Prospects for SBA Reauthorization Appear Bright

Bills Reported by House Small Business Committee (May Markup | July Markup)
Bill Number	Bill Name	Vote	Topic
H.R. 1644	7(a) Loan Agent Oversight Act	22-0	Capital
H.R. 1651	Small Business 7(a) Loan Agent Transparency Act	21-0	Capital
H.R. 3511	Service-Disabled Veteran Opportunities in Small Business Act	23-0	Contracting
H.R. 4670	Small Business Contracting Transparency Act	26-0	Contracting
H.R. 4671	Corrective Action Report Oversight and Accountability Act	26-0	Contracting
H.R. 1541	Small Business Workplace Pipeline Act	21-1	Counseling
H.R. 1730	Supporting Small Businesses and Career and Technical Education Act	22-0	Counseling
H.R. 1606	Veteran Entrepreneurship Training Act	23-0	Counseling
H.R. 4666	To require the Inspector General of the SBA to submit a quarterly report on fraud relating to certain COVID-19 loans	26-0	Disaster/Lending
H.R. 4667	RECLAIM Taxpayer Funds Act	26-0	Disaster/Lending
H.R. 4669	DOE and SBA Research Act	26-0	Innovation
H.R. 4480	SERV Act	26-0	Other
H.R. 4668	POST IT Act	26-0	Rules & Regulations
H.R. 3995	Small Business Regulatory Reduction Act	14-12	Rules & Regulations

Bills Reported by Senate Small Business and Entrepreneurship Committee (July Markup)
Bill Number	Bill Name	Vote	Topic
S. 673	Small Business Childcare Investment Act	18-1	Capital
S. 1345	504 Credit Risk Management Improvement Act	18-1	Capital
S. 1352	504 Modernization and Small Manufacturer Enhancement Act	18-1	Capital
S. 2099	Supporting Community Lenders Act	18-1	Capital
S. 2212	SBIC Advisory Committee Act	18-1	Capital
S. 2482	Community Advantage Loan Program Act	18-1	Capital
S. 38	Veteran Entrepreneurship Training Act	18-1	Counseling
S. 936	Supporting Small Business and Career and Technical Education Act	18-1	Counseling
S. 943	Small Business Disaster Damage Fairness Act	18-1	Disaster
S. 1396	RAMP for Innovators Act	18-1	Innovation
S. 1156	Native American Entrepreneurship and Opportunity Act	18-1	Other

The most consequential cooperation, however, occurred within the Senate Small Business and Entrepreneurship Committee, where the chairman and ranking member found common ground in the Community Advantage Loan Program Act on how to address recently enacted SBA rules that changed lending criteria and opened the door for more lenders to secure Small Business Lending Company licenses.

The SBA rules had created substantial concern among committee members—not to mention many small business stakeholders—and became an unexpected roadblock to SBA reauthorization. With 18 senators, plus industry groups, now backing a bill to roll back and reshape those rules, SBA reauthorization is back on track.

What Issues Remain Unaddressed?

Capital | Accessing capital is one of the most common challenges entrepreneurs and small businesses face. The committees have passed legislation to reform and enhance aspects of SBA lending and capital programs that will help more small business owners get the funding they need to start and grow their businesses. Additional opportunities exist to expand the availability of microloans and ensure 7(a) loans can be used to address a variety of needs modern small businesses have.

Contracting | While the federal government has met its topline goal of awarding at least 23% of contracts to small businesses for each of the last 10 years, small business owners, members of Congress, and the White House all support creating more opportunities for small businesses to supply goods and services to federal agencies. With this kind of alignment, bipartisan agreement is within reach on any number of reforms to small business contracting—whether those be increasing goals, improving the quality of procurement data, or helping more small businesses enter the procurement market.

Counseling | Starting and running a business is hard—especially for most Americans who don’t receive formal education or training on how to do so. That’s why business counseling, training, and technical assistance are so important. SBA’s resource partners provide entrepreneurs and small businesses with valuable help and advice, but these programs need to keep pace with current business trends and a diversifying population of small business owners. It shouldn’t be surprising that some members of Congress may have an affinity for particular counseling programs; BPC encourages legislators, though, to embrace the same adaptability that characterizes successful entrepreneurs and make changes to enhance the effectiveness of SBA’s counseling programs. 

Where do Partisan Differences Remain?

The lone small business bill to make it through either small business committee that did not garner bipartisan support is H.R. 3995, the Small Business Regulatory Reduction Act. This legislation seeks to address a real issue that can cause headaches, and worse, for small businesses: complying with government rules. “Everyone on this committee wants to lessen the burden of regulations on small businesses,” Ranking Member Nydia Velázquez said at the July markup. Yet the parties differ on how best to accomplish this shared goal.

In April, BPC spoke with two former heads of SBA’s Office of Advocacy, which is responsible for monitoring federal agency compliance with the Regulatory Flexibility Act (RFA). This law requires agencies to consider regulatory alternatives if a regulation is expected to have a “significant economic impact” on a substantial number of small businesses.

Tom Sullivan, who led the Office of Advocacy under then-President George W. Bush, told us during that conversation that RFA responsibility is intended to be independent from “the policies and regulatory proposals” of a given administration. Dr. Winslow Sargeant, head of the Office of Advocacy during the Obama administration, said the RFA’s goal “is to make sure that the regulatory process is clear, transparent, and predictable” for small businesses.

Partisan differences on regulatory issues derailed the last attempt at SBA reauthorization in 2019. Small business owners would again be the losers in the unfortunate event that disagreements over regulatory issues torpedo reauthorization once more. Today, there is bipartisan recognition that the burden of regulatory compliance can fall more heavily on small businesses compared to larger companies. There also appears to be acknowledgment by both sides that regulation can be helpful in ensuring competitive market space for small businesses. Relieving the small business regulatory burden does not need to be the same as opposing regulation outright. Most important, as Dr. Sargeant pointed out, is transparency and predictability in the regulatory process.

Thankfully, with common ground on making life easier for small businesses, bipartisan compromise on updating the RFA is possible so long as legislators maintain a posture of cooperation.

Why Should It Be a Priority?

The pandemic unleashed a wave of entrepreneurship, with Americans starting a record number of businesses in 2021. This year is on track to see the second-highest number of new businesses started. With demand already increasing for SBA services, Congress must ensure the agency is prepared to “aid, counsel, and assist” these new businesses—not to mention the millions of existing small businesses looking for capital and contracts to grow.

Congress has passed important reforms to enhance SBA over the years, but it has been more than two decades since a comprehensive reauthorization bill became law.

SBA’s customers—small business owners—strongly support strengthening access to capital programs, expanding procurement opportunities, modernizing entrepreneurial development programs, and improving communication and customer service. The comprehensive nature of these desires amounts to a request that SBA modernization be a congressional priority.

The House and Senate Small Business Committees are showing it is. Now is the time to finish the work and pass a comprehensive SBA reauthorization bill.