The rush to provide immediate relief to struggling businesses during the pandemic created vulnerabilities that fraudsters exploited. The report highlights how the agency weakened or removed controls, making it easier for scammers to access the funds meant for eligible entities. The allure of easy money attracted an overwhelming number of fraudsters to the programs.

“The agency weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs and provide assurance that only eligible entities received funds.” – Office of Inspector General of the Small Business Administration

The report also attributes the $200 billion estimate to advanced data analytics of SBA data on pandemic cash disbursements. Although some argue that the urgency of the situation initially justified the relaxed controls, the analysis conducted by the SBA Office of Inspector General suggests that tighter measures could have been implemented in real-time.

According to SBA estimates, the first nine months of the epidemic in 2020 saw over 90% of possible fraud. In order to stop additional system misuse, the Biden Administration has since included extra real-time anti-fraud measures. These precautions include looking for name and employer ID number inconsistencies.

“SBA did in fact do that when we put our anti-fraud control framework in place.” – Katie Frost, Deputy Associate Administrator in the Office of Capital Access at SBA

While the Inspector General’s estimate suggests $200 billion in potential fraud, the SBA’s calculations of likely fraud amount to approximately $36 billion. Although the latter number is significantly lower, it is still considered unacceptable and outrageous. Efforts have been made to reduce these figures, and progress has been achieved in 2021.

“The number is significantly less, but it’s still unacceptable, it’s outrageous, it’s too high. We’re proud that in 2021 we were able to come in and reduce that.” – Gene Sperling, Senior Advisor to the President and White House Coordinator for the American Rescue Plan

The report highlights the efforts made by the SBA and federal investigators to recover the stolen funds. As of May 2023, there have been over 1,000 indictments, 800 arrests, and 500 convictions related to COVID-19 EIDL and PPP fraud. Approximately $30 billion in aid has been seized or returned to the government.

“1,011 indictments, 803 arrests, and 529 convictions related to COVID-19 EIDL and PPP fraud as of May 2023.” – Office of Inspector General of the Small Business Administration

While significant steps have been taken to address fraudulent loans, the impact on legitimate businesses cannot be ignored. The diversion of funds meant for struggling businesses hinders their ability to recover and rebuild. It is crucial to understand the consequences of fraudulent loans for the overall business ecosystem.

Legitimate businesses face several challenges when fraudulent loans are prevalent. Firstly, the availability of funds is reduced, making it more difficult for eligible businesses to access the financial support they need to survive and grow. Secondly, the reputation of government aid programs may be tarnished, leading to a decrease in trust and participation from genuine businesses. Finally, the diversion of funds to fraudulent entities perpetuates an uneven playing field, disadvantaging honest businesses and distorting market competition.

To prevent future fraudulent activities and protect businesses, it is essential to strengthen the controls and safeguards within loan programs. This includes implementing stricter due diligence processes, verifying the legitimacy of businesses applying for loans, and conducting thorough background checks on applicants. Additionally, leveraging advanced data analytics and technology can help identify red flags and patterns indicative of potential fraud.

“Preventing fraud requires a multi-faceted approach that combines robust due diligence, advanced data analytics, and technology-driven solutions.” – Small Business Administration

Collaboration between government agencies, financial institutions, and private sector companies is crucial in sharing information and expertise to combat fraudulent activities effectively. The development of comprehensive fraud prevention strategies and continuous monitoring of loan programs can help identify and address vulnerabilities promptly.

Transparency and accountability are essential in rebuilding trust and ensuring the fair distribution of funds. Clear communication about the measures taken to address fraudulent loans and recover stolen funds is necessary to maintain confidence in government aid programs. Providing regular updates and progress reports regarding investigations and prosecutions can demonstrate the commitment to holding fraudsters accountable.

“Clear communication and transparency are vital in rebuilding trust and instilling confidence in government aid programs.” – Small Business Administration

Ensuring that eligible businesses receive the support they need is equally important. Streamlining the application and approval processes, providing accessible resources for guidance, and offering assistance in navigating the loan programs can help legitimate businesses access the aid they require swiftly.

The discovery of significant fraudulent activity within pandemic business loans highlights the need for enhanced controls and a proactive approach to prevent such occurrences in the future. While efforts have been made to recover the stolen funds and reduce the overall fraud, the impact on legitimate businesses cannot be ignored. By strengthening the safeguards, collaborating with relevant stakeholders, and promoting transparency, the business ecosystem can rebuild with trust and resilience.

First reported by NPR.

The post The Impact of Fraudulent Business Loans During the Pandemic appeared first on SmallBizTechnology.

The 12 Federal Reserve Banks’ Small Business Credit Survey 2022 Report on Employer Firms show what economists suspect. Many small businesses have not returned to pre-pandemic levels, with the pandemic affecting smaller enterprises, notably those run by persons of color.

The Small Business Credit Survey (SBCS) gathers data on small business performance, financing requirements and options, and borrowing experiences.

Responses illuminate the dynamics of aggregate loan trends and special small business categories. Therefore, the study contains data from over 11,000 businesses in all 50 states and the District of Columbia using the latest technology.

The Fed Small Business Credit Survey

Emergency financial assistance programs were commonly utilized in 2020 and 2021, although use fell in the year before the study.

Notably, the pandemic-prone companies were less likely to get the required funding.

During COVID, the U.S. government offered small business pandemic aid, mostly through the Fed SBCS.

The SBCS uncovered…quite a lot.

The pandemic still has an impact, with 77% of enterprises reporting negative technology consequences.

In 2020, 87 percent of employer enterprises got pandemic-related financial support. 59 percent of enterprises reported being in good or bad financial positions.

A percentage was unchanged from 2020. The most financially distressed enterprises were those of color, smaller firms, and leisure and hospitality.

The biggest operational concerns for small businesses are finding competent employees and managing supplier technology chains. The proportion of applicants that received all of the typical financings requested declined from 51% in 2019 to 36% in 2020 and 30% in 2021. However, Hispanics got 19% of what was requested, while non-Hispanic Whites received 34%.

In 2019, non-Hispanic Blacks (26%) earned the least desired, followed by Hispanics (32%), non-Hispanic Asians (34%), and non-Hispanic whites (34%).

Revenue and employment have recovered since 2020, but performance remains below pre-pandemic levels.

Eighty-five percent of employers faced financial issues, up to four points from 2020 and roughly 20 points from 2019. Therefore, revenue fell for 48% of businesses, while it rose 38%. 63 percent of enterprises have fewer revenues than pre-pandemic, and 43 percent have decreased employment.

The pandemic significantly impacted half of leisure and hospitality companies, but just 26% of industrial enterprises.

Revenue and employment growth expectations have increased since 2020 but remain below pre-pandemic levels. Recruiting and keeping talented employees were cited as top operational concerns by 60% of organizations.

However, 78% of businesses reported too few candidates made hiring difficult. Employer revenue and employment patterns show some businesses recovered from the pandemic’s early impacts. Still more firms report sustained revenue and employment decreases.

Businesses extensively utilized assistance in 2021, but they also did earlier in the epidemic.

Approximately 48% of enterprises applied for the Economic Injury Disaster Loan Program and 47% for the Paycheck Protection Program (PPP).

Firms applied for PPP in 2020 and 2021, with 36% using the PPP in 2020 and 6% in 2021. In 2021, 90% of employer businesses that sought PPP financing obtained funding.

Approval rates for PPP applications fell in 2021. Small firms obtaining the total amount requested in PPP financing declined from 76% in 2020 to 67% in 2021.

Access to credit proved problematic.

Traditional finance applications were down in 2021. Those who did apply were less likely to get the money they wanted.

Firms seeking conventional finance declined from 43% in 2019 to 37% in 2020 and 36% in 2021. As a result, the reports show the percentage of low-credit-risk enterprises a decline in funding all requests. Moreover, from 45 percent in 2020 to 38 percent in 2021.

Firms sought funding to cover operational costs rather than grow. Small-bank applicants were the most satisfied. Minority-owned businesses, small businesses, and leisure and hospitality businesses were the least likely to get complete funding requests.

Small banks were preferred by 76% of enterprises, while big banks are now the bank of choice by 62%. Online-lender applicants cited exorbitant interest rates and unfavorable repayment conditions.

The January 2022 Biz2Credit Small Business Lending Index found similar results. Therefore, in January, central banks ($10+ assets) granted 14.5 percent of small company loan requests, while small banks report authorization of 20.3 percent. In January, non-bank lenders granted around 25.1 percent of financing requests, while credit unions authorized 20.7 percent.

Before the pandemic, central banks accepted 28.3% of loan applications. Whereas small banks authorized more than half (50.4%) of small company financing requests. According to the Biz2Credit Index, institutional lenders accepted almost two-thirds of requests (66.4%). Alternative lenders authorized 56.1%, and credit unions approved 39.6%.

Supply chain challenges multiplied.

Every small business needs to be aware of supply chain gaps today. These often start with big companies.

The upshot is those small companies have difficulty getting funding. For example, those in hard-hit sectors like restaurants, and those owned by people of color.

Forgiving loans is a thing of the past. Yet, the private sector and government agencies must be more eager to lend to small company owners. This includes agencies like the SBA which produce the majority of employment in the U.S.

Meanwhile, at the Minority Business Development Agency…

The Brookings Institute recommends expanding the Commerce Department’s Minority Business Development Agency (MBDA), consequently linking minority-owned firms with finance, contracts, and markets.

However, the new Infrastructure Investment and Jobs Act gives the MBDA tools to assist minority firms and entrepreneurs.

Allowing minority-owned companies to get finance will help them survive. Likewise, initiatives like the Restaurant Revitalization Fund helped eateries survive during the epidemic.

While the government can only do so much, fostering an environment that encourages small company survival is critical. Small business agencies like the SBA help smaller businesses grow.

Therefore, small companies generate employment and a feeling of community. Helping new and expanding companies strengthens America.

The post Business Survey Identifies Pandemic-Hit Firms appeared first on SmallBizTechnology.

Even though small company owners confront great challenges, such as the ongoing supply chain issue, they continue to bounce back. And customers continue to support them. Even though finances can be troublesome.

As recently as last month, the National Retail Federation predicted that over 58 million people would shop on Small Business Saturday. Marketers had a chance to recover and reassess how to best serve the rising small company sector during the previous year.

We wanted to discover how small firms were reacting to the present climate, preparing for the future, and encouraging innovation. Recently, Forbes polled 500 small company owners in the United States to provide marketers with the information they required to effectively serve this market.

And, based on the statistics, the mood is upbeat!

Despite the fact that 41% of owners reported low growth last year, over half believe their company emerged stronger than before the pandemic. According to the same study, small company owners will be spending in five areas in the next year. What exactly are they?

Customer Satisfaction Challenges

Customers are at the forefront of small company owners’ digital developments. In the Forbes Small Business Survey, more than 80% of respondents stated they would concentrate on customer experience next year. One-third of respondents responded that the primary purpose of new technology investments is to serve more consumers.

Small company owners want to empower their teams when deciding what technology to invest in. Three out of four aim to improve their workers’ ability to create transformational client experiences.

It’s no surprise that many small company owners are turning to data to improve their client experience and reach a larger audience. According to our poll, 45% of respondents want to acquire consumer analytics software next year.

Initiatives Promoting Diversity, Equality, and Inclusion

Brands will continue to prioritize diversity, equality, and inclusion next year, regardless of their size.

Despite this, 62% of small company owners want to invest in additional DE&I efforts in 2022, according to our poll. While Forbes is not a small business, it’s providing a good example for promoting a diverse, egalitarian, and inclusive workplace while assisting small companies. Forbes EQ is a dedicated area for companies, entrepreneurs, and charitable organizations.

Supporting underrepresented groups to share their experiences and insights with Forbes.com widens its audience through the BrandVoice content marketing platform.

The Challenge of Technology

According to 78% of poll respondents, technology will be a major investment challenge in 2022.

It’s perhaps no surprise that technology would be front and center for small company owners. However, they have no intention of investing in just any technology. Research also revealed that a staggering 80% of companies have invested in the cloud or intend to do so in the next year.

What is the primary goal of all of these investments? To service a more significant number of customers — and to do so successfully.

Workforce and Talent

Small company owners now aim to improve their employee experience, with 73% of owners predicting that personnel would be a major challenge and investment in 2022.

To empower their workers, 36% said they’ll concentrate on enhancing mental health and well-being while 35% said they’d focus on promoting work-life balance.

More than three-quarters of chief experience officers (CxOs) claimed they’ve already enhanced parental leave. CxOs have created clear limits around working hours to recruit and retain female talent. With “The Great Resignation” continuing in full gear, small companies will continue to prioritize talent in 2022.

2022 has arrived, and smaller companies are eagerly embracing it.

As an entrepreneur or small company owner, you need to be a futurist. Think past today. Imagine tomorrow, then act on your intuition, no matter how far-fetched.

Marketers will also need to be futurists in order to target small enterprises. Small businesses faced difficult times as a result of the epidemic. We’ve seen and heard about several firms that found creative methods to adapt and prosper.

Salesforce, the world’s largest cloud-based software firm, saw this coming a long time ago. At the height of the epidemic, Salesforce wanted to encourage small companies. They hoped to encourage them to keep pushing ahead while also recognizing those who had already made significant progress. This key action yielded great results.

So…find your blissful state when it comes to the modest requirements you have. Or, go big if you have the guts for it and are not risk-averse or fearful of challenge. Always remember that the longest journey begins with that single, first step.

The post Challenges to Small Business Owners in 2022 appeared first on SmallBizTechnology.

Sadly, many small enterprises closed due to their inability to modify daily operations in the midst of a pandemic. Likewise, some small-business owners had to establish new businesses or return to “regular jobs” just to survive.

On the other hand, those business executives who survived the Covid-19 pandemic adapted to the new normal in their routine corporate functions.

The universe’s only constant is change. Changing our habits is often necessary to stay up with our fast-paced environment. However, small and medium-sized businesses (SMBs) who are unwilling to adopt new business practices may collapse.

Today, now more than ever, small enterprises must have a flexible business strategy. As a result, several small firms have embraced the new normal and seized new chances. Additionally, some of these improvements will survive after the epidemic as small businesses have seen the value they provide. In the future, small enterprises will likely see four changes.

1. Business Models: Hybrid

Firstly, the hybrid financial model is a pandemic “early adopter.” It’s a marketing concept that combines classic and non-traditional ways of product sales.

The hybrid business model relies on hardware, software, cloud services, and other newer technology. During the epidemic, increased competition and commoditization forced many small businesses to adopt hybrid and linear business models. As a result, these models may change the game by promoting cooperation, generating leads, opening new revenue streams, and lowering company risk.

Many successful large firms previously used hybrid business models. However, the epidemic spurred many small businesses to see their value. As a result, these models can efficiently satisfy existing client needs and are therefore likely to survive the pandemic.

2. Digital Shift

SMBs have gone digital and sold their goods online. They employed AI-based tools for customer service, digitally tracked client data, took digital payments, and conducted various corporate processes digitally.

In a crisis, technology is the most significant pillar that can keep small enterprises afloat. A corporation with advanced technology can react quickly to new ideas.

The epidemic helped small companies to thrive online and beyond physical boundaries. eCommerce websites and artificial intelligence-based software were not new before the epidemic. Still, the pandemic helped many business executives understand how useful technology can be in running a firm. Digital-first enterprises will endure.

3. Partnerships and Collaborations

Collaboration has greatly aided SMBs in surviving the epidemic. Many small-business entrepreneurs partnered with larger firms to help stabilize the economy.

Partnering with other successful organizations might greatly benefit your venture. Associating with a larger group can help a small firm develop rapidly. It can lead to additional resources, leads, brand visibility, and equity.

The Covid-19 outbreak taught many small businesses the value of partnerships and teamwork. Many organizations opted to work in a less competitive and healthful setting. Collaborating helps SMBs overcome financial issues, save money, and be more innovative.

4. New Business Opportunities Emerge

Every obstacle provides fresh chances. In 2020, entrepreneurs applied for 4.3 million new company identification numbers, a 24% increase over 2019. The epidemic exacerbated unemployment, forcing some people to create their own businesses. It provided them time to consider pursuing their dreams.

Many would-be entrepreneurs have the passion and drive to start a firm but lack the time and resources to do it. The epidemic forced some people to create businesses. Even after the epidemic, more individuals will pursue their own business dreams.

Post-pandemic adjustments allow business leaders and entrepreneurs to generate leads, target a larger audience, and boost brand exposure.

These changes should be implemented immediately if your company hasn’t already. Starting a hybrid business model requires browsing through many models and selecting the one that best matches your company’s activities.

Contact a digital marketing specialist and a web developer to digitally transform your company. Businesses must do their homework to properly adapt. Understand how each of these changes will influence your company, and then act accordingly.

Adopt and Adapt

Despite the hurdles, the pandemic provided valuable lessons for entrepreneurs and small company owners. The epidemic taught all companies one thing: flexibility.

SMBs adapted to the new normal in several ways. Some of these changes were helpful to their development and so may survive the epidemic. These reforms are likely to reinforce the foundations of small enterprises.

In the post-pandemic world of small businesses, more changes are coming. Some of these are going to be federally mandated or state-mandated. It’s all up to our lawmakers. However, small business owners should be proactive. They must look ahead to see what needs to be done, and then do it.

The post Small Business Post-Pandemic Adaptations appeared first on SmallBizTechnology.

Unfortunately, the pandemic has thrown a serious wrench into many companies’ interview and assessment processes. As firms try to navigate a path forward, it’s worth figuring out where coronavirus has dented your recruiting infrastructure. Here are 4 of the most important elements to consider: 

1. Posting the Job

Job hunting has been a primarily digital affair for years now, but the pandemic has taken the importance of tech in the process to new levels. Job fairs, conferences, and in-person recruiting opportunities have all but vanished, making recruitment sites the de facto job fairs of today. 

Technical recruiters need to keep in mind that this shift is exactly what they’ve been waiting for: an opportunity to take in resumes from as few funnels as possible, reduce travel costs, and maximize efficiency throughout. The impact can be positive for your entire business, too! Candidates recruited from LinkedIn are 40% less likely to leave than employees recruited through more traditional means. The shift to a fully digital recruiting process may have been sudden, but be prepared for it to stick around for the long term. 

2. Technical Assessment

Perhaps the single most crucial aspect of technical recruitment is the technical assessment. Before you hire a candidate, you need to know if they’re up to the tasks or not. While you might have once held technical assessments in your office during prospect visits, Covid-19 has mandated a new way of doing things. If you don’t want the quality of your technical assessment process to tank, you’ll likely need a bit of help.

There are a number of firms out there capable of facilitating remote technical assessments for tech hires. Platforms such as Coderbyte can reduce the cost per hire by up to 25% by maximizing efficiency and effectively vetting candidates. This makes the initial investment easy to earn back over time. 

3. Identifying Need

How do you determine when it’s time for a new hire in the first place? Likely after consultation with team leads and balance sheets, you feel comfortable enough to make a call either way. The new world of remote work has turned the water cooler into the project management platform, meaning that you can be more precise than ever about potential areas of need. After a given development cycle, go back through the data covering the process from start to finish. Is there anywhere that lagged behind expectations? Any snags that employees ran into repeatedly? Any complaints about crunch or resource misallocation? The more concrete your answers to these questions are, the more informed your decisions about technical recruiting will be.

4. “Fit” Analysis

How do you know whether a potential employee will fit well with her future team? More importantly, what steps can you take to come up with as definitive an answer as possible? During normal times, this involves conversations between top candidates and existing team members. These discussions likely entails questions that get to the heart of key issues. Now that the interview process relies almost entirely on email, Zoom, and phone calls, fit is no longer something that can be determined on the fly — you need to search it out. 

Find other ways to determine fit ahead of time. An increasingly popular method is by combing through candidates’ social media. A survey from CareerBuilder found that 70% of businesses now check the social media pages of applicants, and 54% have rejected someone because of what they found. In this day and age, that number should be quickly approaching 100. It’s not easy to coax sociability out of someone over a video chat, so look for its manifestations in other places. 

The age of Covid-19 has not made technical recruiting any easier, but that doesn’t mean a thorough recruiting process is impossible. By using the tools, platforms, and methods at your disposal, you can effectively attract and vet candidates in a way that ensures no one slips through the cracks. 

The post 4 Key Elements of Technical Recruiting & How They’ll Be Affected By Covid-19 appeared first on SmallBizTechnology.