Introduction

The Small Business Administration (SBA) administers several types of programs to support small businesses, including

• direct disaster loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters;
• loan guaranty and venture capital programs to enhance small business access to capital;
• small business management and technical assistance training programs to assist business formation and expansion; and
• contracting programs to increase small business opportunities in federal contracting.

Congressional interest in the SBA's programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Congressional interest, however, has become especially acute in the wake of the Coronavirus Disease 2019 (COVID-19) pandemic's widespread adverse economic impact on the national economy, including productivity losses, supply chain disruptions, major labor dislocation, and significant financial pressure on both businesses and households.

This report begins with an overview of legislation considered during the 116^th and 117^th Congresses to assist small businesses adversely affected by the COVID-19 pandemic. It then provides an overview of SBA disaster loans and discusses various issues related to providing disaster assistance to small businesses adversely affected by COVID-19. It then presents an overview of SBA access to capital programs (including the 7(a) loan guarantee, 504/CDC loan guarantee, and Microloan programs), SBA management and technical training programs (Small Business Development Centers [SBDCs], Women Business Centers [WBCs], SCORE, and Microloan technical assistance), and SBA contracting programs. This is followed by a discussion of legislation enacted during the 111^th Congress to assist small businesses during and immediately following the Great Recession (2007-2009).

As discussed below, some of the provisions included in legislation enacted during the 116^th and 117^th Congresses to assist small businesses adversely affected by the COVID-19 pandemic were included in legislation enacted during the 111^th Congress to assist small businesses during and immediately following the Great Recession, including SBA fee waivers and increased loan limits. However, the legislation enacted during the 116^th and 117^th Congresses is much larger in scope and cost than the legislation enacted during the 111^th Congress and includes loan deferrals, loan forgiveness, and greatly expanded eligibility, including, for the first time, specified types of nonprofit organizations.

Legislative and Administrative Efforts to Assist Small Businesses During the 116^th Congress

P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, was the first act to include provisions targeting SBA assistance to small businesses adversely affected by COVID-19. The act provided the SBA an additional $20 million for SBA disaster assistance administrative expenses and deemed the coronavirus to be a disaster under the SBA's Economic Injury Disaster Loan (EIDL) program. This change made economic injury from the coronavirus an eligible EIDL expense.

At that time, the SBA had $1.1 billion in disaster loan credit subsidies available, enough to support between $7 billion and $8 billion in disaster loans. Anticipating high demand, the SBA initially reduced the maximum COVID-19 EIDL loan amount from the statutory imposed $2 million lending cap to $500,000. Due to unprecedented demand, on May 3, 2020, the SBA lowered the maximum COVID-19 EIDL loan amount to six-months of economic injury up to $150,000.¹

P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, made numerous changes to SBA programs, including the creation of the Paycheck Protection Program (PPP), which are loans 100% guaranteed by the SBA with a maximum term of 10 years and a maximum interest rate of no more than 4%. These loans are available to small businesses, small 501(c)(3) nonprofit organizations, and small 501(c)(19) veterans organizations—and are eligible for loan forgiveness. The SBA initially announced that the loans would have a two-year term at a 1% interest rate.

The CARES Act provided deferment relief for PPP loans and existing loans made under the 7(a), 504/CDC, and Microloan programs. The act also appropriated $349 billion for PPP loan guarantees and subsidies (to remain available through FY2021), $10 billion for Emergency EIDL Advance Payment grants, $675 million for the SBA's salaries and expenses account, $562 million for disaster loans, $25 million for the SBA's Office of Inspector General (OIG), $265 million for entrepreneurial development programs ($192 million for small business development centers (SBDCs), $48 million for women's business centers (WBCs), and $25 million for SBA resource partners to provide online information and training), and $17 billion for six months of debt relief for the SBA's 7(a), 504/CDC, and Microloan programs.

A summary of the CARES Act's major small business-related provisions is presented in the Appendix.

On March 30, 2020, the SBA updated its website to allow COVID-19-related EIDL applicants an option to request an Emergency EIDL Advance Payment grant.²

The SBA started accepting PPP loan applications on April 3, 2020.³ Because the SBA neared its $349 billion authorization limit for Section 7(a) lending, which at that time included the PPP, the SBA stopped accepting new PPP loan applications on April 15, 2020.⁴ A total of 1,661,367 PPP loans were approved by 4,975 lenders, totaling $342,277,999,103. Most of the loans (74%) were for less than $150,000. The average loan amount was $206,022.⁵

The SBA also stopped accepting COVID-19-related EIDL and Emergency EIDL Advance Payment grant applications on April 15, 2020, because the SBA was approaching its disaster loan assistance credit subsidy limit.⁶ COVID-19-related EIDL and Emergency EIDL Advance Payment grant applications already received continued to be processed on a first-in first-out basis.

The SBA resumed the acceptance of new PPP loan applications on April 27, 2020, following enactment of the Paycheck Protection Program and Healthcare Enhancement Act (Enhancement Act; P.L. 116-139) on April 24, 2020. The Enhancement Act increased the SBA's Section 7(a) loan authorization limit from $349 billion to $659 billion and appropriated $321.335 billion to support that level of lending. The act also appropriated $50 billion for EIDL (to support $367.1 billion in loan authority), $10 billion for Emergency EIDL advance payments (grants), and $2.1 billion for SBA salaries and expenses.

The SBA began accepting new EIDL and Emergency EIDL Advance Payment grant applications on a limited basis on May 4 to accommodate agricultural businesses that were provided COVID-19-related EIDL eligibility by the Enhancement Act. The SBA also processed applications from agricultural businesses that had submitted an EIDL application prior to the legislative change. Those agricultural businesses did not need to reapply. All other EIDL loan applications that were submitted before the SBA stopped accepting new applications on April 15 continued to be processed on a first-in, first-out basis.⁷ The SBA resumed the acceptance of new EIDL and Emergency EIDL Advance Payment applications from all borrowers on June 15, 2020.⁸

A summary of the Enhancement Act's major small business-related provisions is presented in the Appendix.

Numerous proposals to amend the PPP were introduced throughout the spring, summer, and fall of 2020, including

• H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions Act (Heroes Act), which was passed by the House on May 15, 2020;
• S. 4321, the Continuing Small Business Recovery and Paycheck Protection Program Act, which was introduced in the Senate on July 27, 2020; and
• H.R. 925, the (updated) Heroes Act, which was passed by the House on October 1, 2020.

As negotiations among House and Senate leaders continued over these and other legislative proposals, several changes to the PPP were agreed to. For example, P.L. 116-142, the Paycheck Protection Program Flexibility Act, enacted on June 5, 2020, among other provisions,

• extended the PPP loan forgiveness covered period from 8 weeks after the loan's origination date to the earlier of 24 weeks after the loan's origination date or December 31, 2020;
• provided borrowers that received a PPP loan prior to the date of enactment (June 5, 2020) the option to use the CARES Act's loan forgiveness covered period of eight weeks after the loan's origination date;
• replaced the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness purposes with the requirement that at least 60% of the loan proceeds be used for payroll costs and up to 40% be used for covered mortgage interest, rent, and utility payments;⁹
• provided borrowers a "safe harbor" from the loan forgiveness rehiring requirement if the borrower is unable to rehire an individual who was an employee of the recipient on or before February 15, 2020, or if the borrower can demonstrate an inability to hire similarly qualified employees on or before December 31, 2020;
• established a minimum PPP loan maturity of five years for loans made on or after the date of enactment; and
• extended the PPP loan deferral period from six months (under SBA regulations) to the date that the SBA remits the borrower's loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower's loan forgiveness covered period.

Under the act, June 30, 2020, remained the last date on which a PPP loan application could be approved. A summary of the Paycheck Protection Program Flexibility Act is presented in the Appendix.

As required by the CARES Act, the SBA stopped accepting new PPP loan applications at midnight on June 30, 2020.

P.L. 116-147, to extend the authority for commitments for the paycheck protection program and separate amounts authorized for other loans under Section 7(a) of the Small Business Act, and for other purposes, enacted on July 4, 2020, extended the PPP covered loan period from June 30, 2020, to August 8, 2020, and authorized $659 billion for PPP loan commitments and $30 billion for 7(a) loan commitments. The Senate passed the bill by voice vote on June 30, 2020, and the House passed it by unanimous consent on July 1, 2020.

On July 11, 2020, the SBA announced that it had stopped accepting Emergency EIDL Advance Payment grant applications because the program had reached its authorization limit of $20 billion in grants.¹⁰ The SBA approved 5,781,390 Emergency EIDL Advance Payment grant applications.¹¹ As of February 15, 2021, the SBA had approved 3,734,701 COVID-19-related EIDL loans, totaling over $203 billion.¹²

As required by P.L. 116-147, the SBA stopped accepting PPP loan applications on August 8, 2020.

As of August 8, 2020, the SBA had approved, after cancellations, 5,212,128 PPP loans, totaling over $525 billion (see Table 1). For comparative purposes, that loan approval amount is more than the amount the SBA has approved in all of its loan programs, including disaster loans, during the last 29 years (from October 1, 1991, through December 31, 2019; $509.9 billion).¹³

As of August 8, 2020, four industry sectors had received at least 10% of PPP net loan amounts:

• Health Care and Social Assistance (12.9%);
• Professional, Scientific, and Technical Services (12.7%);
• Construction (12.4%); and
• Manufacturing (10.3%).¹⁴

House and Senate leaders continued negotiations on legislation to reopen and amend the PPP throughout the summer and fall. P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), enacted on December 27, 2020, among other provisions,

• extended the PPP loan covered period from August 8, 2020, to March 31, 2021;
• expanded the list of allowable uses of proceeds and loan forgiveness to include personal protective equipment, supplier costs, payments for software, cloud computing, and other human resources and accounting needs, and costs related to property damage from public disturbances that occurred in 2020 that are not covered by insurance;
• allowed borrowers to select a PPP loan forgiveness covered period of either 8 weeks after the loan's origination date or 24 weeks after the loan's origination date regardless of when the loan was disbursed;
• created a simplified loan forgiveness application process for loans of $150,000 or less, which includes an application form that is not more than one page in length and only requires borrowers to provide a description of the number of employees the borrower was able to retain because of the loan, the estimated amount of the loan amount spent on payroll costs, and the total loan amount;¹⁵
• allowed PPP borrowers with fewer than 300 employees, that have or will use the full amount of their PPP loan, and can document quarterly revenue losses of at least 25% in the first, second, or third quarter of 2020 relative to the same quarter of 2019 to receive a second-draw PPP loan of up to $2 million;
• increased the PPP loan authorization level from $659 billion to $806.45 billion, appropriated an additional $284.45 billion for the PPP, and rescinded $146.5 billion from the SBA's business loans program account (appropriated funds that were not spent prior to enactment);
• set aside funds for new and smaller small businesses, for borrowers in low- and moderate-income communities, and for community and smaller lenders;¹⁶
• extended the covered period for Emergency EIDL advance payments (grants) from December 31, 2020, to December 31, 2021 and repealed the requirement that borrowers deduct the amount of their EIDL advance payment from their PPP loan forgiveness amount if the advance payment was refinanced into their PPP loan;
• appropriated $20 billion for an EIDL Targeted advance payment (grant) program;¹⁷
• increased the 7(a) loan guarantee program's authorization limit from $30 billion to $75 billion in FY2021, and appropriated $1.918 billion for 7(a) loan guarantee program subsidy costs, and costs related to (1) increasing the 7(a) program's loan guarantee percentage from 75% and 85%, depending on the loan amount, to 90% for all 7(a) loans; (2) increasing the SBAExpress loan amount from $350,000 to $1 million on January 1, 2021 (reverted permanently to $500,000 on October 1, 2021); (3) increasing the SBAExpress loan guarantee percentage from 50% to 75% for loans of $350,000 or less (reverted permanently to 50% for all SBAExpress loans on October 1, 2021); (4) waiving 7(a) and 504/CDC lender and borrower fees in FY2021; and (5) providing lower interest rates for the 504/CDC refinancing program;
• appropriated $3.5 billion to resume the first six months of payments of principal, interest, and fees for SBA 7(a) loans, 504/CDC loans, and Microloans, capped at $9,000 per month per borrower;
• appropriated $15 billion for a new Shuttered Venue Operators Grant program to provide grants to eligible live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives who demonstrate a 25% reduction in revenue over specified time periods;¹⁸ and
• appropriated $57 million for Microloan program enhancements, including $50 million for Microloan technical assistance grants and $7 million in loan credit subsidies to support up to $64 million in additional Microloan lending.

Legislative and Administrative Efforts to Assist Small Businesses During the 117^th Congress

On January 6, 2021, the SBA released two interim final rules to enable implementation of P.L. 116-260's PPP-related provisions.¹⁹ On January 8, 2021, the SBA announced that it would reopen the PPP loan portal on January 11, 2021, on a restricted basis. Initially, only community financial institutions were allowed to submit PPP loan applications (first-draw loans were accepted starting on January 11 and second-draw loans were accepted starting on January 13) as a means to promote PPP loan access for minority, underserved, veteran and women-owned small businesses.²⁰ Community financial institutions are generally recognized as more likely to serve these populations than are other lending institutions.

The SBA reopened the PPP loan portal to PPP-eligible lenders with $1 billion or less in assets on January 15, 2021, and to all PPP-eligible lenders on January 19, 2021.²¹

In addition, in an effort to enhance PPP access for smaller entities, the SBA announced on February 22, 2021, that it would restrict PPP loan applications to businesses and nonprofit organizations with fewer than 20 employees for 14 days, starting on February 24, 2021.²² The SBA also announced several regulatory changes, effective the first week in March 2021, to "advance equity goals," including revising the formula that determines the loan amount for sole proprietors, independent contractors, and self-employed individuals to enable them to receive more financial support;²³ establishing a $1 billion set aside for sole proprietors, independent contractors, and self-employed individuals that do not have employees and are located in low- and moderate-income areas; and making it clear that legal U.S. residents who are not citizens are eligible and if they use an Individual Taxpayer Identification Number (ITIN) to pay their taxes they may use their ITIN as an identifier when applying for a PPP loan.²⁴

In a related development, on January 20, 2021, the Biden Administration requested an additional $50 billion for SBA program enhancements in its "American Rescue Plan," including $25 billion for a Restaurant Revitalization grant program.²⁵ During congressional consideration of the proposal, Congress increased the Restaurant Revitalization grant program's funding to $28.6 billion and accepted the Administration's other small business proposals.

Specifically, P.L. 117-2, the American Rescue Plan Act of 2021, provided an additional $53.6 billion for SBA program enhancements, including

• $28.6 billion for the Restaurant Revitalization grant program to provide grants of up to $10 million per entity (up to $5 million per physical location, limited to 20 locations) to restaurants and other food and beverage-related establishments that have experienced COVID-19-related revenue loss;
• $15 billion for the Targeted Economic Injury Disaster Loan Advance payment program;
• $7.25 billion for the PPP;
• $1.25 billion for the Shuttered Venue Operators Grant Program;
• $840 million for administrative costs to prevent, prepare and respond to the COVID-19 pandemic, including expenses related to PPP, SVOG, and grants to restaurants;
• $460 million for the disaster loan program ($70 million for credit subsidies and $390 million for administrative costs);
• $100 million for a community navigator pilot grant program to improve small business access to COVID-19-related assistance programs;
• $75 million for outreach, education, and improving the SBA website; and
• $25 million for SBA's Office of Inspector General for oversight, to remain available until expended.²⁶

On March 24, 2021, the SBA announced that, as of April 6, 2021, the maximum COVID-19 EIDL would be increased to 24 months of economic injury up to $500,000 from 6 months of economic injury up to $150,000. The SBA indicated that it would contact existing EIDL borrowers via email to provide details about how they can request an increase.²⁷

In addition, P.L. 117-6, the PPP Extension Act of 2021, signed into law on March 30, 2021, extended the acceptance of PPP applications through May 31, 2021, and authorized the SBA to process any pending applications submitted on or before that date through June 30, 2021.

On May 4, 2021, the SBA informed lenders that due to budgetary limitations it was limiting new PPP loan applications to community financial institutions and would continue to process applications that had already been submitted.²⁸

As of May 31, 2021, the date on which the SBA stopped accepting new PPP loan applications, the SBA had approved more than 11.8 million PPP loans totaling over $799.8 billion, including more than 6.6 million PPP loans totaling over $277.7 billion during 2021 (see Table 2).²⁹

On September 9, 2021, the SBA announced that it was increasing the EIDL borrowing limit to $2 million from $500,000 (effective October 8, 2021), offering 24 months of loan deferment after loan origination (later extended to 30 months), and allowing EIDL funds to be used to prepay commercial debt (typically used to prepay loans with a higher interest rate) and make payments on federal business debt.³⁰

As of January 1, 2022, the SBA had stopped accepting applications for new COVID-19 EIDL loans or advances. As of May 6, 2022, the SBA's COVID-19 EIDL funds were exhausted and the SBA was no longer accepting COVID-19 EIDL loan increase requests or requests for reconsideration. The SBA closed the COVID-19 EIDL application portal on May 16, 2022.

As of April 27, 2022, the SBA had approved over 3.9 million EIDL loans totaling over $378.4 billion; 601,058 Targeted EIDL Advance payment (grants) totaling over $5.2 billion; 453,417 Supplemental Targeted EIDL Advance payment (grants) totaling over $2.2 billion.³¹

Disaster Loans

Overview

SBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the federal government. The SBA's disaster loans are unique in two respects: (1) they go directly to the ultimate borrower, and (2) they are not limited to small businesses.³²

SBA disaster loans for physical damage are available to individuals, businesses of all sizes, and nonprofit organizations in declared disaster areas.³³ SBA disaster loans for economic injury (EIDL) are available to eligible small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, nonprofit organizations in declared disaster areas. Prior to COVID-19, about 80% of the SBA's direct disaster loans were provided to individuals and households (renters and property owners) to repair and replace homes and personal property. The SBA disbursed $401 million in disaster loans in FY2016, $889 million in FY2017, $3.59 billion in FY2018, $1.5 billion in FY2019, $178.5 billion in FY2020 (primarily to businesses for COVID-19-related assistance), and $73.8 billion in FY2021 (primarily to businesses for COVID-19-related assistance).³⁴

Types of Disaster Loans

The SBA Disaster Loan Program includes home disaster loans, business physical disaster loans, and EIDLs.³⁵ This report focuses on the EIDL program because it was used to address the adverse economic impact of COVID-19 on small businesses and other EIDL-eligible organizations.

P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, deemed the coronavirus to be a disaster under the EIDL program. This change made economic injury from the coronavirus an eligible EIDL expense. The act also provided the SBA an additional $20 million for disaster loan administrative expenses.

For a discussion of all SBA disaster loans, see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress, by Bruce R. Lindsay.

Economic Injury Disaster Loans

EIDLs provide up to $2 million for working capital (including fixed debts, payroll, accounts payable and other bills that cannot be paid because of the disaster's impact) to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, nonprofit organizations meet their financial obligations and operating expenses that cannot be met as a direct result of the disaster.³⁶

As mentioned, due to unprecedented demand, in March 2020, the SBA lowered the maximum COVID-19 EIDL amount from $2 million to $500,000, and, on May 3, 2020, reduced it to six months of economic injury up to $150,000. On April 6, 2021, the SBA increased the maximum COVID-19 EIDL to 24 months of economic injury up to $500,000.³⁷ On September 9, 2021, the SBA announced that it was increasing the EIDL borrowing limit to $2 million from $500,000 (effective October 8, 2021).

Public nonprofit organizations and several specific business types are not eligible for EIDL assistance. Ineligible businesses include, but are not limited to, the following:

• businesses that do not meet the SBA's small business eligibility criteria, including the SBA's size standards;
• businesses that derive more than one-third of their annual gross revenue from legal gambling activities;
• casinos and racetracks;
• religious organizations;
• political and lobbying concerns;
• government-owned concerns (expect for businesses owned or controlled by a Native American tribe); and
• businesses determined by the SBA to have credit available elsewhere.³⁸

EIDL loan amounts are based on actual economic injury and financial needs, regardless of whether the business or eligible nonprofit suffered any property damage. If an applicant is a major source of employment, the SBA may waive the $2 million statutory limit.³⁹ In addition, EIDL loan proceeds cannot be used to refinance long-term debt, expand facilities, pay dividends or bonuses, or for relocation.⁴⁰

Applicants must have a credit history acceptable to the SBA, the ability to repay the loan, and present collateral for all EIDL loans over $25,000 if available. The SBA collateralizes real estate or other assets when available, but it will not deny a loan for lack of collateral.⁴¹

EIDL interest rates are determined by formulas established in law (discussed later) and are fixed for the life of the loan. EIDL interest rate ceilings are statutorily set at no more than 4% per annum. EIDL applicants are not eligible if the SBA determines that the applicant has credit available elsewhere.

EIDL loans can have maturities up to 30 years. The SBA determines an appropriate installment payment based on each borrower's financial condition, which, in turn, determines the loan term.⁴² There are no prepayment penalties.

SBA EIDL assistance is not automatically available. It must be requested in one of two ways: (1) a state or territory governor can submit a request to the President for a major disaster declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act⁴³ or (2) a state or governor can submit a request for SBA EIDL from the SBA Administrator under the Small Business Act.

There was some initial concern that COVID-19 would not be a declarable disaster under the Small Business Act because it did not meet the legal definition for a disaster. As mentioned, to prevent any potential ambiguity, Title II of P.L. 116-123 deemed the coronavirus a disaster under Section 7(b)(2)(D) of the Small Business Act, making economic injury from the coronavirus an eligible expense under the SBA's Economic Injury Disaster Loan program.

Initial EIDL Response to COVID-19

On March 16, 2020, the SBA Administrator began issuing declarations for SBA EIDLs in response to states seeking SBA disaster assistance for small businesses.⁴⁴ The SBA changed its requirement that a state or territory "provide documentation certifying that at least five small businesses have suffered substantial economic injury as a result of the disaster, with at least one business located in each declared county/parish."⁴⁵ Under new criteria, states and territories were "only required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where the businesses are located."⁴⁶ The SBA announced that under the new criteria EIDL assistance may be available statewide instead of just within specific identified counties in declarations related to COVID-19.

EIDL Funding and Application Processing

Prior to the CARES Act's enactment, the SBA had about $1.1 billion in disaster loan credit subsidy available to support about $7 billion to $8 billion in disaster loans. Loan credit subsidy is the amount provided to cover the government's cost of extending or guaranteeing credit.⁴⁷ The loan credit subsidy amount is about one-seventh of the cost of each disaster loan.⁴⁸ The credit subsidy amount is used to protect the government against the risk of estimated shortfalls in loan repayments. There was some concern that the SBA's funding for disaster loan credit subsidies would be insufficient to meet the demand for disaster loans now that EIDL eligibility had been extended to economic injuries related to COVID-19.

The CARES Act addressed this issue by providing an additional $562 million to support disaster loans and $10 billion to support the Emergency EIDL grant program. As mentioned, the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139) appropriated an additional $50 billion for EIDL and $10 billion for Emergency EIDL grants. P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), appropriated an additional $20 billion for the EIDL Targeted advance payment (grant) program. P.L. 117-2, the American Rescue Plan Act of 2021, appropriated an additional $15 billion for the Targeted Economic Injury Disaster Loan Advance payment program and $460 million for the disaster loan program ($70 million for credit subsidies and $390 million for administrative costs).

Also, in anticipation of increased demand for EIDL loans, the CARES Act addressed anticipated delays in EIDL application loan processing by authorizing the SBA Administrator, in response to economic injuries caused by COVID-19, to

• waive the "credit not available elsewhere" requirement,
• approve an applicant based solely on their credit score,
• not require applicants to submit a tax return or tax return transcript for approval,
• waive any rules related to the personal guarantee on advances and loans of not more than $200,000, and
• waive the requirement that the applicant needs to be in business for the one-year period before the disaster declaration (except that no waiver may be made for a business that was not in operation on January 31, 2020).

SBA EIDL Repayment and Forgiveness

Under present law and regulations, the first SBA EIDL payment is normally due five months after disbursement. However, on March 23, 2020, the SBA announced that it would defer payments on existing disaster loans through December 31, 2020, "to help borrowers during this unprecedented time."⁴⁹ The SBA also announced that payments on new EIDL loans would be deferred for one year (interest does accrue).

Additionally, on March 12, 2021, the SBA extended the deferment period for all COVID-19-related EIDL and other disaster loans until 2022. Specifically, all disaster loans made in calendar year 2020 will have a first payment due extended from 12 months to 24 months from the date of the note, and all disaster loans made in calendar year 2021 will have a first payment due extended from 12 months to 18 months from the date of the note.⁵⁰

As mentioned, on September 9, 2021, the SBA announced that EIDL loan payments would be deferred for 24 months after loan origination to help small businesses "get through the pandemic without having to worry about making ends meet."⁵¹ Also, on March 15, 2022, the SBA extended the deferral period for all COVID-19 EIDL loans approved in calendar years 2020-2022 to 30 months from the date of the note (interest continues to accrue).⁵²

The CARES Act also authorized the SBA to provide complete payment deferment relief, for not less than six months and not more than one year, for Paycheck Protection Program (PPP) borrowers if the borrower was in operation on February 15, 2020, and had an application for a covered loan approved or pending approval on or after the date of enactment. The SBA subsequently deferred PPP loan payments for six months. Interest continued to accrue on these loans during the six-month deferment.⁵³

PPP loans can also be forgiven, in whole or in part, under specified conditions related to the borrower's retention of employees and wages. Federal loan forgiveness is rare, but has been used in the past to help businesses that were having difficulty repaying their loans. For example, loan forgiveness was granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane Disaster Relief Act of 1965.⁵⁴ Section 3 of the act authorized the SBA Administrator to grant disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and Mississippi as a result of the hurricane. The act stated that

to the extent such loss or damage is not compensated for by insurance or otherwise, (1) shall at the borrower's option on that part of any loan in excess of $500, (A) cancel up to $1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than $1,800 over a period not to exceed three years; and (2) may lend to a privately owned school, college, or university without regard to whether the required financial assistance is otherwise available from private sources, and may waive interest payments and defer principal payments on such a loan for the first three years of the term of the loan.⁵⁵

Disaster Grants

Historically, businesses that suffer uninsured loss as a result of a major disaster declaration are not eligible for Federal Emergency Management Agency (FEMA) disaster grant assistance, and grant assistance from other federal sources is limited. On some occasions, Congress has provided disaster assistance to businesses through the Department of Housing and Urban Development's (HUD's) Community Development Block Grant (CDBG) program. The CDBG program provides loans and grants to eligible businesses to help them recover from disasters as well as grants intended to attract new businesses to the disaster-stricken area.

In a few cases, CDBG has also been used to compensate businesses and workers for lost wages or revenues. However, CDBG disaster assistance is not available for all major disasters. States can use CDBG funding to respond to emergencies or other "urgent needs" through the conventional CDBG entitlement and states program,⁵⁶ but existing (or future) CDBG monies generally must be reprogrammed in consultation with HUD to respond to the emergency.⁵⁷ For these reasons, CDBG is generally used for long-term recovery needs rather than providing immediate, direct disaster assistance.

Thus, prior to COVID-19, advocates of providing disaster grants to small businesses generally focused on FEMA or the SBA. Advocates of enlisting FEMA to administer the program argued that FEMA already has grant processing operations in place, making it relatively easier to expand the operations to include small businesses disaster grants rather than establishing new grant-making operations within the SBA. They also argued that having FEMA administer the small business disaster grant program may limit duplication of administrative functions between FEMA and the SBA. It would also provide access to FEMA's Disaster Relief Fund (DRF) which, as of July 31, 2020, had roughly $74 billion for disaster assistance activities.⁵⁸

In contrast, advocates of using the SBA to administer the program argued that it already has a framework in place to evaluate business disaster needs and disaster loan eligibility.

Congress decided to use the SBA, not FEMA, to provide disaster grants to assist small businesses affected by COVID-19. For example, the CARES Act authorized the SBA Administrator to provide up to $10,000 as an advance payment in the amount requested within three days after receiving an EIDL application from an eligible entity. Applicants were not required to repay the advance payment, referred to in the CARES Act as an Emergency EIDL grant, even if subsequently denied an EIDL loan. Due to anticipated demand, the SBA limited Emergency EIDL grants to $1,000 per employee, up to a maximum of $10,000.

The CARES Act also provided the SBA's OIG $25 million for oversight of the SBA's administration of its lending programs and for investigations to serve as a general deterrent to fraud, waste, and abuse.

As mentioned, the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139) appropriated an additional $10 billion for Emergency EIDL grants. P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), appropriated an additional $20 billion for the EIDL Targeted advance payment (grant) program. SBA's OIG is to receive $20 million of that amount "to prevent waste, fraud, and abuse" in the awarding of the grants. Also, P.L. 117-2, the American Rescue Plan Act of 2021, appropriated an additional $15 billion for the Targeted Economic Injury Disaster Loan Advance payment program.

SBA EIDL Interest Rates

SBA EIDL interest rates for COVD-19 are 3.75% for businesses and 2.75% for nonprofit organizations.⁵⁹

SBA disaster loan interest rates have been a long-standing congressional concern. First, there is concern about the ability of disaster victims to pay off their loans. Second, there is concern about how interest rates are determined given the complexity of the statutory language about disaster loan interest rates. 15 U.S.C. §636(d)(5)(C)) states that interest rates are "in the case of a business, private nonprofit organization, or other concern, including agricultural cooperatives, unable to obtain credit elsewhere, not to exceed 4 per centum per annum."⁶⁰ To determine EIDL interest rates, SBA uses a formula under 15 U.S.C. §636(d)(4)(A):

Notwithstanding the provisions of the constitution of any State or the laws of any State limiting the rate or amount of interest which may be charged, taken, received, or reserved, the maximum legal rate of interest on any financing made on a deferred basis pursuant to this subsection shall not exceed a rate prescribed by the Administration, and the rate of interest for the Administration's share of any direct or immediate participation loan shall not exceed the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans and adjusted to the nearest one-eighth of 1 per centum, and an additional amount as determined by the Administration, but not to exceed 1 per centum per annum: Provided, That for those loans to assist any public or private organization for the handicapped or to assist any handicapped individual as provided in paragraph (10) of this subsection, the interest rate shall be 3 per centum per annum.

Congress could request SBA to reevaluate its interpretation of 15 U.S.C. §636(d)(4)(A) and provide detailed information explaining how the formula provides nonprofit organizations with lower interest rates than small businesses. Alternatively, Congress could change the formula under the Small Business Act if it considered the language ambiguous, or it could designate an interest rate (including a zero interest rate) for all SBA EIDL for the duration of COVID-19.

SBA Capital Access Programs

Overview

The SBA has authority to make direct loans but, with the exception of disaster loans and loans to Microloan program intermediaries, has not exercised that authority since 1998.⁶¹ The SBA indicated that it stopped issuing direct business loans primarily because the subsidy rate was "10 to 15 times higher" than the subsidy rate for its loan guaranty programs.⁶² Instead of making direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions."⁶³ With few exceptions, to qualify for SBA assistance, an organization must be both a for-profit business and small.⁶⁴

What Is a "Small Business"?

To participate in any of the SBA loan guaranty programs, a business must meet the Small Business Act's definition of small business. This is a business that

• is organized for profit;
• has a place of business in the United States;
• operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor;
• is independently owned and operated;
• is not dominant in its field on a national basis;⁶⁵ and
• does not exceed size standards established, and updated periodically, by the SBA.⁶⁶

The business may be a sole proprietorship, partnership, corporation, or any other legal form.

What Is "Small"?⁶⁷

The SBA uses two measures to determine if a business is small: SBA-derived industry specific size standards or a combination of the business's net worth and net income. For example, businesses participating in the SBA's 7(a) loan guaranty program are deemed small if they either meet the SBA's industry-specific size standards for firms in 1,047 industrial classifications in 18 subindustry activities described in the North American Industry Classification System (NAICS) or do not have more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carryover losses) for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard.⁶⁸

The SBA's industry size standards vary by industry, and they are based on one of the following four measures: the firm's (1) average annual receipts in the previous three (or five) years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small and average annual receipts for most other industries.

The SBA's size standards are designed to encourage competition within each industry. They are derived through an assessment of the following four economic factors: "average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms."⁶⁹ The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors "as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses."⁷⁰

SBA Loan Guarantee Programs

Overview

The SBA provides loan guarantees for small businesses that cannot obtain credit elsewhere on reasonable terms and conditions. Its largest loan guaranty programs are the 7(a) loan guaranty program and the 504/CDC loan guaranty program.

The SBA's loan guaranty programs require personal guarantees from borrowers and share the risk of default with lenders by making the guaranty less than 100%.⁷¹ Most of the SBA's lending programs, including the 7(a) and 504/CDC loan guaranty programs, charge fees to help offset program costs, including costs related to loan defaults. In most instances, limits on these fees are set in statute.⁷² In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses.

The SBA's goal is to achieve a zero subsidy rate, meaning that the appropriation of budget authority for new loan guaranties is not required.

In an effort to assist small business owners, the SBA has, from time-to-time, reduced its fees. For example, in FY2019, the SBA waived the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reduced the up-front one-time guaranty fee for these loans from 2% to 0.6667% of the guaranteed portion of the loan.⁷³

In an effort to assist small businesses adversely affected by COVID-19, the CARES Act permanently required the SBA to waive the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program.⁷⁴ In addition, P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), waived SBA fees in the 7(a) and 504/CDC loan guarantee programs in FY2021.

The 7(a) Loan Guaranty Program⁷⁵

The 7(a) loan guaranty program is named after the section of the Small Business Act that authorizes it. The loans are made by SBA lending partners (mostly banks but also some other financial institutions) and partially guaranteed by the SBA. Borrowers may use 7(a) loan proceeds to establish a new business or to assist in the operation, acquisition, or expansion of an existing business.⁷⁶

Lenders are permitted to charge borrowers "a reasonable fixed interest rate" or, with the SBA's approval, a variable interest rate.⁷⁷ In FY2021, the SBA approved 51,853 7(a) loans totaling $36.8 billion.⁷⁸ In FY2021, there were 1,738 active lending partners providing 7(a) loans.⁷⁹

As mentioned, the CARES Act appropriated $17 billion to pay the principal, interest, and any associated fees that are owed on an existing 7(a) loan, 504/CDC loan, or Microloan and for loans subsequently approved and fully disbursed prior to September 27, 2020, for a six-month period.⁸⁰ Of this amount, $7.1 billion was spent and the remainder was rescinded by P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021).⁸¹

P.L. 116-260 appropriated $3.5 billion to resume SBA's monthly debt relief payments, capped at $9,000 per month per borrower. The SBA is authorized to provide up to an additional eight monthly payments, depending on the availability of funds, when the loan was disbursed, the type of loan received, and the business's industry.

Because the SBA determined that the $3.5 billion provided was insufficient to make the maximum number of monthly payments authorized in P.L. 116-260, the SBA announced that it would pay two additional monthly payments on 7(a) and 504/CDC loans that were in repayment before March 27, 2020, starting with the next payment due on or after February 1, 2021. After the first two monthly payments are provided, businesses with an SBA Community Advantage loan, Microloan, or operating in specified economically hard-hit industries will receive an additional three monthly payments. Loans approved from February 1, 2021, through September 30, 2021, will receive three monthly payments beginning with the first payment due.⁸²

P.L. 116-260 also waived SBA fees for the 7(a) and 504/CDC loan guarantee programs in FY2021 and increased the 7(a) program's current guaranty rate from 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (up to a maximum guaranty of $3.75 million—75% of $5 million) to 90% through October 1, 2021.

The 504/CDC Loan Guaranty Program⁸³

The 504/CDC loan guaranty program uses Certified Development Companies (CDCs), which are private, nonprofit corporations established to contribute to economic development within their communities. Each CDC has its own geographic territory. The program provides long-term, fixed-rate loans for major fixed assets, such as land, structures, machinery, and equipment. Program loans cannot be used for working capital, inventory, or repaying debt. A commercial lender provides up to 50% of the financing package, which is secured by a senior lien. The CDC's loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a guaranteed debenture.⁸⁴ The small business must contribute at least 10% as equity.

To participate in the program, small businesses cannot exceed $15 million in tangible net worth and cannot have average net income of more than $5 million for two full fiscal years before the date of application. Also, CDCs must intend to create or retain one job for every $75,000 of the debenture ($120,000 for small manufacturers) or meet an alternative job creation standard if they meet any one of 15 community or public policy goals.

Maximum 504/CDC participation in a single project is $5 million and $5.5 million for manufacturers and specified energy-related projects; the minimum is $25,000. There is no limit on the project size. Loan maturity is 10 years for equipment and 20 or 25 years for real estate. Unguaranteed financing may have a shorter term. The maximum fixed interest rate allowed is established when the debenture backing the loan is sold and is pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues.

The SBA is authorized to charge CDCs

• a one-time, up-front guaranty fee of up to 0.5% of the debenture (0.5% in FY2022),
• an annual servicing fee of up to 0.9375% of the unpaid principal balance (0.2475% for regular 504/CDC loans and 0.2590% for 504/CDC debt refinance loans in FY2022),
• a funding fee (not to exceed 0.25% of the debenture), an annual development company fee (0.125% of the debenture's outstanding principal balance), and
• a one-time participation fee (0.5% of the senior mortgage loan if in a senior lien position to the SBA and the loan was approved after September 30, 1996).

In addition, CDCs are allowed to charge borrowers a processing (or packaging) fee of up to 1.5% of the net debenture proceeds and a closing fee, servicing fee, late fee, assumption fee, Central Servicing Agent (CSA) fee, other agent fees, and an underwriters' fee.

In FY2021, the SBA approved 9,676 504/CDC loans totaling over $8.2 billion.⁸⁵ In FY2020, 208 CDCs provided at least one 504/CDC loan.⁸⁶

As mentioned, the CARES Act appropriated $17 billion to provide six monthly debt relief payments for 7(a), 504/CDC, and Microloan borrowers with loans that were fully disbursed prior to September 27, 2020. P.L. 116-260 appropriated $3.5 billion to resume up to eight monthly debt relief payments, depending on the availability of funds, when the loan was disbursed, the type of loan received, and the business's industry. The SBA announced that the $3.5 billion appropriation would enable the agency to provide two additional monthly payments on 7(a) and 504/CDC loans that were in repayment before March 27, 2020, starting with the next payment due on or after February 1, 2021. After the first two monthly payments are provided, businesses with an SBA Community Advantage loan, Microloan, or operating in specified economically hard-hit industries will receive an additional three monthly payments. Loans approved from February 1, 2021, through September 30, 2021, will receive three monthly payments beginning with the first payment due.⁸⁷

In addition, in an effort to assist small businesses adversely affected by COVID-19, P.L. 116-260 waived SBA fees in the 7(a) and 504/CDC loan guarantee programs in FY2021.

The Microloan Program⁸⁸

The Microloan program provides direct loans to qualified nonprofit intermediary Microloan lenders that, in turn, provide "microloans" of up to $50,000 to small businesses and nonprofit child care centers. Microloan lenders also provide marketing, management, and technical assistance to Microloan borrowers and potential borrowers.

The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, by P.L. 105-135, the Small Business Reauthorization Act of 1997. Although the program is open to all small businesses, it targets new and early stage businesses in underserved markets, including borrowers with little to no credit history, low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who generally do not qualify for conventional loans or other, larger SBA guaranteed loans.

Microloans can be used for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. Loans cannot be made to acquire land or property. Loan terms are up to seven years.

The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate, adjusted to the nearest one-eighth percent (called the Base Rate), less 1.25% if the intermediary maintains a historic portfolio of Microloans averaging more than $10,000 and less 2% if the intermediary maintains a historic portfolio of Microloans averaging $10,000 or less. The Base Rate, after adjustment, is called the Intermediary's Cost of Funds. The Intermediary's Cost of Funds is initially calculated one year from the date of the note and is reviewed annually and adjusted as necessary (called recasting). The interest rate cannot be less than zero.

On loans of more than $10,000, the maximum interest rate that can be charged to the borrower is the interest rate charged by the SBA on the loan to the intermediary, plus 7.75%. On loans of $10,000 or less, the maximum interest rate that can be charged to the borrower is the interest charged by the SBA on the loan to the intermediary, plus 8.5%. Rates are negotiated between the borrower and the intermediary and typically range from 6% to 9%.

The SBA does not charge intermediaries up-front or ongoing service fees under the Microloan program.

In FY2021, microloan intermediaries provided 4,510 loans to small businesses totaling $74.6 million. The average Microloan amount was $16,557.⁸⁹

As mentioned, the CARES Act appropriated $17 billion to provide six monthly debt relief payments for 7(a), 504/CDC, and Microloan borrowers with loans that were fully disbursed prior to September 27, 2020. P.L. 116-260 appropriated $3.5 billion to resume up to eight monthly debt relief payments, depending on the availability of funds, when the loan was disbursed, the type of loan received, and the business's industry. The SBA has announced that the $3.5 billion appropriation will enable the agency to provide two additional monthly payments on 7(a) and 504/CDC loans that were in repayment before March 27, 2020, starting with the next payment due on or after February 1, 2021. After the first two monthly payments are provided, businesses with an SBA Community Advantage loan, Microloan, or operating in specified economically hard-hit industries will receive an additional three monthly payments. Loans approved from February 1, 2021, through September 30, 2021, will receive three monthly payments beginning with the first payment due.⁹⁰

SBA Loan Enhancements to Address the Great Recession

Many of the proposals under consideration to address the capital needs of small businesses adversely affected by the COVID-19 pandemic were used to address the severe economic slowdown during and immediately following the Great Recession (2007-2009). The main difference is that given the unique nature of the COVID-19 pandemic's impact on households, especially physical distancing and the resulting decrease in consumer spending, there is an added emphasis today on SBA loan deferrals, loan forgiveness, and expanded eligibility, including, for the first time, specified types of nonprofit organizations.

During the 111^th Congress, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided the SBA an additional $730 million, including $375 million to temporarily subsidize the 7(a) and 504/CDC loan guaranty programs' fees ($299 million) and to temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% ($76 million).⁹¹ ARRA also included provisions designed to increase the amount of leverage issued under the SBA's Small Business Investment Company (SBIC venture capital) program.⁹² SBICs provide loans and equity investments in small businesses.

ARRA's funding for the fee subsidies and 90% maximum loan guaranty percentage was about to be exhausted in November 2009, when Congress passed the first of six laws that provided additional funding to extend the loan subsidies and 90% maximum loan guaranty percentage.⁹³

On January 3, 2011, the SBA announced that the fee subsidies and 90% maximum guarantee percentage ended because funding for these enhancements had been exhausted.⁹⁴

In addition to providing additional funding to continue the SBA's fee subsidies, P.L. 111-240, the Small Business Jobs Act of 2010, among other provisions,

• increased the 7(a) program's gross loan limit from $2 million to $5 million;
• increased the 504/CDC Program's loan limits from $1.5 million to $5 million for "regular" borrowers, from $2 million to $5 million if the loan proceeds are directed toward one or more specified public policy goals, and from $4 million to $5.5 million for manufacturers;
• temporarily expanded for two years the eligibility for low-interest refinancing under the SBA's 504/CDC program for qualified debt;
• temporarily increased for one year the SBAExpress Program's loan limit from $350,000 to $1 million (expired on September 26, 2011);
• increased the Microloan Program's loan limit for borrowers from $35,000 to $50,000; and increased the loan limits for Microloan intermediaries after their first year in the program from $3.5 million to $5 million;
• authorized the U.S. Treasury to make up to $30 billion of capital investments for a Small Business Lending Fund ($4 billion was issued);⁹⁵
• authorized to be appropriated $1.5 billion for the State Small Business Credit Initiative Program;⁹⁶
• authorized a three-year Intermediary Lending Pilot Program to allow the SBA to make direct loans to not more than 20 eligible nonprofit lending intermediaries each year totaling not more than $20 million. The intermediaries, in turn, would be allowed to make loans to new or growing small businesses, not to exceed $200,000 per business;
• established an alternative size standard for the 7(a) and 504/CDC loan programs to enable more small businesses to qualify for assistance;⁹⁷ and
• provided small businesses with about $12 billion in tax relief.⁹⁸

There were also efforts during the 111^th and 112^th Congresses to require the SBA to reinstate direct lending to small businesses (see H.R. 3854, the Small Business Financing and Investment Act of 2009, H.R. 3007, the Give Credit to Main Street Act of 2011, and H.R. 5835, the Veterans Access to Capital Act of 2012).

Current Issues, Debates, and Lessons Learned

During the 111^th Congress (2009-2010), there was a consensus in Congress that the federal government had to take decisive action to address the capital needs of small businesses, primarily as a means to promote job retention and creation. Similar sentiments are being expressed today as Congress considers proposals to assist small businesses adversely affected by the COVID-19 pandemic.

Many Members of Congress argued during the 111^th Congress that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation.

Given the coronavirus's widespread adverse economic impact, including productivity losses, supply chain disruptions, labor dislocation, and financial pressure on businesses and households, there has been relatively little concern expressed about federal fiscal restraint during the current pandemic. The debate has been primarily over which specific policies would have the greatest impact and which types of small businesses and small business owners should be helped the most.

As mentioned, many of the enhancements to the SBA's capital access programs that were made during the 111^th Congress, such as increasing loan limits, providing fee subsidies, increasing loan guaranty percentages, and expanding eligibility criteria are being considered again. These changes had a demonstrated impact on small business lending during and immediately following the Great Recession. SBA lending increased. For example, the SBA's OIG found that SBA 7(a) loan approvals increased 39% and 504/CDC loan approval increased 73% from March to July 2009, largely due to ARRA's fee reductions and increased loan guarantee percentages. Lending volume remained below pre-recession levels, but was much higher than before the fee reductions and increase in the loan guarantee percentage were implemented.

The OIG also noted that the increased loan volume "may be impacting Agency staffing requirements and program risk.... Without adequate training and supervision, the increased demands on loan center staff could impact the quality of Agency loan reviews."⁹⁹

Also, in 2012, the SBA issued a press release lauding P.L. 111-240's impact on SBA loan volume:

With loan volume steadily increasing for the past six quarters, the U.S. Small Business Administration's loan programs posted the second largest dollar volume ever in FY 2012, supporting $30.25 billion in loans to small businesses. That amount was surpassed only by FY 2011, which was heavily boosted by the loan incentives under the Small Business Jobs Act of 2010.¹⁰⁰

The data demonstrate that ARRA and the Small Business Jobs Act of 2010 helped small businesses access capital. However, because the SBA primarily gathers data on program output (e.g., loan volume, number of small businesses served, default rates) as opposed to program outcomes (e.g., small business solvency, job creation, wealth generation) it is difficult to know how effective these programs were in assisting small businesses or if other approaches might have produced better (or different) results.

Among the lessons learned from earlier small business stimulus packages is that additional funding for the SBA OIG to conduct oversight of the SBA's implementation of stimulus changes could help Congress in its oversight responsibilities. Additional funding for the SBA OIG to conduct investigations of potentially fraudulent behaviors by borrowers and lenders could also prove useful in deterring fraud, waste, and abuse.¹⁰¹ In addition, requiring the SBA to periodically report to Congress and on its website both output and outcome performance data could help Congress in its oversight responsibilities and assure the public that the taxpayer's dollars are being spent both efficiently and effectively.

SBA Entrepreneurial Development Programs¹⁰²

Overview

The SBA has provided technical and managerial assistance to small businesses since it began operations in 1953. Initially, the SBA provided its own small business management and technical assistance training programs. Over time, the SBA has relied increasingly on third parties to provide that training.

Congressional interest in the SBA's management and technical assistance training programs has increased in recent years, primarily because these programs are viewed as a means to assist small businesses create and retain jobs. In FY2022, these programs received $256.6 million in appropriations. These funds support about 14,000 resource partners, including 62 lead small business development centers (SBDCs) and nearly 900 SBDC local outreach locations, 146 women's business centers (WBCs), and more than 250 chapters of the mentoring program, SCORE.¹⁰³

The SBA reports that nearly a million aspiring entrepreneurs and small business owners receive mentoring and training from an SBA-supported resource partner each year. Most of this training is free, and some is offered at low cost.¹⁰⁴

Small Business Development Centers

SBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small businesses in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. SBDCs are funded by SBA grants and matching funds equal to the grant amount.

SBDC funding is allocated on a pro rata basis among the states (including the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa) by a statutory formula "based on the percentage of the population of each State, as compared to the population of the United States."¹⁰⁵ If, as is currently the case, SBDC funding exceeds $90 million, the minimum funding level is "the sum of $500,000, plus a percentage of $500,000 equal to the percentage amount by which the amount made available exceeds $90 million."¹⁰⁶

There are 62 lead SBDC service centers, one located in each state (four in Texas and six in California), the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa. These centers manage more than 900 SBDC outreach locations. SBDCs were appropriated $135.0 million in FY2020, $136.0 million in FY2021, and $138.0 million in FY2022. The SBA also was provided an additional $192.0 million in supplemental funding for SBDC grants in FY2020 under the CARES Act.¹⁰⁷

In FY2021, SBDCs provided training and counseling to 643,144 unique SBDC clients, and 22,589 new businesses were started largely as a result of SBDC training and counseling.¹⁰⁸

Microloan Technical Assistance

Congress authorized the SBA's Microloan lending program in 1991 (P.L. 102-140, the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1992) to address the perceived disadvantages faced by women, low-income, veteran, and minority entrepreneurs and business owners gaining access to capital to start or expand their business. The program became operational in 1992. Initially, the SBA's Microloan program was authorized as a five-year demonstration project. It was made permanent, subject to reauthorization, by P.L. 105-135, the Small Business Reauthorization Act of 1997.

The SBA's Microloan Technical Assistance Program is affiliated with the SBA's Microloan lending program but receives a separate appropriation. This program provides grants to Microloan intermediaries for management and technical training assistance to Microloan program borrowers and prospective borrowers.¹⁰⁹ There are currently 140 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico.¹¹⁰

Under the Microloan program, intermediaries are eligible to receive a Microloan technical assistance grant "of not more than 25% of the total outstanding balance of loans made to it."¹¹¹ Grant funds may be used only to provide marketing, management, and technical assistance to Microloan borrowers, and no more than 50% of the funds may be used to provide such assistance to prospective Microloan borrowers and no more than 50% of the funds may be awarded to third parties to provide that technical assistance. Grant funds also may be used to attend required training.¹¹²

In most instances, intermediaries must contribute, solely from nonfederal sources, an amount equal to 25% of the grant amount.¹¹³

In an effort to assist small businesses adversely affected by COVID-19, P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), waived the Microloan Technical Assistance Program's matching requirement and the limitations on the use of those funds to provide training to prospective borrowers and on contracts to third parties to provide that training in FY2021.

The SBA does not require Microloan borrowers to participate in the Microloan Technical Assistance Program. However, intermediaries typically require Microloan borrowers to participate in the training program as a condition of the receipt of a microloan. Combining loan and intensive management and technical assistance training is one of the Microloan program's distinguishing features.¹¹⁴

The SBA was provided $34.5 million for Microloan technical assistance grants in FY2020, $85.0 million in FY2021 ($35.0 million in the Consolidated Appropriations Act, 2021 and an additional $50.0 million in P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act), and $37.0 million in FY2022.

Women's Business Centers

The WBC Renewable Grant Program was initially established by P.L. 100-533, the Women's Business Ownership Act of 1988, as the Women's Business Demonstration Pilot Program, targeting the needs of socially and economically disadvantaged women. The act directed the SBA to provide financial assistance to private, nonprofit organizations to conduct demonstration projects giving financial, management, and marketing assistance to small businesses, including start-up businesses, owned and controlled by women. The WBC program was expanded and provided permanent legislative status by P.L. 109-108, the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006.¹¹⁵

Since the program's inception, the SBA has awarded WBCs a grant of up to $150,000 per year. WBC initial grants are currently awarded for up to five years, consisting of a base period of 12 months from the date of the award and four 12-month option periods.¹¹⁶ The SBA determines if the option periods are exercised and makes that determination subject to the continuation of program authority, the availability of funds, and the recipient organization's compliance with federal law, SBA regulations, and the terms and conditions specified in a cooperative agreement. WBCs that successfully complete the initial five-year grant period may apply for an unlimited number of three-year funding intervals.¹¹⁷

During their initial five-year grant period, WBCs are required to provide a nonfederal match of one nonfederal dollar for each two federal dollars in years one and two (1:2), and one nonfederal dollar for each federal dollar in years three, four, and five (1:1). After the initial five-year grant period, the matching requirement in subsequent three-year funding intervals is not more than 50% of federal funding (1:1).¹¹⁸ The nonfederal match may consist of cash, in-kind, and program income.¹¹⁹

In an effort to assist small businesses adversely affected by COVID-19, the CARES Act waived the WBC matching requirement for three months following enactment (March 27, 2020). P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), reactivated this waiver, made it retroactive to March 27, 2020, and extended it through June 30, 2021.

Today, there are 146 WBCs located throughout the states and territories.¹²⁰ In FY2021, WBCs provided technical assistance training and counseling services to 87,957 unique WBC clients, and 3,301 new businesses were started largely as a result of WBC training and counseling.¹²¹

The SBA was provided $22.5 million for WBC grants in FY2020, $23.0 million in FY2021, and $24.4 million in FY2022. The SBA also was provided an additional $48.0 million in supplemental funding for WBC grants in FY2020 under the CARES Act.¹²²

SCORE (formerly the Service Corps of Retired Executives)

SCORE was established on October 5, 1964, by then-SBA Administrator Eugene P. Foley as a national, volunteer organization, uniting more than 50 independent nonprofit organizations into a single, national nonprofit organization.

The SBA currently provides grants to SCORE to provide in-person mentoring, online training, and "nearly 9,000 local training workshops annually" to small businesses.¹²³ SCORE's more than 250 chapters are located throughout the United States and partner with more than 10,000 volunteer counselors, who are working or retired business owners, executives and corporate leaders, to provide management and training assistance to small businesses "at no charge or at very low cost."¹²⁴

In FY2021, SCORE provided technical assistance training and counseling services to 145,838 unique SCORE clients, and 3,064 new businesses were started largely as a result of SCORE training and counseling.¹²⁵

The SBA was provided $11.7 million for SCORE grants in FY2020, $12.2 million in FY2021, and $14.0 million in FY2022.

Current Issues, Debates, and Lessons Learned

Congress provided additional funding for SBA entrepreneurial development programs during and immediately following the Great Recession. For example, ARRA provided an additional $24 million for Microloan technical assistance grants. The Small Business Jobs Act of 2010 provided SBDCs an additional $50 million and temporarily waived SBDC, Microloan technical assistance, and WBC matching requirements.

Similar proposals were made to address the COVID-19 pandemic. For example, during the 116^th Congress, the CARES Act appropriated an additional $265 million for SBA entrepreneurial development programs ($192 million for SBDCs, $48 million for WBCs, and $25 million for SBA resource partners to provide online information and training). The act also waived SBDC and WBC matching requirements. P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), appropriated an additional $50 million for Microloan technical assistance grants, and continued the waiver of the WBC matching requirement through June 30, 2021. During the 117^th Congress, P.L. 117-2, the American Rescue Plan Act of 2021, appropriated $100 million for a community navigator pilot grant program to improve small business access to COVID-19-related assistance programs and $75 million for outreach and education programs. All SBA resource partners, including SBDCs, WBCs, and SCORE, are eligible to compete for these grants.

Congress could require the SBA's resource partners to report to the SBA both output and outcome performance data for these grants and to require the SBA to report that information to Congress and make that information available to the public on the SBA website.

SBA Contracting Programs¹²⁶

Overview

Federal agencies are required to facilitate the maximum participation of small businesses as prime contractors, subcontractors, and suppliers. For example, federal agencies are generally required to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased.¹²⁷

Several SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs, subcontracting programs, and other assistance (e.g., contracting technical training assistance and oversight of the federal small business goaling program and the Surety Bond Guarantee program).¹²⁸

8(a) Program¹²⁹

The SBA's 8(a) Business Development Program provides business development assistance to businesses owned and controlled by persons who are socially and economically disadvantaged, have good character, and demonstrate a potential for success.¹³⁰

Although the 8(a) Program was originally established in the 1980s for the benefit of disadvantaged individuals, Congress expanded the program to include small businesses owned by four disadvantaged groups. Small businesses owned by Alaska Native Corporations (ANCs), Community Development Corporations (CDCs), Indian tribes, and Native Hawaiian Organizations (NHOs) are also eligible to participate in the 8(a) Program under somewhat different requirements.

Federal agencies are authorized to award contracts for goods or services, or to perform construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate the function of executing contracts to the procuring agencies and often does so. Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded through either a restricted competition limited to just 8(a) participants (a set aside) or on a sole source basis, with the contract amount generally determining the acquisition method used.

For individually owned small businesses, when the contract's anticipated total value, including any options, does not exceed $4.5 million ($7.5 million for manufacturing contracts), the contract is normally awarded without competition (as a sole source award). In contrast, when the contract's anticipated value exceeds these thresholds, the contract generally must be awarded via a set aside with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price.¹³¹

Similar to other participants, firms owned by ANCs, CDCs, NHOs, and Indian tribes are eligible for 8(a) set asides and may receive sole source awards valued at less than $4 million ($7 million for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also receive sole source awards in excess of $4.5 million ($7.5 million for manufacturing contracts) even when contracting officers reasonably expect that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price.¹³² NHO-owned firms may receive sole source awards from the Department of Defense under the same conditions.¹³³

The 8(a) program is designed to help federal agencies achieve their statutory goal of awarding at least 5% of their federal contracting dollars to small disadvantaged businesses.

In FY2020, the federal government awarded $34.0 billion to 8(a) firms.

Historically Underutilized Business Zone Program¹³⁴

The SBA oversees the Historically Underutilized Business Zones (HUBZones) Program. The program assists small businesses located in HUBZone-designated areas through set asides, sole source awards (so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, does not exceed $4.5 million, or $7.5 million for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open competitions.¹³⁵ The HUBZone program targets assistance to small businesses located in areas with low income, high poverty, or high unemployment.¹³⁶ To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone.

The HUBZone contracting program is designed to help federal agencies achieve their statutory goal of awarding at least 3% of their federal contracting dollars to HUBZone small businesses.

In FY2020, the federal government awarded $13.6 billion to HUBZone-certified small businesses.

Service-Disabled Veteran-Owned Small Business Program

The SBA oversees the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program. The program allows agencies to set aside contracts for SDVOSBs. Federal agencies may award sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, does not exceed $4 million ($7 million for manufacturing contracts).¹³⁷ For purposes of this program, veterans with service-related disabilities are defined as they are under the statutes governing veterans affairs.¹³⁸

The SDVOSB contracting program is designed to help federal agencies achieve their statutory goal of awarding at least 3% of their federal contracting dollars to SDVOSBs.

In FY2020, the federal government awarded $26.1 billion to SDVOSBs.

Women-Owned Small Business Program

The SBA oversees the Women-Owned Small Businesses (WOSB) Program. Under this program, federal contracting officers may set aside federal contracts (or orders) for WOSBs and Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) in industries in which the SBA determines WOSBs are substantially underrepresented in federal procurement. Federal contracting officers can also set aside federal contracts for EDWOSBs exclusively in industries in which the SBA determines WOSBs are underrepresented in federal procurement.

The WOSB Program is designed to help federal agencies achieve their statutory goal of awarding at least 5% of their federal contracting dollars to WOSBs.

Federal agencies may award sole source contracts to WOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, does not exceed $4.5 million ($7 million for manufacturing contracts).¹³⁹

In FY2020, the federal government awarded $27.2 billion to WOSBs.

SBA Surety Bond Program¹⁴⁰

The SBA's Surety Bond Guarantee Program has been operational since April 1971.¹⁴¹ It is designed to increase small business' access to federal, state, and local government contracting, as well as private sector contracting, by guaranteeing bid, performance, payment, and specified ancillary bonds "on contracts … for small and emerging contractors who cannot obtain bonding through regular commercial channels."¹⁴² The program guarantees individual contracts of up to $6.5 million, and up to $10 million for federal contracts if a federal contracting officer certifies that such a guarantee is necessary. The $6.5 million limit is periodically adjusted for inflation.¹⁴³ The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs.

In FY2020, the SBA guaranteed 10,577 bid and final surety bonds (a payment bond, performance bond, or both a payment and performance bond) with a total contract value of nearly $7.2 billion.¹⁴⁴

A surety bond is a three-party instrument between a surety (who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. Surety bonds encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions.

Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government.

Current Issues, Debates, and Lessons Learned

Congress included enhancements for small business contracting in both ARRA (increased funding and higher maximum bond amounts for the SBA Surety Bond program) and the Small Business Jobs Act of 2010 (new restrictions on the consolidation or bundling of contracts that make it more difficult for small businesses to be awarded the contract). The CARES Act authorizes federal agencies to modify a contract's terms and conditions to reimburse contractors—at the minimum billing rate not to exceed an average of 40 hours per week—for any paid leave (including sick leave) the contractor provides to keep its employees or subcontractors in a ready state through September 30, 2020. Eligible contractors are those whose employees or subcontractors cannot perform work on a federally approved site due to facility closures or other restrictions because of COVID-19 and cannot telework because their job duties cannot be performed remotely.

Concluding Observations

In response to the Great Recession, Congress took a number of actions to enhance small businesses' access to capital, management and training programs, and contracting opportunities. The goal then, as it is now, was to provide small businesses with the resources necessary to survive the economic downturn and retain or create jobs. Some of the CARES Act's provisions (e.g., fee waivers, increased loan limits, and increased guarantee percentages) were used in legislation passed during the 111^th Congress to address the severe economic slowdown during and immediately following the Great Recession (2007-2009). The main difference between that legislation and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness, and greatly expanded eligibility, including, for the first time, specified types of nonprofit organizations.

The CARES Act's inclusion of loan deferral and forgiveness is, at least partly, due to the unique economic dislocations and reduction in consumer spending resulting from individuals and households engaging in physical distancing to avoid COVID-19 infection.

As mentioned, because COVID-19's adverse economic impact is so widespread, including productivity losses, supply chain disruptions, labor dislocation, and financial pressure on businesses and households, there has been relatively little concern expressed about federal fiscal restraint during the current pandemic. The debate has been primarily over which specific policies would have the greatest impact and which types of small businesses and small business owners should be helped the most.

Among the lessons learned from the 111^th Congress is the potential benefits that can be derived from providing additional funding for the SBA's Office of Inspector General and the Government Accountability Office. GAO and the SBA's OIG can provide Congress information that could prove useful as Congress engages in congressional oversight of the SBA's administration of the CARES Act, provide an early warning if unforeseen administrative problems should arise, and, through investigations and audits, serve as a deterrent to fraud.

The CARES Act addressed this issue by providing the SBA's OIG $25 million for its investigative functions. Also, P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated Appropriations Act of 2021), provided the SBA OIG an additional $20 million to prevent waste, fraud, and abuse in the awarding of EIDL Targeted advance payment grants. The act also provided the SBA $50 million for PPP auditing and fraud mitigation efforts. In addition, P.L. 117-2, the American Rescue Plan Act of 2021, appropriated an additional $25 million for SBA's Office of Inspector General for oversight.

Requiring the SBA to report regularly on its implementation of the CARES Act and succeeding legislation could also promote transparency and assist Congress in performing its oversight responsibilities. In addition, requiring output and outcome performance measures and requiring the SBA to report this information directly to both Congress and the public by posting that information on the SBA's website could enhance both congressional oversight and public confidence in the SBA's efforts to assist small businesses.

Appendix. Major Provisions of the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act, and the Paycheck Protection Program Flexibility Act

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136)

• established a Paycheck Protection Program (PPP) to provide "covered loans" with a 100% SBA loan guarantee, a maximum term of 10 years, and an interest rate not to exceed 4% to assist small businesses and other organizations adversely affected by the Coronavirus Disease 2019 (COVID-19). The SBA announced that PPP loans will have a two-year term at a 1% interest rate;
• defined a covered loan as a loan made to an eligible recipient from February 15, 2020, through June 30, 2020;
• waived the up-front loan guarantee fee and annual servicing fee, the no credit elsewhere requirement, and the requirements for collateral and a personal guarantee for a covered loan;
• expanded eligibility for a covered loan to include 7(a) eligible businesses and any business, 501(c)(3) nonprofit organization, 501(c)(19) veteran's organization, or tribal business not currently eligible that has not more than 500 employees or, if applicable, the SBA's size standard in number of employees for the industry in which they operate. Sole proprietors, independent contractors, and eligible self-employed individuals were also eligible to receive a covered loan;¹⁴⁵
• allowed borrowers to refinance Economic Injury Disaster Loans (EIDLs) made on or after January 31, 2020, as part of a covered loan;
• increased the maximum loan amount for a covered loan to the lesser of (1) 2.5 times the average total monthly payments by the applicant for payroll costs incurred during the one-year period before the date on which the loan is made plus the outstanding balance of any EIDL made on or after January 31, 2020, that is refinanced as part of a covered loan, or (2) $10 million;
• specified that covered loans are nonrecourse (meaning that the SBA cannot pursue collections actions against the recipient(s) in the case of nonpayment) except to the extent that the covered loan proceeds are used for nonauthorized purposes;
• allowed covered loans to be used for payroll costs, costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, employee salaries, commissions, or similar compensations, mortgage payments, rent, utilities, and interest on any other debt obligations that were incurred before the covered period;
• expanded lender delegated loan approval authority for making covered loans to all 7(a) lenders to expedite PPP loan processing;
• required lenders, when evaluating borrower eligibility for a covered loan, to consider whether the borrower was in operation on February 15, 2020, had employees for whom the borrower paid salaries and payroll taxes, and paid independent contractors;
• required borrowers to, among other acknowledgements,
• make a good faith certification that the covered loan is needed because of the uncertainty of current economic conditions and to support ongoing operations, and
• acknowledge that the funds will be used to retain workers, maintain payroll, or make mortgage payments, lease payments, and utility payments;
• required lenders to provide "impacted borrowers" adversely affected by COVID-19 "complete payment deferment relief"¹⁴⁶ on a covered PPP loan for not less than six months and not more than one year if the borrower was in operation on February 15, 2020, and has an application for a covered loan approved or pending approval on or after the date of enactment. The SBA announced that covered loan payments will be deferred for six months. However, interest continued to accrue on these loans during the six-month deferment;¹⁴⁷
• presumed that each eligible recipient that applies for a PPP loan is an impacted borrower and authorizes the SBA Administrator to purchase covered loans sold on the secondary market so that affected borrowers may receive a deferral for not more than one year. The SBA announced that the deferment relief on covered loans will be for six months;
• provided for the forgiveness of covered loan amounts equal to the amount the borrower spent during an 8-week period after the loan's origination date on payroll costs, interest payment on any mortgage incurred prior to February 15, 2020, payment of rent on any lease in force prior to February 15, 2020, and payment on any utility for which service began before February 15, 2020. The amount of loan forgiveness cannot exceed the covered loan's principal amount. The forgiveness is reduced proportionally by formulas related to the borrower's retention of full-time equivalent employees compared to the borrower's choice of either (1) the period beginning on February 15, 2019, and ending on June 30, 2019, or (2) January 1, 2020, and February 29, 2020; and by the amount of any reduction in pay of any employee beyond 25% of their salary or wages during the most recent full quarter before the covered period.¹⁴⁸ Borrowers that re-hire workers previously laid off are not penalized for having a reduced payroll at the beginning of the period. Cancelled debt resulting from loan forgiveness is included in the borrower's taxable federal income;
• The SBA announced that due to likely high subscription, at least 75% of the forgiven loan amount must be used for payroll;¹⁴⁹
• required the SBA to pay the principal, interest, and any associated fees that are owed on an existing 7(a), 504/CDC, or Microloan that is in a regular servicing status for a six-month period starting on the next payment due. Loans that are already on deferment received six months of payment by the SBA beginning with the first payment after the deferral period. Loans made up until six months after enactment also received a full six months of SBA loan payments;
• required federal banking agencies or the National Credit Union Administration Board applying capital requirements under their respective risk-based capital requirements to provide a covered loan with a 0%-risk weight;
• increased the SBA's lending authorization under Section 7(a) of the Small Business Act from $30 billion to $349 billion during the covered period;
• increased the SBAExpress loan limit from $350,000 to $1 million (reverted to $350,000 on January 1, 2021);
• permanently eliminated the zero subsidy requirement to waive SBAExpress loan fees for veterans;
• appropriated $349 billion for loan guarantees and subsidies (remaining available through FY2021), $675 million for the SBA's salaries and expenses account, $25 million for the SBA's Office of Inspector General (OIG), $562 million for disaster loans, $265 million for entrepreneurial development programs ($192 million for SBDCs, $48 million for WBCs, and $25 million for SBA resource partners to provide online information and training), $17 billion for subsidies for certain loan payments, and $10 million for the Department of Commerce's Minority Business Development Agency;
• allowed the period of use of FY2018 and FY2019 grant awards made under the State Trade Expansion Program (STEP) through FY2021;
• reimbursed (up to the grant amount received) STEP award recipients for financial losses relating to a foreign trade mission or a trade show exhibition that was cancelled solely due to a public health emergency declared due to COVID-19;
• waived SBDC and WBC matching requirements;
• required federal agencies to continue to pay small business contractors and revise delivery schedules, holding small contractors harmless for being unable to perform a contract due to COVID-19 caused interruptions until September 2021;
• required federal agencies to promptly pay small business prime contractors and requires prime contractors to promptly pay small business subcontractors within 15 days, notwithstanding any other provision of law or regulation, for the duration of the President invoking the Defense Production Act in response to COVID-19; and
• provided SBA Emergency Injury Disaster Loan (EIDL) enhancements during the covered period of January 31, 2020, through December 31, 2020, including
• expanding eligibility beyond currently eligible small businesses, private nonprofit organizations, and small agricultural cooperatives, to include startups, cooperatives, and eligible ESOPs (employee stock ownership plans) with not more than 500 employees, sole proprietors, and independent contractors;
• authorizing the SBA Administrator, in response to economic injuries caused by COVID-19, to
• waive the no credit available elsewhere requirement,
• approve an applicant based solely on their credit score,
• not require applicants to submit a tax return or tax return transcript for approval,
• waive any rules related to the personal guarantee on advances and loans of not more than $200,000,
• waive the requirement that the applicant needs to be in business for the one-year period before the disaster declaration, except that no waiver may be made for a business that was not in operation on January 31, 2020;
• authorizing the SBA Administrator, through December 31, 2020, to provide up to $10,000 as an advance payment in the amount requested within three days after receiving an EIDL application from an eligible entity. Applicants are not required to repay the advance payment, even if subsequently denied an EIDL loan. The funds may be used for any eligible EIDL expense, including, among other expenses, providing paid sick leave to employees unable to work due to COVID-19, maintaining payroll to retain employees, and meeting increased costs to obtain materials due to supply chain disruptions. The SBA limited EIDL-advance payments to $1,000 per employee, up to a maximum of $10,000; and
• appropriating an additional $10 billion for EIDL assistance.

The Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139)

• increased the SBA's lending authorization under Section 7(a) of the Small Business Act from $349 billion during the covered period to $659 billion;
• required that no less than $30 billion of this authorization amount be set aside for loans issued by insured depository institutions and credit unions with consolidated assets of $10 billion to $50 billion;
• required that no less than $30 billion of this authorization amount be set aside for loans issued by community financial institutions (including community development financial institutions (CDFIs), minority depository institutions, SBA-certified development companies, and SBA microloan intermediaries), and insured depository institutions and credit unions with consolidated assets less than $10 billion;
• increased the PPP appropriation amount from $349 billion to $670.335 billion;
• appropriated an additional $50 billion for EIDL loans;
• appropriated an additional $10 billion for Emergency EIDL grants;
• appropriated an additional $2.1 billion for the SBA's salaries and expenses account (to remain available until September 30, 2021); and
• provided agricultural enterprises eligibility for Emergency EIDL grants and COVID-19-related EIDL loans during the covered period (January 31, 2020 through December 31, 2020).

The Paycheck Protection Program Flexibility Act (P.L. 116-142)

• extended the PPP loan forgiveness covered period from 8 weeks after the loan's origination date to the earlier of 24 weeks after the loan's origination date or December 31, 2020;
• provided borrowers that received a PPP loan prior to the enactment date (June 5, 2020) the option to use the CARES Act's loan forgiveness covered period of eight weeks after the loan's origination date;
• replaced the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness purposes with the requirement that at least 60% of the loan proceeds be used for payroll costs and up to 40% be used for covered mortgage interest, rent, and utility payments;¹⁵⁰
• provided borrowers a "safe harbor" from the loan forgiveness rehiring requirement if the borrower is unable to rehire an individual who was an employee of the recipient on or before February 15, 2020, or if the borrower can demonstrate an inability to hire similarly qualified employees on or before December 31, 2020;
• established a minimum PPP loan maturity of five years for loans made on or after the date of enactment;
• extended the PPP loan deferral period from six months (under SBA regulations) to the date that the SBA remits the borrower's loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower's loan forgiveness covered period; and
• eliminated the exception in the CARES Act preventing taxpayers who receive PPP loan forgiveness from delaying the payment of employer payroll taxes.¹⁵¹