What we know about claims of SBA fraud in Minnesota as agency suspends borrowers

The Trump administration’s decision to ban thousands of Minnesotans from U.S. Small Business Administration loans further stokes the fraud allegations that have roiled the state.

The borrower suspensions, announced Jan. 1, follow President Donald Trump’s increased criticism of fraud, governance and immigration in Minnesota. The SBA has said it will also cut $5.5 million in annual funding to the state.

But the agency’s administrator, Kelly Loeffler, said Minnesota is just the first state to get extra scrutiny.

“I think there’s more to come across the country,” she said on Fox News on Friday. “This is just the start.”

The Small Business Administration (SBA) review focuses on two programs: the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP), which no longer accepts applicants.

Between these two programs, Loeffler said 6,900 Minnesotans suspected of fraud received approximately $400 million distributed among 7,900 loans.

While the suspensions follow a viral video from a conservative influencer that has put more emphasis on fraud in Minnesota, the White House is also reckoning with criticism that the SBA poorly regulated lenders who administered the PPP loans. The program began during Trump’s first term and continued under then-President Joe Biden.

Entrepreneurs typically have an easier time accessing SBA loans to grow their businesses, as they require less cash to access on the front end and have longer payment periods than a typical loan from a bank.

Trump’s first administration launched the PPP loan program in early 2020 as the pandemic threatened to shutter small businesses and leave workers jobless. The program initially covered up to eight weeks of a company’s payroll and overhead expenses, and it did not require collateral, guarantees or fees from business owners.

“Speed is the operative word,” former SBA Administrator Jovita Carranza said announcing the program in a news release at the time. PPP ended in May 2021.

COVID-19 EIDL loans allowed small businesses, agriculture cooperatives and many nonprofits experiencing hardship to access funds they had to pay back and receive grants. The program stopped accepting applications on Jan. 1, 2022.

Minnesota’s shares of the two programs appear balanced compared to other states.

The administration awarded businesses in the state $4.4 billion in EIDL funds spread across 43,479 loans, the SBA reported. The program overall provided $378 billion spread across nearly 4 million loans.

The 7,900 loans Loeffler is probing represent nearly 5% of all the loans issued between the two pandemic programs in Minnesota.

The Minnesota Star Tribune reported in March that regulators found the two loan programs were magnets for fraud. At least 17% of the trillion-dollar pool of money from the two programs potentially fueled fraudsters, according to an SBA inspector general report.

Kyle Brenizer was the first Minnesotan to face federal fraud charges related to PPP loans, as he admitted to falsely claiming that he ran a business with 30 employees. He bought a motorcycle after receiving $841,000. He was ordered to repay $23,491 and spend 81 months in prison.

Abdimajid Mohamud Elmi, of Burnsville, pleaded guilty to felony charges related to a series of fraudulent PPP and EIDL loans totaling nearly $271,000, which he largely gambled away.