Watchdog report: SBA didn't tell lenders to prioritize rural businesses for relief loans, so they got shortchanged

A new report from the Office of the Inspector General in the Small Business Administration said the agency didn't tell private lenders to prioritize borrowers in under-served and rural markets when implementing federal relief, so rural and other underserved businesses may not have gotten much-needed funds from the $669 billion Paycheck Protection Program under the CARES Act.

"The report is the first independent analysis of a key feature of the government’s efforts to deal with the economic fallout from the coronavirus," Aaron Gregg reports for The Washington Post. It buttresses concerns about whether the funds from the $2 trillion CARES Act are being distributed fairly: "Last month, the Treasury Department had to warn well-capitalized, publicly traded businesses that they would probably not be eligible for the program after several national brand names reported receiving tens of millions of dollars in loans under the Paycheck Protection Program, while many small businesses without strong banking relationships struggled to get loans."

The PPP is designed to allow small businesses to stay afloat and keep paying their employees via low-interest loans that can be forgiven if at least 75 percent of the funds are spent on payroll costs, among other measures. But the program relies on the banking industry to administer the program, with the SBA and Treasury functioning mostly as regulators, Gregg reports.