The Small Business Administration’s Gaffes Are Now Her Job to Fix

Isabella Casillas Guzman, President Biden’s alternative to run the Small Business Administration, inherited a portfolio of practically $1 trillion in emergency assist and an company tormented by controversy when she took over in March. She has been sprinting from disaster to disaster ever since.

Some new packages have been mired in delays and glitches, whereas the S.B.A.’s best-known pandemic aid effort, the Paycheck Protection Program, practically ran out of cash for its loans this month, complicated lenders and stranding tens of millions of debtors. Angry enterprise homeowners have deluged the company with criticism and complaints.

Now, it’s Ms. Guzman’s job to flip the ship round. “It’s the largest S.B.A. portfolio we’ve ever had, and clearly there’s going to need to be some changes in how we do business,” she mentioned in a current interview.

When the coronavirus disaster struck and the economic system went right into a free fall final yr, Congress and the Trump administration pushed the Small Business Administration to the forefront, placing it accountable for big sums of aid cash and sophisticated new packages.

It is by far the smallest cabinet-level company, with an annual working funds that’s usually lower than half of what the Defense Department spends in a day. It was lengthy considered throughout the authorities as a sleepy backwater.

But when the pandemic despatched unemployment claims hovering, Congress responded with an unprecedented plan: Give companies cash to maintain their staff employed. Just seven days after President Donald J. Trump signed the $2.2 trillion CARES Act in late March 2020, the Small Business Administration started accepting purposes for the Paycheck Protection Program.

Agency workers describe a blurry month of round the clock work to handle this system’s launch and early days. The company’s 68 district places of work, which usually discipline a couple of hundred inquiries per week, obtained 12,000 cellphone calls a day from determined enterprise homeowners. A rotating group of a dozen individuals camped in an advert hoc battle room on the largely empty headquarters to write this system’s guidelines and revamp expertise programs to deal with the onslaught of purposes.

Despite numerous pace bumps — together with complicated, often-revised mortgage phrases and several other technical meltdowns — this system loved some success. Millions of enterprise homeowners credit score it with serving to them survive the pandemic and maintain extra staff employed.

Economists are skeptical about whether or not this system’s outcomes justify its big value, however Mr. Trump and Mr. Biden each embraced the trouble as a centerpiece of their financial rescue plans. As the pandemic stretched on and the economic system plunged right into a recession, the Paycheck Protection Program morphed into the most important enterprise bailout in American historical past. More than eight million firms bought forgivable loans, totaling $788 billion — practically as a lot cash as the federal government spent on its three rounds of direct funds to taxpayers.

But there have been pitfalls, a few of which can take years to unravel. Fraud is a serious concern. Thousands of individuals took benefit of the rushed program’s minimal documentation necessities and sought illicit loans, in accordance to prosecutors, to fund playing sprees, Lamborghinis, luxurious watches, an alpaca farm and a Medicare fraud scheme. The Justice Department has charged lots of of individuals with stealing greater than $440 million, and scores of federal investigations are lively. (During her affirmation listening to, Ms. Guzman promised that she would “prioritize the reduction of fraud, waste and abuse.”)

There had been different issues. Female and minority enterprise homeowners had been disproportionately not noted of the aid effort. A final-minute try by Mr. Biden to make this system extra beneficiant for solo enterprise homeowners got here too late to assist a lot of them. This month, a brand new emergency popped up: The program ran wanting cash and abruptly closed to most new candidates.

“There was no warning,” Toby Scammell, the chief government of Womply, an organization that helps debtors get loans, mentioned of the newest debacle. His firm alone has greater than 1.6 million candidates caught in limbo.

Ms. Guzman and Vice President Kamala Harris with President Biden when he signed an extension of the Paycheck Protection Program in March.Credit…Doug Mills/The New York Times

The Paycheck Protection Program is much from the company’s solely problem. It’s additionally managing a fancy and evolving system of low-interest catastrophe loans of up to $500,000 and new grant funds, created by Congress, for 2 of the hardest-hit industries: the Shuttered Venue Operators Grant for live-event companies and the Restaurant Revitalization Fund. (The resort business is pushing for its personal model.)

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Each required the company to create insurance policies and expertise programs from scratch. The venue program has been particularly rocky. On its scheduled begin day, in early April, the appliance system fully failed, leaving determined candidates hitting refresh and counting on social media posts for info and updates.

“I turned to my associate director and said, ‘I figured something like this would happen,’” mentioned Chris Zacher, the chief director of Levitt Pavilion, a nonprofit performing arts heart in Denver. The Small Business Administration revived the system three weeks later and has obtained 12,200 purposes, however it doesn’t anticipate awarding grants till late May.

People decrease within the tiered precedence queue, together with Mr. Zacher, worry that even when their declare is accredited, they gained’t see a test till June or July — a serious hurdle for venues making an attempt to plan their summer time and fall seasons.

“It’s maddening,” Mr. Zacher mentioned. “A program that’s supposed to help save indie venues is putting us at a disadvantage because of all these delays.”

Ms. Guzman, 51, hears these criticisms relentlessly — the response threads to her company’s social media posts have became primal screams of ache. (“I SERIOUSLY CANNOT TAKE THIS WITH SBA ANY LONGER” is among the milder replies.) She mentioned she understood the urgency.

“It’s definitely unprecedented — across the board, across the nation — and we are seeing multiple disasters at the same time,” she mentioned. “The agency is highly focused on just still responding to disaster and implementing this relief as quickly as possible.”

This is Ms. Guzman’s second tour on the Small Business Administration. When President Barack Obama picked Maria Contreras-Sweet in 2014 to take over the company, Ms. Guzman went alongside as a senior adviser and deputy chief of employees. The ladies had met within the mid-1990s. Ms. Guzman, a California native with an undergraduate diploma from the University of Pennsylvania’s Wharton School of Business, was employed at 7Up/RC Bottling by Ms. Contreras-Sweet, an government there.

“I was always impressed with her ability to handle jobs with steep learning curves — she has a quick grasp of complex concepts,” Ms. Contreras-Sweet mentioned.

Ms. Guzman spent her first stint on the company centered on conventional tasks like its flagship lending program, which usually facilitates round $28 billion a yr in loans. This time, the job is radically completely different.

“We’re working closely to identify opportunities to build up a strong agency to meet this demand of scale,” she mentioned. “The S.B.A. needs to be as entrepreneurial as the small businesses we serve. What I really, truly mean by that is that a more customer-first approach.”

The company is testing a brand new “community navigators” program, which can fund native organizations, together with nonprofits and authorities teams, to work carefully with companies owned by individuals with disabilities or in underserved rural, minority and immigrant communities. It’s an enlargement of a grass-roots effort by a number of nonprofits to get susceptible companies entry to Paycheck Protection Program loans.

Ms. Guzman mentioned she was bullish about that effort and different company priorities, like increasing Black and different minority entrepreneurs’ entry to capital — however first, just like the shoppers it serves, the Small Business Administration has to climate the pandemic.

And to try this, it has to cease capturing itself within the foot.

The much-awaited second try at opening the Shuttered Venue Operators Grant fund was preceded by one ultimate debacle: The company introduced — after which, lower than a day earlier than the date, deserted — a plan to open the first-come-first-served fund on a Saturday. For these looking for assist that has not but arrived, the incident felt like yet one more kick within the tooth.

Ms. Guzman mentioned she was conscious of the necessity for her company to overcome its limitations and rebuild its checkered fame.

“This is a pivotal moment in time where we can leverage the interest in small business to really deliver a remarkable agency to them,” she mentioned. “I value being the voice for the 30 million small and innovative start-ups around the country. What I always say to my staff is that I want these businesses to feel like the giants that they are in our economy.”