In the pandemic shutdown last year, three-quarters of the nation’s small employers turned to the Small Business Administration for help. The portfolio that includes loans issued or guaranteed by the federal agency swelled more than five times to nearly $900 billion.

The extraordinary demand has overwhelmed the SBA, best known for guaranteeing loans to small businesses, and left many entrepreneurs in limbo as they seek to recover. Business owners complain of unprocessed aid applications, waiting hours on the phone with questions that go unanswered and technological glitches. Its inspector general warned of signs of rampant fraud.

At the heart of many of the problems is the Office of Disaster Assistance, a little-known unit that issued nearly a quarter of the agency’s pandemic loan volume. In normal times, the office provides loans after floods and other natural disasters.

Since March 2020, the office has issued…

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