SBA Introduces New Anti-Fraud Measures: Key Points and What You Need to Know

The U.S. Small Business Administration (SBA) has recently implemented several significant changes to its loan programs and operations. These updates, driven by a focus on preventing fraud and addressing financial sustainability, will impact small business owners seeking SBA assistance. The following are key changes you need to know.

New Anti-Fraud Measures:

The SBA is taking steps to strengthen the integrity of its loan programs with the implementation of new anti-fraud measures. These changes are being introduced with the stated support of the Department of Government Efficiency. The primary new measures include:

• Citizenship Verification: All new SBA loan applications will now require citizenship verification. Lenders are responsible for confirming that the applicant business is not owned, in whole or in part, by an individual who is not a legal U.S. resident. This aims to ensure that SBA programs are accessed by eligible applicants.

• Date-of-Birth Verification: A new process to verify the age and date of birth of loan applicants has been introduced. The SBA states this will help prevent fraud stemming from the use of false identities, including those of minors or deceased individuals.

• Automatic Fraud Alerts: The date-of-birth verification process includes an automatic alert system. Any applicant claiming to be younger than 18 or older than 115 years of age will be automatically flagged for review.

The SBA attributed these changes to addressing what it described as "lax guardrails" in the past, citing instances of loans being approved for individuals outside the typical age range. It's important to note that the examples provided by the SBA primarily relate to the COVID-19 Economic Injury Disaster Loan (EIDL) program from 2020-2021.

Other Significant Changes to SBA Loan Programs and Operations:

Beyond the new anti-fraud measures, small business owners should be aware of the following additional changes:

• Increased Loan Fees: Borrowers seeking new SBA loans after March 27, 2025, will face higher fees. This adjustment comes after the SBA's 7(a) loan program experienced negative cash flow in 2024, partly due to previous fee reductions and an increase in loan defaults.

• End of Hardship Accommodation Plan (HAP): The SBA has discontinued its Hardship Accommodation Plan for COVID EIDL payments. This means that small businesses that were temporarily paying a reduced amount on their EIDL loans will now be required to resume making their full payments. A significant number of loans were enrolled in this program, potentially impacting many small businesses.

• Staff Reductions: The SBA has announced plans to cut its employee count by a significant 43%, which could involve hundreds or even thousands of positions. This is part of an effort to streamline operations and eliminate "non-essential" roles.

• Pausing of Green-Lender Initiative: The SBA has put a hold on its green-lender initiative, the details of which were not extensively covered in the provided article.

• Elimination of DEI Office and Closure of Select Offices: The SBA has eliminated its Office of Diversity, Equity, Inclusion and Accessibility. Additionally, it has targeted offices in certain "sanctuary cities" for closure, including locations like Boston, Chicago, Denver, and New York.

• End of Remote Work: As of February 24, 2025, SBA employees are no longer permitted to work remotely.

What This Means for Small Businesses:

These changes signal a shift towards stricter oversight and fiscal responsibility within the SBA. For small business owners, this means:

• More stringent application processes: Be prepared for additional verification steps related to citizenship and date of birth when applying for SBA loans.

• Potentially higher borrowing costs: New SBA loans will likely come with increased fees.

• Resumption of full EIDL payments: If you were utilizing the Hardship Accommodation Plan, ensure you are prepared for your regular payment schedule to resume.

• Potential for slower processing times: Significant staff reductions within the SBA could potentially lead to longer wait times for loan processing and other services.

Small business owners and business loan brokers must stay informed about these evolving policies and understand how they might impact their ability to access SBA resources. Keeping abreast of these changes will help you navigate the application process and plan accordingly for your business financing needs.