How Long Can the Government Investigate My EIDL Loan?

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience defending federal fraud cases. If you’re worried about your Economic Injury Disaster Loan, you’re probably wondering how long the government can investigate. The answer isn’t simple, and it’s not good news: ten years from when you committed the alleged fraud.

We handle EIDL investigations at every stage. Our team includes former federal prosecutors who understand how the SBA Inspector General and Department of Justice build these cases. We know what investigators look for, what triggers criminal referrals, and how to protect your rights when the government comes asking questions.

The COVID-19 EIDL Fraud Statute of Limitations Act

Congress passed the COVID-19 EIDL Fraud Statute of Limitations Act in August 2022. President Biden signed it the same day he signed the PPP statute extension. The statute of limitations for EIDL fraud jumped from five years to ten years.

This law applies specifically to EIDL loans made “in response to COVID-19 during the covered period.” If you got an EIDL loan between January 31, 2020 and the program’s end, you’re under the ten-year statute. Traditional EIDL loans – for hurricanes, floods, other disasters – still have the shorter limitations period.

Ten years means if you received your EIDL loan in June 2020, the government can investigate and file charges through June 2030. We’re in 2025 now. That’s five more years of potential prosecution.

The law covers both criminal charges and civil enforcement actions. Criminal cases mean prison time – wire fraud carries up to 20 years, bank fraud up to 30 years. Civil cases mean the government sues for triple damages under the False Claims Act, plus penalties that can reach hundreds of thousands of dollars.

How EIDL Investigations Actually Work

Most EIDL investigations start with data analytics, not whistleblowers or angry employees. The SBA has flagged tens of thousands of potentially fraudulent loans. They run algorithms looking for patterns: multiple loans to the same address, loans to businesses that don’t exist in state records, loan amounts that don’t match the business’s prior tax returns.

When the SBA flags a loan, the file goes to the Office of Inspector General. The OIG does preliminary review – pulls your application, checks public records, might run your social security number to see if you applied for other pandemic loans. If they see red flags, they open a formal investigation.

At that point, you might not know anything’s happening. Investigators work quietly. They subpoena bank records, contact your lender, pull IRS transcripts. They’re building a case file before they ever contact you.

Some investigations stay civil. The SBA sends an audit letter asking for documentation – proof of how you used the funds, evidence your business existed before February 2020, tax returns supporting your loan amount. If you can’t provide adequate documentation, they might deny any forgiveness, demand immediate repayment, or refer you to Treasury for collection.

Other investigations turn criminal. The OIG identifies indicators of fraud – fake tax documents, stolen identity, funds transferred to personal accounts immediately after deposit. They refer the case to the FBI or the DOJ’s Criminal Division. Once that referral happens, you’re dealing with criminal investigators and federal prosecutors.

What Counts as Fraud in EIDL Cases

The government charges several types of EIDL fraud. Application fraud is the most common – lying about your business to get approved. Maybe your business didn’t exist before the pandemic, or it existed but wasn’t operating, or you inflated your revenue to get a larger loan. Every false statement on the application can be a separate count of wire fraud.

Identity theft is a huge portion of EIDL cases. Criminals filed thousands of applications using stolen identities – real people’s names, Social Security numbers, birthdates. If someone filed an EIDL application in your name, you’re a victim, not a suspect. But you need to report it to the SBA immediately and document that you didn’t apply.

Misuse of funds gets charged even when your application was truthful. EIDL loans had to be used for working capital and operating expenses. Buying personal items, paying off personal debt, transferring money to relatives – those aren’t authorized uses. The government tracks where the money went. If it went to unauthorized expenses, you violated the loan agreement and potentially committed fraud.

One client came to us after receiving an EIDL audit letter. He’d legitimately owned a small construction business, suffered economic injury from COVID, applied honestly. But he used $30,000 of the loan to pay his mortgage – he worked from home, figured it was a business expense. The SBA disagreed. We negotiated a repayment plan and avoided criminal charges, but it was close.

The Government Has Resources and Motivation

Don’t assume the government will forget about your loan. They’ve recovered millions already and they’re not slowing down. The extended statute of limitations was specifically designed to give investigators more time.

Federal prosecutors treat pandemic fraud as a priority. The DOJ created strike forces focused exclusively on COVID-19 fraud. They have dedicated prosecutors, FBI agents, data analysts. They’re reviewing loans systematically – not randomly, systematically.

Larger loans get more scrutiny. If you borrowed over $150,000, expect heightened review. But even small loans get investigated when the fraud is obvious. We’ve seen prosecutions for $10,000 EIDL loans where the business never existed.

Cooperation from banks helps the government. Banks that processed EIDL applications are required to report suspicious activity. If your bank sees unusual patterns after loan disbursement – immediate transfers, account closures, cash withdrawals – they file a Suspicious Activity Report. Those SARs go to FinCEN and filter to law enforcement.

The timeline works against defendants. Memories fade, records get lost, witnesses move away. Five years after receiving a loan, you might not remember exactly why you answered a question the way you did, what documents you relied on, what your business situation was. The government has all your contemporaneous records – your application, your bank statements, your tax returns. You’re relying on memory.

What You Should Do Right Now

If you received an EIDL loan and you’re concerned about your application or how you used the funds, take action before the government contacts you. Once investigators reach out, your options narrow.

Gather every document related to your EIDL loan. Find your original application – if you don’t have it, request it from the SBA. Collect proof of how you spent the money: receipts, invoices, bank statements showing payments to suppliers or employees. Get your tax returns from the year before you applied and the years after. If you used accounting software, export those records.

If you made mistakes on your application, don’t ignore them. Lying to federal agents during an investigation is a separate crime – 18 U.S.C. § 1001, up to five years in prison. If an investigator asks about your application and you lie to cover up an earlier mistake, you just committed a new crime with its own limitations period.

Consider whether you’re actually at risk. Honest mistakes usually aren’t criminal fraud. The government goes after intentional schemes. But honest mistake is a legal defense that requires proof – you can’t just assert it. Documentation showing you tried to comply, consulted professionals, relied on guidance – that supports the defense.

If the SBA contacts you about an audit, don’t respond without talking to a lawyer first. Audit letters seem administrative, but they’re often the precursor to criminal investigation. How you respond matters. Providing inconsistent information, failing to produce documents, changing your story – those actions make you look guilty.

At Spodek Law Group, we help clients respond to SBA audits strategically. Sometimes the right move is full cooperation and documentation. Sometimes it’s asserting your rights and declining to provide information that could incriminate you. It depends on your specific situation, what the SBA is asking for, what your actual exposure is.

Todd Spodek has years of experience with federal fraud defense. We understand how prosecutors evaluate cases, what factors influence charging decisions, how to negotiate resolutions that avoid criminal prosecution. Our goal is to protect your freedom and your financial future.

Identity Theft Victims Need to Act Quickly

If you’re a victim of EIDL identity theft – someone filed an application in your name without your knowledge – report it immediately. The SBA has a specific process: email documentation to IDTheftRecords@sba.gov. They’ll pause collection efforts within a few business days while they investigate.

You’ll need evidence you didn’t apply. File a police report, submit an identity theft affidavit to the FTC, check your credit reports for accounts you didn’t open. The SBA might require you to provide additional documentation proving you weren’t involved.

Don’t delay on this. If the SBA refers the loan to the Department of Justice before you report the identity theft, you might find yourself defending against criminal charges. Prosecutors see a loan in your name, funds deposited to an account you control or linked to you – from their perspective, you’re the suspect until proven otherwise.

The ten-year statute of limitations means you could discover an EIDL loan in your name years after it was taken out. Fraudsters sometimes use stolen identities for multiple applications over time. Check your records, monitor your credit, watch for unexpected IRS forms showing business income you didn’t earn.

The government can investigate your EIDL loan through 2030 or later. That’s a long time to worry. If you received an EIDL loan and you’re concerned about any aspect of your application or fund usage, call Spodek Law Group. We’re available 24/7, and we handle federal cases nationwide. The consultation is confidential and risk-free. Don’t wait for the government to contact you – by then, your options are limited.