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Task Force on the Future of SBA

One year ago, we were delighted to help launch the Task Force on the Future of SBA at the Bipartisan Policy Center. As co-chairs of the Task Force, we have drawn on our experiences serving at the Small Business Administration and in the private sector to lead conversations about modernization of this critically important federal agency.

Members of the Task Force—all of whom bring experience with small businesses and public policy—have met with advocates, former SBA officials, congressional staff, financial institutions, and more. Next year, the Task Force will be releasing recommendations for changes that could be made at SBA. Between now and then, the Task Force and BPC will be releasing a series of short, in-depth explainers that highlight issues we have looked at. This week we are releasing the first piece, a summary of the small business lending market and a snapshot of the types of credit products and sources used by small businesses. Other posts/explainers will examine topics ranging from the impact of COVID on small business financing to online lenders to government-guaranteed lending.

To date, the Task Force has spent most of its time on access to capital. This is not surprising as we began our work while still under the shadow of the COVID-19 pandemic and only a few months after the close of the Paycheck Protection Program (PPP). Through PPP and COVID Economic Injury Disaster Loans (EIDL), SBA was responsible for delivering over $1 trillion in emergency federal aid in response to the pandemic. That is roughly one thousand times more than the agency’s entire annual budget. This arduous task stretched the agency’s capacity nearly to the breaking point. By all accounts, however, SBA performed remarkably well—especially through two administrations of different political parties. Many small business owners describe PPP and EIDL as a “lifeline” and applaud the tireless work of SBA staff.

Inevitably, the pandemic experience underscored not only SBA strengths but also areas for improvement. Longstanding gaps in access to capital, for example, were starkly highlighted during the crisis. The Task Force has been examining SBA’s lending support programs—principally the 7(a) loan guaranty—and looking at trends and whether the program is meeting both its mission and the needs of small businesses.

We have been encouraged by actions taken by SBA and Congress that align with ideas the Task Force has discussed. For example, in August, an SBA rule took effect permitting higher interest rates on 7(a)-backed loans of different sizes. The SBA is also moving to propose a rule that would expand lender participation in the 7(a) program, something that has garnered bipartisan support in proposed legislation in Congress.

Over two-thirds of small businesses today did not exist the last time SBA was formally reauthorized by Congress. Whether reauthorization is on the table again or not, it’s clear that SBA operates in a landscape of constant change. The challenges successfully weathered by the agency have put a spotlight on areas where reforms are needed—and where strengths can be enhanced. We look forward to sharing, in coming weeks and months, the findings and recommendations of the Task Force on the Future of SBA.

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