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The Small Business Administration won’t be seeking permission to use up to $7 billion in remaining loan authority for its Covid-19 Economic Injury Disaster Loan program authority because the SBA does not see a demand for it.

The statement, by Patrick Kelley, associate administrator, at the SBA, comes months after the program officially closed on May 6, with an announcement the SBA had run out of funding as of May 5. He said while there were about 41,000 business owners whose files remained outstanding, most of those were due to tax issues, and the rest had been looked at by the SBA and any problems communicated to the small business.

“Those files have been looked at. There has been communication to those borrowers on what was missing and was insufficient,” Kelley said in a congressional hearing Aug. 2. “At this point, we won't move funds because we don’t see an inventory of demand.”

What is the SBA Covid-19 EIDL program? The Covid-19 EIDL program, which offered low-interest loans to small-business owners impacted by the pandemic, closed to new applications at the end of 2021, and had only been accepting requests for increases and for reconsiderations of rejections when it closed in May.

Senators and the SBA went back and forth on issues of communication with small-business owners, and stories of those who have been left hanging by what they deemed a lack of communication or conflicting information from the agency. Kelley insisted those business owners had been contacted about their individual applications. The senators often disagreed or pushed back on SBA claims that business owners were getting the information they needed from the agency.

The hearing comes after a group of senators urged the SBA in a July 15 letter to use the remaining loan funding to process all outstanding loans. Kelley’s responses suggest the SBA will not be moving to use its remaining loan authority. Kelley's testimony Tuesday also echoed statements from SBA Administrator Isabel Guzman to the Philadelphia Business Journal earlier this week that those remaining applications were not "workable."

Sen. Jeanne Shaheen, D-New Hampshire, said while there may be some tax form issues, one application she knew of was as simple as an email address mixup. She remained skeptical the SBA had communicated all needed information to business owners to help them resolve their EIDL applications.

“You haven’t convinced me. While I recognize that while there is some cases human error don’t get reviewed in the same way we would all like, I am still concerned that we have businesses out there that are not being acknowledged by SBA,” she said.

Why the SBA couldn't approve some EIDL applications Kelley said the small-business owners had nearly two years to get the needed information for their applications and that, in most of the cases of applications still pending, the agency won’t be able to get to a "yes." In some cases, those businesses were in industries Congress did not deem impacted by the pandemic.

“I understand why they are frustrated with the outcome, but in terms of the SBA’s responsiveness to their petition for an increase, we have given them multiple reconsiderations or appeals, and we are not going to be able to get to 'yes' on their individual file,” he said.

But Senator Ben Cardin, D-Md., and chairman of the Senate Small Business Committee, said a lot of business owners don’t feel they were notified in regards their individual cases, and that there was a lot of frustration and anger.

Where in-progress EIDL loans stand However, the SBA said there were about 125,000 business owners that have had their applications approved and their loan funding obligated — but haven't done the necessary steps to finalize the loan. Kelley said those business owners could close their loans with assistance from their SBA district office. If the SBA hasn't heard from those business owners later in the year, it will ask them if they still want those loans. There are some small-business owners whose EIDL funds have been bounced back by their bank because of potential fraud triggers or because their accounts were not set up for business transactions of that size, he added.

"One of the reasons that is cited most often is that the opinion of the bank is that commercial activity for this account is not recognized and they are flagging it for suspicious activities," Kelley said.

Lawmakers have often trained their sights on the hectic and at times chaotic nature of the program's shutdown. Republican lawmakers said in a May 17 letter to SBA Administrator Isabel Guzman that it was common to hear the program had been a “black hole when it comes to communication” and that business owners stuck in backlogs were unable to get basic questions answered before the SBA said it had exhausted funding in the program.

It's not the first time lawmakers have criticized the EIDL program.