$312 Million: The SBA Gave Business Loans to Children Under 11 Years Old During COVID

§ 01 / The Fraud

The SBA’s Emergency Injury Disaster Loan Program Required No Age Verification. Fraudsters Used Children’s Social Security Numbers to Claim Businesses That Didn’t Exist.

The Small Business Administration’s Economic Injury Disaster Loan (EIDL) program and its Advance grant component provided $390 billion to businesses during the COVID-19 pandemic. Identity thieves who obtained Social Security numbers belonging to children used those SSNs to create fraudulent business entities and file EIDL applications. Because the SBA’s expedited pandemic processing system did not cross-check applicant age against Social Security Administration records, $312 million in EIDL loans and advances were approved for applicants whose linked SSNs belonged to children 11 years old and under — none of whom could legally operate a business.

SBA OIG identified the impossible-age problem in its 2022 inspection report, which found that the SBA approved loans to applicants with birthdates indicating they were minors, incarcerated individuals, deceased persons, and individuals who had never received any IRS income records consistent with business ownership. The $312 million figure represents the subset of impossible-age approvals where the claimant was under 11 — old enough to have a Social Security number (issued at birth for tax/benefits purposes) but plainly not old enough to own a business.

The System Design Failure

Preventing this fraud required one check: compare the applicant’s date of birth against the minimum legal age to own a business (18 in every state). The SBA’s pandemic systems did not perform this check. SBA OIG warned in multiple reports that the agency’s decision to prioritize speed over verification — explicitly directed by Congress and the White House — resulted in a system where fraud was not just possible but trivially easy. The children whose SSNs were stolen will spend years dealing with identity theft consequences. SBA has recovered less than 1% of fraudulent EIDL disbursements.

§ 02 / Scale of SBA COVID Fraud

SBA OIG estimates that total fraud in EIDL and PPP programs combined may exceed $200 billion. The DOJ has charged over 1,000 individuals with COVID loan fraud, including organized crime rings that submitted thousands of fraudulent applications simultaneously using stolen identity data purchased from dark web databases. Congressional investigators found that foreign organized crime groups — particularly from West Africa and Eastern Europe — were responsible for a substantial share of SBA COVID fraud.

The children’s SSN subset represents the most easily detectable fraud in the entire portfolio — it required only an age check — yet $312 million of it was approved and disbursed before the SBA implemented better controls. DOGE flagged the impossible-age subset as a clear illustration of institutional dysfunction: the simplest possible fraud filter was never deployed on a $390 billion program.

What This Means

$312 million in SBA EIDL loans approved for applicants whose Social Security numbers belonged to children 11 years old and younger. Identity theft at scale, enabled by an SBA system with no minimum-age check on a $390 billion loan program. SBA OIG documented the failure in 2022; less than 1% of fraudulent disbursements have been recovered. DOGE flagged the impossible-age payments as the most unambiguous evidence of a system that prioritized speed over elementary fraud prevention.

Sources · 10 Citations