. Borrowers who think they might have been falsely flagged can also appeal or submit documentation for record clearance, but face delays in their new capital as their status is under review. 

Some Minnesota lenders have expressed concern that the added scrutiny could slow processing times, although many also welcomed the crackdown as overdue after widespread reports of fraud during the pandemic.

The fraud allegedly perpetrated in Minnesota is occurring during a time when there are also moves to reinforce procurement and loaning incentives for true small businesses. Cities like Orlando have developed programs to prefer small businesses to make sure public contracts go to qualified small businesses and not just fronts or pass-through corporations. 

On its part, there are also SBA efforts to encourage domestic manufacturing as well as an educated small business workforce with an emphasis on SBA programs tied to intensified coordination and performance obligations.

Neighbor states are also ramping up their efforts to assist genuine small businesses from varied groups to tap into federal and state sources. In Wisconsin, for instance, there have been information sessions to enable small businesses owned by minorities and women to be ready to access grants and contracts within the area of infrastructure. 

The most recent round of SBA fraud enforcement, however, has come to alert genuine Minnesota small businesses to the dangers of fraud within emergency relief efforts, as well as to the continuing need to properly document and engage with lenders.