Korena Keys’ small business was hit hard when the pandemic first started last year.
KeyMedia Solutions, a digital media company of Sioux Falls, South Dakota, posted a 60% year-over-year revenue decline in May. She was able to secure a $ 115,000 loan from the Small Business Administration’s paycheck protection program to keep the workers busy until things stabilized.
When Keys received filing from the SBA in January that an additional $ 150,000 loan had been taken out on behalf of her company under the Disaster Loan for Economic Injury program, she believed it was a mistake.
Korena Keys runs a digital marketing company in Sioux Falls, South Dakota. She received help from the Small Business Administration’s Paycheck Protection Program, but found that her identity was stolen in order to obtain a fraudulent loan under the Economic Injury Disaster Loan Program for $ 150,000.
“We made a conscious decision not to seek any other assistance,” said Keys. “We thought these funds had to be left for companies that are not doing so well.”
Although she says she didn’t receive the money, the loan is very real and payments of nearly $ 800 a month are slated to start in November. The loan was approved, Keys said, despite the fact that the application contained inaccurate information about their company, including an incorrect phone number, email address, and financial details.
“The shock of that really turned into frustration and anger,” Keys said, adding that several other companies in their community had similar stories of identity theft in these aid programs.
She has filed claims with the Inspectorate General of the SBA and his fraud department, but she has not yet been released from responsibility, although she is hopeful that things will be cleared up before the loan falls due. Hours were spent damaging their business and trying to pay off the loan.
“It definitely caused some sleepless nights,” she said. “Until it’s in writing, I always worry. It’ll just hang over me until it’s done.”
Get help out the door
When the U.S. government and the SBA rushed out of the door last year for companies hit by the pandemic, criminals took advantage of these assistance programs and in some cases stole the identities of business owners to use this information to fraudulently Obtain credits for profits. A recent analysis of SBA’s OBA project fraud under Covid-19 small business programs could reach $ 84 billion.
In total, the U.S. government has provided more than $ 1 trillion in aid to Main Street through the Paycheck Protection Program and the Economic Injury Disaster Loan Program. The PPP allows small businesses to take out loans that can be extended if the borrower spends most of the capital on payroll, while the Covid-19 EIDL program gives borrowers access to loans based on temporary loss of revenue due to the pandemic. There was also an advance payment under the EIDL.
The OIG’s review of both programs warned of the potential for criminal exploitation due to the rapid progress of implementation and unprecedented demand for help. A recent memo from the House Select subcommittee on the coronavirus crisis describes how widespread it could be. The memo granted potentially fraudulent EIDL loans and prepayments of $ 79 billion and potentially fraudulent PPP loans of up to $ 4.6 billion.
1.34 million EIDL loans and grants have been sent to the OIG by the SBA, including nearly 750,000 referrals for suspected identity theft and more than 585,000 referrals for other potentially fraudulent activity. There have been nearly 150,000 hotline calls to SBA OIG for tips and complaints about potential fraud – an increase of 19,500% over previous years, the memo says.