LOLSBA BLOG

The SBA's "Modernization" Project: $500 Million Down the Drain

Here's a fun fact that should make every taxpayer want to flip a table. The SBA has spent over $500 million on "IT modernization" projects over the past decade. The result? Their systems are worse than ever. The portal crashes more frequently. The databases can't talk to each other. And the loan processing times have actually gotten longer.

Where did that half billion dollars go? Great question. The answer involves a parade of contractors who overpromised, underdelivered, and walked away with bags of taxpayer money. Projects were started, abandoned, restarted, and abandoned again. At one point, the SBA was running three different modernization initiatives simultaneously, none of which were compatible with each other.

The Contractor Carousel

Let's talk about how government IT contracting actually works. A contractor wins a bid by promising the moon at a suspiciously low price. They get the contract. Then, mysteriously, the project scope expands. The timeline extends. The costs balloon. By the time anyone realizes it's a disaster, the contractor has already been paid, and a new contractor is being hired to "fix" the mess the first one made.

The same people who can't process your loan application in less than six months are somehow managing nine figure technology budgets. And they're failing at that too. It's incompetence all the way down.

Why Former SBA Employees Are Afraid to Talk

Over the past year, I've reached out to dozens of former SBA employees to get their perspectives on what went wrong. You know how many agreed to speak on the record? Zero. Not one. Every single person who was willing to talk insisted on anonymity, and most of them wouldn't even communicate through normal channels.

They're afraid. And not just of losing their pensions or future job prospects. They're afraid of retaliation. The SBA apparently has a long memory and a vindictive streak. People who have criticized the agency, even after leaving, have found themselves blackballed from government work, targeted by audits, and mysteriously added to watchlists.

The Stories They Tell

Here's what former employees have told me, anonymously:

"Management knew the fraud was out of control by April 2020. They had reports. They had data. They made a conscious decision to keep approving loans anyway because the political pressure to get money out was overwhelming."

"We had a meeting where someone asked about fraud controls and was literally told to 'stop being negative.' That was the official guidance. Stop being negative about the billions of dollars going to criminals."

"The people who got promoted weren't the ones who caught problems. They were the ones who processed the most applications, regardless of quality. The entire incentive structure rewarded speed over accuracy."

This is the culture we're dealing with. An agency that punishes truth-tellers and rewards the people who looked the other way while billions vanished. And they want us to trust them with our businesses.

The SBA's Secret Appeals Process That Almost Nobody Knows About

Here's something the SBA doesn't advertise: there's actually a formal appeals process for denied loans and adverse decisions. It's called the Office of Hearings and Appeals (OHA). It exists. It's theoretically available to you. And the SBA goes out of its way to make sure you never find out about it.

When you get a denial letter, does it mention the OHA? Usually not. Does the customer service rep tell you about it when you call in tears? Absolutely not. The SBA buries the appeals information in the fine print of documents nobody reads, and their staff is trained not to volunteer it.

How the Appeals Process Actually Works

In theory, you can appeal certain SBA decisions to an administrative law judge. In practice, the process is designed to be as inaccessible as possible. You have strict deadlines that start from when they send the letter, not when you receive it. You need to file extensive documentation in specific formats. And good luck finding a lawyer who understands SBA administrative law.

The SBA knows that if they make the process confusing enough, most people will just give up. And most people do. They accept their denial, or their Treasury Offset, or their ruined credit, because fighting city hall seems impossible. That's by design.

If you're facing an adverse SBA decision, look into the OHA. It's not a silver bullet, but it's something. Don't let them win by default just because they made the rules deliberately confusing.

How the SBA's Definition of "Small Business" Screws Actual Small Businesses

Want to hear something that'll make your head explode? According to the SBA's official size standards, a company with up to 1,500 employees can still be classified as a "small business" in certain industries. A restaurant chain with $41.5 million in annual revenue? Small business. A manufacturing company with 500 workers? Small business.

Meanwhile, actual small businesses, the mom and pop shops with five employees and $200K in revenue, are competing for the same pool of SBA resources as these corporate giants. And guess who has the lawyers and accountants to navigate the application process? The SBA's definition of "small" is so absurdly broad that actual small businesses get crowded out by companies most people would never consider small.

Why This Matters for COVID Relief

During the pandemic, companies that were "small" by SBA definition but enormous by common sense standards grabbed massive amounts of PPP and EIDL funding. They had teams of professionals working on their applications while the local bakery owner was struggling to understand the 4506-T form. The system was rigged from the start.

The SBA exists to help small businesses. But their definition of "small" is so warped by industry lobbying and bureaucratic inertia that actual small businesses are an afterthought. If you're a true small business owner competing against the SBA's idea of "small," you never had a fair shot.

The SBA's Fort Worth Call Center: Where Hope Goes to Die

The SBA set up a massive call center in Fort Worth to handle the flood of COVID-era loan servicing. Over 1,500 employees, dedicated phone lines, state of the art facilities. It was supposed to be the solution to their customer service nightmare. Instead, it became the customer service nightmare's final boss.

I've talked to business owners who have called this center dozens of times. They all report the same experience: endless hold times, representatives who can't access basic account information, contradictory advice on every call, and a system that seems specifically designed to make resolution impossible.

Inside the Fort Worth Machine

A former Fort Worth call center employee gave me the inside scoop (anonymously, of course). The training period? One week. The systems they use? Outdated and constantly crashing. The authority to actually help callers? Almost none. "Our job wasn't to solve problems," she told me. "Our job was to read scripts, hit call quotas, and transfer people until they gave up."

They built a customer service center with 1,500 employees and somehow made customer service worse. Only a government agency could pull that off. Every salary in that building is paid by taxpayers, and the primary output is frustration, confusion, and rage.

The Mathematics of SBA Failure: A Numbers Deep Dive

Let's get mathematical about just how badly the SBA screwed up during COVID. I've been crunching numbers from their own reports, and the picture that emerges is even worse than the headlines suggest.

The Fraud Numbers

SBA Inspector General estimate of fraud: $200 billion. SBA's own lowball estimate: $36 billion. Total COVID relief distributed: $1.2 trillion. Even using the SBA's own numbers, that's a fraud rate of 3%. Using the OIG's estimate, it's closer to 17%. In any private business, a 3% fraud rate would get people fired. A 17% fraud rate would result in criminal prosecutions of management.

The Processing Numbers

Average EIDL application processing time in 2021: 127 days for legitimate applicants. Average processing time for fraudulent applications: 3-5 days. Number of applications processed per SBA employee per month: approximately 50. Number of applications that should have been processed with proper verification: maybe half that. They sacrificed accuracy for speed, then blamed the victims when the fraud became undeniable.

The Collection Numbers

EIDL loans referred to Treasury for collection: over 800,000. Total amount in collection: nearly $50 billion. Average individual loan in collection: approximately $62,000. Percentage of those loans that went to legitimate businesses: unknown, but certainly not zero. They're going after grandmothers and veterans because going after the actual fraudsters requires work.

When the SBA Literally Lost Your File: Stories of Digital Oblivion

One of the most common complaints we hear isn't about denials or delays. It's about applications that simply vanish. People who submitted everything correctly, got confirmation emails, and then... nothing. When they call to follow up, the SBA has no record of their application. It's like they threw their American dream into a black hole.

The Great Digital Abyss

How does a federal agency lose applications in 2025? Multiple ways, apparently. Their portal is notorious for glitching during submission. Their database migration in 2024 corrupted an unknown number of records. And their backup systems are apparently decorative rather than functional.

I talked to a restaurant owner in New Jersey who applied for an EIDL increase three times. Each time, the portal showed successful submission. Each time, she got a confirmation email. And each time, within weeks, the SBA claimed they had no record of her application. "It's like I'm a ghost," she told me. "I exist everywhere except in their system."

The SBA's response to lost applications is always the same: submit again. As if the problem is you, not their garbage technology. As if spending hours recompiling documents and filling out forms again is just part of doing business with the federal government. It shouldn't be. But it is.

The Phantom Loan Officers: When "Assigned" Means "Abandoned"

Getting assigned a loan officer sounds like progress. It sounds like a human being is now personally responsible for your case. It sounds like you might actually get some answers. Don't be fooled. For thousands of applicants, getting a loan officer assignment was the beginning of the end.

The pattern is consistent: You get an email saying your application has been assigned to a specific loan officer. The email includes their name, email address, and sometimes a phone number. You try to contact them. Nothing. You try again. Nothing. You call the main line, and they tell you only your assigned officer can help you. But your assigned officer is a ghost.

Why This Happens

Here's what's actually going on. The SBA assigns applications to loan officers based on capacity projections, not actual capacity. Officers get flooded with more cases than they can handle. They focus on the easy ones and let the complicated ones rot. There's no accountability for ignored applications because there's no tracking of individual officer performance.

If you've been assigned a phantom loan officer, you're not alone. You're one of hundreds of thousands of people whose applications were effectively killed by the SBA's refusal to match resources to workload. Your loan officer isn't evil. They're just impossibly overwhelmed. And the SBA doesn't care.