Introduction

Established in 1953, the Small Business Administration's (SBA's) origins can be traced to the Great Depression of the 1930s and World War II, when concerns about unemployment and war production were paramount. The SBA assumed some of the functions of the Reconstruction Finance Corporation (RFC), which had been created by the federal government in 1932 to provide funding for businesses of all sizes during the Depression and later financed war production. During the early 1950s, the RFC was disbanded following charges of political favoritism in the granting of loans and contracts.¹

In 1953, Congress passed the Small Business Act (P.L. 83-163), which authorized the SBA. The act specifies that the SBA's mission is to promote the interests of small businesses to enhance competition in the private marketplace:

It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.²

The SBA currently administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. This interest has grown especially acute in recent months due to the novel coronavirus (COVID-19) pandemic's widespread, adverse impact on the national economy.

This report provides an overview of the SBA's programs and funding. It also references other CRS reports that examine the SBA's programs in greater detail.³

The SBA's FY2023 congressional budget justification document includes funding and program costs for the following programs and offices:

• 1. disaster assistance (including disaster loan making, servicing, and liquidation; the Shuttered Venue Operators Grant program;⁴ and Economic Injury Disaster Loan (EIDL) grants);
• 2. capital access programs (including the Paycheck Protection Program, 7(a) loan guaranty program, the 504/Certified Development Company [CDC] loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight);
• 3. entrepreneurial development programs (including Small Business Development Centers (SBDCs), Women's Business Centers (WBCs), SCORE, Entrepreneurship Education, Native American Outreach, Regional Innovation Clusters, Cybersecurity Grants, Community Navigator Pilot Program, Centralized HUB for COVID-19 information, PRIME, State Trade Expansion Program, Federal and State Technology (FAST) Partnership program, and veterans' programs);
• 4. contracting programs (including the 7(j) Management and Technical Assistance program, the 8(a) Business Development program, the Historically Underutilized Business Zones [HUBZones] program, the Prime Contract Assistance program, the Women's Business program, the Subcontracting program, the Mentor-Protégé program,⁵ the Center for Verification and Evaluation, and the Surety Bond Guarantee program);
• 5. capital investment programs (including the Small Business Investment Company [SBIC] program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators);
• 6. regional and district offices (counseling, training, and outreach services);
• 7. the Office of Inspector General (OIG);
• 8. the Restaurant Revitalization Fund;
• 9. the Office of Advocacy; and
• 10. executive direction programs (the National Women's Business Council, Office of Ombudsman, and Faith-Based Initiatives).

This report also provides a brief overview of

• P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which, among other provisions, created the $349 billion Paycheck Protection Program (PPP) to provide forgivable, low-interest loans to small businesses, small 501(c)(3) nonprofit organizations, and small 501(c)(19) veterans organizations that have been adversely affected by COVID-19.⁶ Initially, PPP loans were available until June 30, 2020, had a two-year term, and a 1.0% interest rate.
• P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement Act, which, among other provisions, increased the PPP authorization limit to $659 billion and appropriated an additional $321.335 billion to support that authorization level.⁷
• P.L. 116-142, the Paycheck Protection Program Flexibility Act, which, 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 or December 31, 2020. Current PPP borrowers were allowed to remain under the 8-week covered period. The act also provided a minimum five-year maturity for all PPP loans made on or after enactment (June 5, 2020).
• P.L. 116-147, to extend the authority for commitments for the paycheck protection program, which 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.
• P.L. 116-260, the Consolidated Appropriations Act, 2021, which, among other provisions, extended the PPP through March 31, 2021, increased the program's authorization amount from $659 billion to $806.45 billion, and allowed second-draw PPP loans of up to $2 million.
• P.L. 117-2, the American Rescue Plan Act of 2021, which, among other provisions, extended the PPP through May 31, 2021, increased the PPP authorization amount to $813.7 billion, and provided $53.6 billion for SBA program enhancements, including $28.6 billion for a restaurant revitalization grant program.

Table 1 shows the SBA's actual program costs in FY2021 and estimated costs for FY2022. Program costs often differ from new budget authority provided in annual appropriations acts because the SBA has specified authority to carry over appropriations from previous fiscal years. The SBA also has limited, specified authority to shift appropriations among various programs.

Disaster Loans

Overview⁸

Prior to the COVID-19 pandemic, SBA disaster assistance was provided in the form of loans, not grants, which must be repaid to the federal government. As will be discussed, funding for the SBA's disaster loan programs was increased significantly in FY2020 and FY2021 to help small businesses adversely affected by the COVID-19 pandemic.

The SBA's disaster loan programs are unique in two respects: (1) they are the only loans made by the SBA that go directly to the ultimate borrower; and (2) SBA disaster assistance is not limited to small businesses.⁹

SBA disaster loans are available to individuals, businesses, and nonprofit organizations in declared disaster areas.¹⁰ Prior to COVID-19, about 80% of the SBA's direct disaster loans were issued to individuals and households (renters and property owners) to repair and replace homes and personal property. During COVID-19, about 99% of the SBA's direct disaster loans have been issued to small businesses that have suffered economic losses due to the COVID-19 pandemic.

In recent years, the SBA Disaster Loan Program has been the subject of regular congressional and media attention because of concerns expressed about the time it takes the SBA to process disaster loan applications. The SBA approved $1.7 billion in FY2017, $7.4 billion in FY2018, $2.4 billion in FY2019, $195.2 billion in FY2020 ($194.5 billion in COVID-19-related disaster loans and $678 million for natural disasters), and $81.4 billion in FY2021 ($79.5 billion in COVID-19-related disaster loans and $1.9 billion for natural disasters).¹¹

Types of Disaster Loans

The SBA Disaster Loan Program includes the following categories of loans for disaster-related losses: home disaster loans, business physical disaster loans, and economic injury disaster loans.¹²

Disaster Loans to Homeowners, Renters, and Personal Property Owners

Homeowners, renters, and personal property owners located in a declared disaster area (and in contiguous counties) may apply to the SBA for loans to help recover losses from a declared disaster. Only victims located in a declared disaster area (and contiguous counties) are eligible to apply for disaster loans. Disaster declarations are "official notices recognizing that specific geographic areas have been damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills."¹³ Five categories of declarations put the SBA Disaster Loan Program into effect. These include two types of presidential major disaster declarations as authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act)¹⁴ and three types of SBA declarations.¹⁵

The SBA's Home Disaster Loan Program falls into two categories: personal property loans and real property loans. These loans are limited to uninsured losses. The maximum term for SBA disaster loans is 30 years, but the law restricts businesses with credit available elsewhere to a maximum 7-year term. The SBA sets the installment payment amount and corresponding maturity based upon each borrower's ability to repay.

Personal Property Loans

A personal property loan provides a creditworthy homeowner or renter with up to $40,000 to repair or replace personal property items, such as furniture, clothing, or automobiles, damaged or lost in a disaster. These loans cover only uninsured or underinsured property and primary residences and cannot be used to replace extraordinarily expensive or irreplaceable items, such as antiques or recreational vehicles. Interest rates vary depending on whether applicants are able to obtain credit elsewhere. For applicants who can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants who cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year.¹⁶

Real Property Loans

A creditworthy homeowner may apply for a real property loan of up to $200,000 to repair or restore his or her primary residence to its predisaster condition.¹⁷ The loans may not be used to upgrade homes or build additions, unless upgrades or changes are required by city or county building codes. The interest rate for real property loans is determined in the same way as it is determined for personal property loans.

Disaster Loans to Businesses and Nonprofit Organizations

Several types of loans, discussed below, are available to businesses and nonprofit organizations located in counties covered by a presidential disaster declaration. In certain circumstances, the SBA will also make these loans available when a governor, the Secretary of Agriculture, or the Secretary of Commerce makes a disaster declaration. Physical disaster loans are available to almost any nonprofit organization or business. Other business disaster loans are limited to small businesses.

Physical Disaster Loan

Any business or nonprofit organization, regardless of size, can apply for a physical disaster business loan of up to $2 million for repairs and replacements to real property, machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Physical disaster loans for businesses may use up to 20% of the verified loss amount for mitigation measures in an effort to prevent loss from a similar disaster in the future. Nonprofit organizations that are rejected or approved by the SBA for less than the requested amount for a physical disaster loan are, in some circumstances, eligible for grants from the Federal Emergency Management Agency (FEMA). For applicants that can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants that cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year.¹⁸

Economic Injury Disaster Loans

Economic injury disaster loans (EIDLs) are available to most private non-profit organizations of any size and small businesses, as defined by the SBA's size regulations, that are (1) located in a declared disaster area, (2) have suffered substantial economic injury as a direct result of a declared disaster, (3) have used all reasonably available funds, and (4) are unable to obtain credit elsewhere on reasonable terms and conditions.¹⁹ If the Secretary of Agriculture designates an agriculture production disaster, small farms and small cooperatives are eligible. EIDLs are available in the counties included in a presidential disaster declaration and contiguous counties. EIDL loans are designed to provide small businesses with operating funds until those businesses recover. The maximum loan is $2 million, and the terms are the same as personal and physical disaster business loans. The loan can have a maturity of up to 30 years and has an interest rate of 4% or less.²⁰

COVID-19 Economic Injury Disaster Loan and Grant Programs²¹

P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, provided EIDL eligibility to small businesses adversely affected by the coronavirus.²²

The CARES Act (P.L. 116-136) created a temporary COVID-19 EIDL program (initially accepting applications through December 31, 2020, later extended through December 31, 2021). Under this program, EIDL eligibility was temporarily expanded beyond eligible small businesses, private nonprofit organizations, and small agricultural cooperatives, to include startups, cooperatives, and eligible employee-owned businesses (employee stock ownership plans) with fewer than 500 employees, sole proprietors, and independent contractors.

The CARES Act also authorized 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; 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.

The SBA subsequently approved over 3.9 million COVID-19 EIDL loans totaling over $369 billion.²³

In addition, several temporary disaster assistance grant programs were created in 2020 and 2021:

• the CARES Act appropriated $10 billion for Emergency Economic Injury Disaster Loan (EIDL) advance payment grants;²⁴
• P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement Act, appropriated another $10 billion for EIDL advance payment 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 $20 billion for Targeted EIDL advance payment grants;²⁵ and
• P.L. 117-2, the American Rescue Plan Act of 2021, appropriated another $10 billion for Targeted EIDL advance payment grants and $5 billion for Targeted EIDL advance payment supplemental grants.

The SBA funded over 5.7 million EIDL advance payment grants, totaling $20 billion in 2020.²⁶ Also, as of April 13, 2022, the SBA had funded 601,036 Targeted EIDL advance payment grants, totaling over $5.2 billion; and 453,421 Targeted EIDL advance payment supplemental grants, totaling over $2.2 billion.²⁷

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 1998.²⁸ 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.²⁹ 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."³⁰ With few exceptions, to qualify for SBA assistance, an organization must be both a business and small.³¹

What Is a Small Business?

To participate in any of the SBA 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;³² and
• does not exceed size standards established, and updated periodically, by the SBA.³³

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

What Is Small?³⁴

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.³⁵

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."³⁶ 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."³⁷

Loan Guarantees

Overview

The SBA provides loan guarantees for small businesses that cannot obtain credit elsewhere with reasonable terms and conditions. Its largest loan guaranty programs are the 7(a) loan guaranty program, the 504/CDC loan guaranty program, international trade and export promotion programs, and the Microloan 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%. In the event of a default, the borrower owes the amount contracted less the value of any collateral liquidated. The SBA can attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund offset. Most types of businesses are eligible for loan guarantees, but a few are not. A list of ineligible businesses (such as insurance companies, real estate investment firms, firms involved in financial speculation or pyramid sales, and businesses involved in illegal activities) is contained in 13 C.F.R. Section 120.110.³⁸ With one exception, nonprofit and charitable organizations are also ineligible.³⁹

As shown in the following tables, most of these programs charge fees to help offset program costs, including costs related to loan defaults. In most instances, the fees are set in statute. For example, for 7(a) loans with a maturity exceeding 12 months, the SBA is authorized to charge lenders an up-front guaranty fee of up to 2% for the SBA guaranteed portion of loans of $150,000 or less, up to 3% for the SBA guaranteed portion of loans exceeding $150,000 but not more than $700,000, and up to 3.5% for the SBA guaranteed portion of loans exceeding $700,000. Lenders with a 7(a) loan that has a SBA guaranteed portion in excess of $1 million can be charged an additional fee not to exceed 0.25% of the guaranteed amount in excess of $1 million.

7(a) loans are also subject to an ongoing servicing fee not to exceed 0.55% of the outstanding balance of the guaranteed portion of the loan.⁴⁰ In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses.

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 2.0% to 0.6667% of the guaranteed portion of the loan.⁴¹ P.L. 116-260 waived the SBA's 7(a) and 504/CDC loan guarantee fees from December 27, 2020, through October 1, 2021. In addition, the SBA is required to waive the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program.⁴²

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. However, as shown in Table 2, the SBA's fees and proceeds from loan liquidations do not always generate sufficient revenue to cover loan losses, resulting in the need for additional appropriations to account for the shortfall.

7(a) Loan Guaranty Program⁴³

The 7(a) loan guaranty program is named after the section of the Small Business Act that authorizes it. These are loans made by SBA lending partners (mostly banks but also some other financial institutions) and partially guaranteed by the SBA.

In FY2021, the SBA approved 51,853 7(a) loans totaling $36.8 billion.⁴⁴ In FY2021, there were 1,738 active lending partners providing 7(a) loans.⁴⁵

The CARES Act appropriated $17 billion to pay the principal, interest, and any associated fees 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.⁴⁶ P.L. 116-260, enacted on December 27, 2020, appropriated an additional $3.5 billion for SBA's monthly debt relief payments, capped at $9,000 per month per borrower. The SBA was authorized to provide up to an additional eight monthly payments, but due to high demand the SBA paid two, three, or five additional monthly payments, depending on when the loan was approved or disbursed, the type of loan received, and the business's industry.⁴⁷

As mentioned, P.L. 116-260 temporarily waived SBA fees for the 7(a) and 504/CDC loan guarantee programs 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% from December 27, 2020, through October 1, 2021.

Lenders are permitted to charge borrowers fees to recoup specified expenses and are allowed to charge borrowers "a reasonable fixed interest rate" or, with the SBA's approval, a variable interest rate.⁴⁸ The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register.⁴⁹

Maximum interest rates allowed on variable-rate 7(a) loans are pegged to either the prime rate, the 30-day London Interbank Offered Rate (LIBOR) plus 3%, or the SBA optional peg rate, which is a weighted average of rates that the federal government pays for loans with maturities similar to the guaranteed loan. The allowed spread over the prime rate, LIBOR base rate, or SBA optional peg rate depends on the loan amount and the loan's maturity (under seven years or seven years or more).⁵⁰ The adjustment period can be no more than monthly and cannot change over the life of the loan.

Table 3 provides information on the 7(a) program's key features, including its eligible uses, maximum loan amount, loan maturity, fixed interest rates, and guarantee fees.

Variations on the 7(a) Program

The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress program (for loans of up to $500,000), the Export Express program (for loans of up to $500,000 for entering or expanding an existing export market), and the Community Advantage pilot program (for loans of $350,000 or less). The SBA also has a Small Loan Advantage program (for loans of $350,000 or less), but it is currently being used as the 7(a) program's model for processing loans of $350,000 or less and exists as a separate, specialized program in name only.

The SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 (P.L. 108-447, the Consolidated Appropriations Act, 2005). The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guarantee on loans. Prior to COVID-19, it provided a 50% loan guarantee on loan amounts of $350,000 or less.⁵¹ The CARES Act temporarily increased the SBAExpress maximum loan amount to $1 million until January 1, 2021. P.L. 116-260 continued that temporary increase until October 1, 2021. At that time, the program's maximum loan amount was reset at $500,000.

SBAExpress loan proceeds can be used for the same purposes as the 7(a) program, except participant debt restructuring cannot exceed 50% of the project and may be used for revolving credit. The program's fees and loan terms are the same as the 7(a) program, except the term for a revolving line of credit cannot exceed seven years.

The Community Advantage pilot program began operations on February 15, 2011, and is limited to mission-focused lenders targeting underserved markets. Originally scheduled to cease operations on March 15, 2014, the program has been extended several times and is currently scheduled to operate through September 30, 2024.⁵²

In FY2021, 64 Community Advantage lenders approved 565 Community Advantage loans, totaling $82.8 million. As of March 9, 2022, 96 of the 108 approved Community Advantage lenders were actively making or servicing Community Advantage loans.⁵³

Lenders must receive SBA approval to participate in these 7(a) specialized programs.⁵⁴

The 504/CDC Loan Guaranty Program⁵⁵

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.⁵⁶ 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.

In FY2021, the SBA approved 9,676 504/CDC loans totaling over $8.2 billion.⁵⁷ In FY2020, 208 CDCs provided at least one 504/CDC loan.⁵⁸

As mentioned, the CARES Act appropriated $17 billion to pay the principal, interest, and any associated fees 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.⁵⁹ P.L. 116-260 appropriated an additional $3.5 billion for SBA's monthly debt relief payments, capped at $9,000 per month per borrower. The SBA was authorized to provide up to an additional eight monthly payments. As mentioned, due to high demand, the SBA paid two, three, or five monthly payments, depending on when the loan was approved or disbursed, the type of loan received, and the business's industry.

Table 4 summarizes the 504/CDC loan guaranty program's key features.

International Trade and Export Promotion Programs⁶⁰

Although any of SBA's loan guaranty programs can be used by firms looking to begin exporting or expanding their current exporting operations, the SBA has three loan programs that specifically focus on trade and export promotion:

• 1. Export Express loan program provides working capital or fixed asset financing for firms that will begin or expand exporting. It offers a 90% guaranty on loans of $350,000 or less and a 75% guaranty on loans of $350,001 to $500,000.
• 2. Export Working Capital loan program provides financing to support export orders or the export transaction cycle, from purchase order to final payment. It offers a 90% guaranty of loans up to $5 million.
• 3. International Trade loan program provides long-term financing to support firms that are expanding because of growing export sales or have been adversely affected by imports and need to modernize to meet foreign competition. It offers a 90% guaranty on loans up to $5 million.⁶¹

In many ways, the SBA's trade and export promotion loan programs share similar characteristics with other SBA loan guaranty programs. For example, the Export Express program resembles the SBAExpress program. The SBAExpress program shares several characteristics with the standard 7(a) loan guarantee program except that the SBAExpress program has an expedited approval process, a lower maximum loan amount, and a smaller percentage of the loan guaranteed. Similarly, the Export Express program shares several of the characteristics of the standard International Trade loan program, such as an expedited approval process in exchange for a lower maximum loan amount ($500,000 compared with $5 million) and a lower percentage of guaranty.

In addition, the SBA administers grants through the State Trade Expansion Program (STEP), which are awarded to states to execute export programs that assist small business concerns (such as a trade show exhibition, training workshops, or a foreign trade mission). Initially, the STEP program was authorized for three years and appropriated $30 million annually in FY2011 and FY2012. Congress approved $8 million in appropriations for STEP in FY2014, $17.4 million in FY2015, $18 million annually in FY2016-FY2019, $19 million in FY2020, $19.5 million in FY202, and $20 million in FY2022.⁶²

The Microloan Program⁶³

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.

In FY2021, microloan intermediaries provided 4,510 loans to small businesses totaling $74.6 million. The average Microloan amount was $16,557.⁶⁴

As mentioned, The CARES Act appropriated $17 billion to pay the principal, interest, and any associated fees 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.⁶⁵ P.L. 116-260 appropriated an additional $3.5 billion for SBA's monthly debt relief payments, capped at $9,000 per month per borrower. The SBA was authorized to provide up to an additional eight monthly payments, but due to high demand the SBA paid two, three, or five monthly payments, depending on when the loan was approved or disbursed, the type of loan received, and the business's industry.

Table 5 summarizes the Microloan program's key features.

Paycheck Protection Program⁶⁶

The CARES Act, among other provisions, created the $349 billion (later increased to $813.7 billion) Paycheck Protection Program (PPP) to provide 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, small 501(c)(3) nonprofit organizations, and small 501(c)(19) veterans organizations that have been adversely affected by COVID-19.⁶⁷ The act also provides for loan deferment and forgiveness under specified conditions. The SBA initially announced that PPP loans will have a two-year term (later increased to a five-year term for PPP loans approved on or after June 5, 2020 by P.L. 116-142, the Paycheck Protection Program Flexibility Act) at 1% interest.⁶⁸

PPP loans are not subject to the 7(a) loan program's up-front loan guarantee fee or annual servicing fee, the no credit elsewhere requirement, or 7(a) collateral and personal guarantee requirements. Also, PPP eligibility includes 7(a) eligible businesses and any business, 501(c)(3) nonprofit organization, 501(c)(19) veterans organization, or tribal business not currently eligible that has not more than 500 employees or, if applicable, the SBA's size standard for the industry in which they operate. Sole proprietors, independent contractors, and eligible self-employed individuals are also eligible.⁶⁹

The maximum PPP loan amount was 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 7(a) loan (made on or after January 31, 2020) that is refinanced into the PPP loan; or (2) $10 million.

The SBA completed two rounds of PPP loan applications. Round 1 started on April 3, 2020 and, after several interruptions, concluded on August 8, 2020.⁷⁰

As of August 8, 2020, the SBA had approved, after cancellations, 5,212,128 PPP loans totaling more than $525 billion.⁷¹ For comparative purposes, that loan approval amount is more than the amount the SBA had approved in all of its loan programs, including disaster loans, during the previous 29 years (from October 1, 1991, through December 31, 2019; $509.9 billion).⁷²

House and Senate leaders continued negotiations on legislation to reopen and amend the PPP throughout the summer and fall. P.L. 116-260, enacted on December 27, 2020, among other provisions,

• extended the PPP loan covered period from August 8, 2020, to March 31, 2021;
• 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;
• allowed PPP borrowers that have fewer than 300 employees, 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; and
• increased the PPP loan authorization level from $659 billion to $806.45 billion.

The SBA reopened the PPP online application portal (Round 2) on January 11, 2021.⁷³ To promote PPP loan access for minority, underserved, veteran, and women-owned small businesses, the SBA initially restricted access to the PPP application portal to community financial institutions seeking first-draw PPP loans (on January 11 and 12) and second-draw PPP loans (on January 13).⁷⁴ 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, 2021.⁷⁵

P.L. 117-2, the American Rescue Plan Act of 2021, enacted on March 11, 2021, among other provisions, appropriated an additional $7.25 billion for the PPP to increase its authorization amount to $813.7 billion. P.L. 117-6, the PPP Extension Act of 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.

As of April 24, 2022, the SBA had issued over 11.4 million PPP loans totaling $788.7 billion, received over 10.0 million applications for PPP loan forgiveness totaling $725.0 billion, and approved nearly 10.0 million PPP loan forgiveness applications totaling more than $721.0 billion.⁷⁶

Entrepreneurial Development Programs⁷⁷

The SBA's entrepreneurial development (ED) noncredit programs provide a variety of management and training services to small businesses. Initially, the SBA provided its own management and technical assistance training programs. Over time, the SBA has come to rely increasingly on third parties to provide that training.

The SBA receives appropriations for seven ED programs and two ED initiatives:

• Small Business Development Centers (SBDCs);
• the Microloan Technical Assistance Program;
• Women Business Centers (WBCs);
• SCORE;
• the Program for Investment in Microentrepreneurs (PRIME);
• Veterans Programs (including Veterans Business Outreach Centers, Boots to Business, Veteran Women Igniting the Spirit of Entrepreneurship [VWISE], Entrepreneurship Bootcamp for Veterans with Disabilities, and Boots to Business: Reboot);
• the Native American Outreach Program (NAO);
• the Entrepreneurial Development (Regional Innovation Clusters) initiative; and
• the Entrepreneurship Education (Emerging Leaders) initiative.

FY2022 appropriations for these programs are

• $138.0 million for SBDCs,
• $37.0 million for the Microloan Technical Assistance Program,
• $24.4 million for WBCs,
• $14.0 million for SCORE,
• $7.0 million for PRIME,
• $16.0 million for Veterans Programs,
• $3.0 million for NAO,
• $8.0 million for the Entrepreneurial Development (Regional Innovation Clusters) initiative, and
• $2.75 million for the Entrepreneurship Education (Emerging Leaders) initiative.⁷⁸

The following ED programs are provided recommended funding in appropriations acts, but are discussed in other sections of this report because of the nature of their assistance:

• the SBA's Growth Accelerators initiative ($3.0 million in FY2022) is a capital investment program and is discussed in the capital access programs section;
• the SBA's 7(j) Technical Assistance Program ($3.5 million in FY2022) provides contacting assistance and is discussed in the contracting programs section; and
• the National Women's Business Council ($1.5 million in FY2022) is a bipartisan federal advisory council and is discussed in the executive direction programs section.

Several other noncredit programs also receive funding under the ED program account, including

• the Step Trade and Export Promotion (STEP) Pilot Grant program, which awards grants to states to assist eligible small businesses with exporting ($20.0 million in FY2022);⁷⁹
• HUBZone (contracting preference program) administrative expenses ($3.0 million in FY2022);
• the Cybersecurity for Small Business Pilot program, which will award up to three grants to states to assist small businesses with access to cybersecurity tools ($3.0 million in FY2022);⁸⁰ and
• the Federal and State Technology (FAST) Partnership program, which provides grants to states and state-endorsed nonprofit organizations to provide outreach, financial support, and technical assistance to technology-based small businesses participating in or interested in participating in the SBIR and STTR programs ($6.0 million in FY2022).⁸¹

In addition, P.L. 116-260, among other provisions, appropriated an additional $50 million for Microloan Technical Assistance Program grants in FY2021, and P.L. 117-2, the American Rescue Plan Act of 2021, appropriated $100 million in FY2021 for the Community Navigator Pilot Program to provide outreach, education, and technical assistance to small businesses.⁸² The SBA's management and technical assistance resource partners, state and local governments, Indian tribes, and private nonprofit organizations are eligible to compete for Community Navigator grants.

On October 28, 2021, the SBA announced that it had awarded 51 Community Navigator grants to organizations to serve as "hubs" that "will work with over 400 local community groups ("spokes") to connect America's entrepreneurs to federal, state, and local resources."⁸³

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. Some of this training is free, and some is offered at low cost.⁸⁴

SBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small business in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. SBDCs are funded by grants from the SBA and matching funds. 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 Virgin Islands, Guam, and American Samoa. These lead SBDC service centers manage more than 900 SBDC outreach locations.

The SBA's Microloan Technical Assistance program is part of the SBA's Microloan program but receives a separate appropriation. It provides grants to Microloan intermediaries to offer management and technical training assistance to Microloan program borrowers and prospective borrowers.⁸⁵ There are currently 140 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico.⁸⁶

WBCs are similar to SBDCs, except they concentrate on assisting women entrepreneurs. There are currently 141 WBCs, with at least one WBC in all 50 states, the District of Columbia, and Puerto Rico.⁸⁷

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. 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.⁸⁸

PRIME provides SBA grants to nonprofit microenterprise development organizations or programs that have "a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; an intermediary; a microenterprise development organization or program that is accountable to a local community, working in conjunction with a state or local government or Indian tribe; or an Indian tribe acting on its own, if the Indian tribe can certify that no private organization or program referred to in this paragraph exists within its jurisdiction."⁸⁹ PRIME grants require a 50% match of each dollar awarded.⁹⁰

The SBA's Office of Veterans Business Development (OVBD) administers several management and training programs to assist veteran-owned businesses, including 22 Veterans Business Outreach Centers which provide "entrepreneurial development services such as business training, counseling and resource partner referrals to transitioning service members, veterans, National Guard and Reserve service members, and veterans or military spouses interested in starting or growing a small business."⁹¹

The SBA's Office of Native American Affairs provides management and technical educational assistance to Native Americans (American Indians, Alaska natives, native Hawaiians, and the indigenous people of Guam and American Samoa) to start and expand small businesses.⁹²

The SBA reports that "regional innovation clusters are on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and grow the supply chain of a particular industry or related set of industries in a geographic region."⁹³ The SBA has supported the Entrepreneurial Development (Regional Innovation Clusters) initiative since FY2009, and the initiative has received recommended appropriations from Congress since FY2010.

The SBA's Entrepreneurship Education (Emerging Leaders) initiative provides assistance to high-growth small businesses in underserved communities. The initiative is a seven-month executive leader education series consisting of "more than 100 hours of training, technical support, access to a professional network, and other resources to strengthen their businesses."⁹⁴ During the training, "participants produce a three-year strategic growth action plan" with "benchmarks and performance targets that help them access the necessary support and resources to move forward for the next stage of business growth."⁹⁵

Contracting Programs⁹⁶

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, the federal goaling program, federal Offices of Small and Disadvantaged Business Utilization, and the Surety Bond Guarantee program).

Prime Contracting Programs

Several contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole-source awards in circumstances in which such awards could not be made to other firms. These programs, which give small businesses a chance to win government contracts without having to compete against larger and more experienced companies, include the following:

8(a) Program.⁹⁷ The 8(a) Business Development Program (named for the section of the Small Business Act from which it derives its authority) is for businesses owned by persons who are socially and economically disadvantaged.⁹⁸ Members of certain racial and ethnic groups are presumed to be socially disadvantaged, although individuals who do not belong to these groups may prove they are also socially disadvantaged.⁹⁹ To be economically disadvantaged, an individual must have a net worth of less than $750,000 (excluding ownership interest in the applicant's business, equity in their primary personal residence, and funds invested in a qualified retirement account), no more than $350,000 in average adjusted gross income over the preceding three years, and no more than $6 million in assets (excluding funds invested in a qualified retirement account).¹⁰⁰

A firm certified by the SBA as an 8(a) firm is eligible for set-aside and sole-source contracts. The SBA also provides technical assistance and training to 8(a) firms. Firms generally may participate in the 8(a) Program for no more than nine years.¹⁰¹

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

• nearly $20.5 billion was awarded with an 8(a) preference ($9.3 billion through an 8(a) set-aside and $11.1 billion through an 8(a) sole-source award);
• $2.2 billion was awarded to an 8(a) firm in open competition with other firms; and
• $11.3 billion was awarded with another small business preference (e.g., set-asides and sole-source awards for small businesses generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses).¹⁰²

Historically Underutilized Business Zone Program.¹⁰³ This program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole-source awards, and price evaluation preferences in full and open competitions. The determination of whether an area is a HUBZone is based upon criteria specified in 13 C.F.R. Section 126.103. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone.

In FY2020, the federal government awarded nearly $13.6 billion to HUBZone-certified businesses:

• $2.1 billion was awarded with a HUBZone preference ($2.0 billion through a HUBZone set-aside, $67.5 million through a HUBZone sole-source award and $48.5 million through a HUBZone price-evaluation preference);
• $4.0 billion was awarded to HUBZone-certified small businesses in open competition with other firms; and
• $7.5 billion was awarded with another small business preference (e.g., set-asides and sole-source awards for small businesses generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses).¹⁰⁴

Service-Disabled Veteran-Owned Small Business Program. This program assists service-disabled veteran-owned small businesses (SDVOSBs) through set-asides and sole-source awards. For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs.¹⁰⁵

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

• $9.7 billion was awarded with a SDVOSB preference ($9.4 billion through a SDVOSB set-aside and $281.9 million through a SDVOSB sole-source award);
• $8.4 billion was awarded to a SDVOSB in open competition with other firms; and
• $8.0 billion was awarded with another small business preference (e.g., set-asides and sole-source awards for small businesses generally and for HUBZone firms, 8(a) firms, and WOSBs).¹⁰⁶

Women-Owned Small Business Program. Under this program, contracts may be set aside for economically disadvantaged women-owned small businesses (WOSB) in industries in which women are underrepresented and women-owned small businesses in industries in which women are substantially underrepresented. Also, federal agencies may award sole-source contracts to women-owned small businesses so long as the award can be made at a fair and reasonable price, and the anticipated value of the contract is below $4.5 million ($7 million for manufacturing contracts).¹⁰⁷

To qualify as an economically disadvantaged WOSB, the owner must demonstrate that her ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared with others in the same or similar line of business. The SBA uses the same three-part test used in the 8(a) Program to determine economic disadvantage relating to the degree of the applicant's diminished credit and capital opportunities.

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

• $1.2 billion was awarded with a WOSB preference ($1.1 billion through a WOSB set-aside award and $116.1 million through a WOSB sole-source award);
• $9.3 billion was awarded to a WOSB in open competition with other firms; and
• $16.6 billion was awarded with another small business preference (e.g., set-asides and sole-source awards for small businesses generally and for HUBZone firms, 8(a) firms, and SDVOSBs).¹⁰⁸

Other small businesses. Agencies may also set aside contracts or make sole-source awards to small businesses not participating in any other program under certain conditions.

Subcontracting Programs for Small Disadvantaged Businesses

Other federal programs promote subcontracting with small disadvantaged businesses (SDBs). SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. As mentioned, members of certain racial and ethnic groups are presumed to be socially disadvantaged, although individuals who do not belong to these groups may prove they are also socially disadvantaged. To be economically disadvantaged, an individual must have a net worth of less than $750,000 (excluding ownership interest in the applicant's business, equity in their primary personal residence, and funds invested in a qualified retirement account), no more than $350,000 in average adjusted gross income over the preceding three years, and no more than $6 million in assets (excluding funds invested in a qualified retirement account).

Non-8(a) business owners must generally satisfy the same eligibility requirements for SDB status as 8(a) firms, although they generally do not apply to the SBA to be designated as a SDB. Instead, most non-8(a) firms self-certify their status as a SDB when seeking a federal contract and are subject to fines, imprisonment, and other penalties if they misrepresent their eligibility.¹⁰⁹

Federal agencies must negotiate "subcontracting plans" with the apparently successful bidder or offer or on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs "have an equitable opportunity to compete for subcontracts." Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors "monetary incentives" to subcontract with SDBs.

As of April 27, 2022, the SBA's Dynamic Small Business Search database included 5,065 SBA-certified 8(a) firms and 165,579 self-certified SDBs.¹¹⁰

The 7(j) Management and Technical Assistance Program

The SBA's 7(j) Management and Technical Assistance program provides "a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities."¹¹¹ Eligible individuals and businesses include "8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals."¹¹²

In FY2021, the 7(j) Management and Technical Assistance program assisted 11,900 small businesses.¹¹³

Surety Bond Guarantee Program¹¹⁴

The SBA's Surety Bond Guarantee program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels.¹¹⁵ 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 SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs.¹¹⁶ In FY2021, the SBA guaranteed 9,633 bid and final surety bonds with a total contract value of nearly $7.0 billion.¹¹⁷

A surety bond is a three-party instrument between a surety (someone 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 terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk associated with contracting.¹¹⁸

Surety bonds are viewed as a means to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and are considered to be at greater risk of failing to comply with the contract's terms and conditions.¹¹⁹

Goaling Program

Since 1978, federal agency heads have been required to establish federal procurement contracting goals, in consultation with the SBA, "that realistically reflect the potential of small business concerns" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting these goals to the SBA.¹²⁰

In 1988, Congress authorized the President to annually establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be "not less than 20% of the total value of all prime contract awards for each fiscal year" and "not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year" for small businesses owned and controlled by socially and economically disadvantaged individuals.¹²¹

Each federal agency was also directed to "have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency."¹²² The SBA was also required to report to the President annually on the attainment of the goals and to include the information in an annual report to Congress.¹²³ The SBA negotiates the goals with each federal agency and establishes a small business eligible baseline for evaluating the agency's performance.¹²⁴ The agency head is required to "make consistent efforts to annually expand participation by small business concerns from each industry category."¹²⁵ If the SBA and the agency cannot agree on the goals, the agency may submit the case to the Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) for resolution.¹²⁶

The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by Federal Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not reported in the General Services Administration's (GSA's) Federal Procurement Data System—Next Generation, or FPDS-NG (such as contracts valued below $10,000 and government procurement card purchases).¹²⁷ These exclusions typically account for 18% to 20% of all federal prime contracts each year.

The SBA then evaluates the agencies' performance against their negotiated goals and presents the results in the SBA's annual Small Business Procurement Scorecards. The SBA uses FPDS-NG data, which are published in GSA's annual Small Business Goaling Report. Each agency that fails to achieve any proposed prime or subcontract goal is required to submit a justification to the SBA on why it failed to achieve a proposed or negotiated goal with a proposed plan of corrective action.¹²⁸

Over the years, federal government-wide procurement contracting goals have been established for small businesses generally (P.L. 100-656, the Business Opportunity Development Reform Act of 1988, and P.L. 105-135, the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), small businesses owned and controlled by socially and economically disadvantaged individuals (P.L. 100-656, the Business Opportunity Development Reform Act of 1988), women (P.L. 103-355, the Federal Acquisition Streamlining Act of 1994), small businesses located within a HUBZone (P.L. 105-135, the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), and small businesses owned and controlled by a service disabled veteran (P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999).

The current federal small business contracting goals are

• at least 23% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year,
• 5% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses for each fiscal year,
• 5% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses,
• 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses, and
• 3% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses.¹²⁹

There are no punitive consequences for not meeting these goals. However, the SBA's Small Business Procurement Scorecards and GSA's Small Business Goaling Report are distributed widely, receive media attention, and heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Procurement Scorecards is often cited by Members during their questioning of federal agency witnesses during congressional hearings.

As shown in Table 6, the FY2020 Small Business Procurement Scorecard indicates that federal agencies met the federal procurement goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2020 (see the second and third columns).

Table 6 also provides, for comparative purposes, the percentage of small business eligible contracts awarded to small businesses in FY2020 without the required double counting of awards in a disaster area and to Puerto Rico and other covered territories (see the fourth column), and the percentage of all federal contracts (without exclusions and without double counting) awarded to small businesses (see the fifth column).

Office of Small and Disadvantaged Business Utilization

Government agencies with procurement authority have an Office of Small and Disadvantaged Business Utilization (OSDBU) to advocate within the agency for small businesses, as well as assist small businesses in their dealings with federal agencies (e.g., obtaining payment).

Office of Inspector General¹³⁰

The Office of Inspector General's (OIG's) mission is "to provide independent, objective oversight to improve the integrity, accountability, and performance of SBA and its programs for the benefit of the American people."¹³¹ The office was created within the SBA by the Inspector General Act of 1978 [P.L. 95-452], as amended. The Inspector General, who is nominated by the President and confirmed by the Senate, directs the office. The Inspector General Act provides the OIG with the following responsibilities:

• "promote economy, efficiency, and effectiveness in the management of SBA programs and supporting operations;
• conduct and supervise audits, investigations, and reviews relating to the SBA's programs and support operations;
• detect and prevent fraud, waste and abuse;
• review existing and proposed legislation and regulations and make appropriate recommendations;
• maintain effective working relationships with other Federal, State and local governmental agencies, and nongovernmental entities, regarding the mandated duties of the Inspector General;
• keep the SBA Administrator and Congress informed of serious problems and recommend corrective actions and implementation measures;
• comply with the audit standards of the Comptroller General;
• avoid duplication of Government Accountability Office (GAO) activities; and
• report violations of law to the Attorney General."¹³²

Capital Investment Programs

The SBA has several programs to improve small business access to capital markets, including the Small Business Investment Company program, two special high technology contracting programs (the Small Business Innovative Research and Small Business Technology Transfer programs), and the growth accelerators initiative.

The Small Business Investment Company Program¹³³

The Small Business Investment Company (SBIC) program enhances small business access to venture capital by stimulating and supplementing "the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply."¹³⁴

The SBA works with 298 privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised and with funds the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation).

SBICs provide equity capital to small businesses in various ways, including by

• purchasing small business equity securities (e.g., stock, stock options, warrants, limited partnership interests, membership interests in a limited liability company, or joint venture interests);¹³⁵
• making loans to small businesses, either independently or in cooperation with other private or public lenders, that have a maturity of no more than 20 years;¹³⁶
• purchasing debt securities from small businesses, which may be convertible into, or have rights to purchase, equity in the small business;¹³⁷ and
• subject to limitations, providing small businesses a guarantee of their monetary obligations to creditors not associated with the SBIC.¹³⁸

The SBIC program currently has invested or committed about $34.7 billion in small businesses, with the SBA's share of capital at risk about $15.2 billion.¹³⁹ In FY2021, the SBA provided SBICs $2.4 billion in leverage and SBICs invested nearly $4.7 billion from private capital for a total of $7.1 billion in financing for 1,080 small businesses.¹⁴⁰

Small Business Innovation Research Program¹⁴¹

The Small Business Innovation Research (SBIR) program is designed to increase the participation of small, high technology firms in federal research and development (R&D) endeavors, provide additional opportunities for the involvement of minority and disadvantaged individuals in the R&D process, and result in the expanded commercialization of the results of federally funded R&D.¹⁴² Current law requires that every federal department with an R&D budget of $100 million or more establish and operate a SBIR program. Currently, 11 federal agencies participate in the SBIR program. A set percentage of that agency's applicable extramural R&D budget—originally set at not less than 0.2% in FY1983 and currently not less than 3.2%—is to be used to support mission-related work in small businesses.¹⁴³

Agency SBIR efforts involve a three-phase process. Phase I awards, normally up to $150,000, for six months are made to evaluate a concept's scientific or technical merit and feasibility. The project must be of interest to and coincide with the mission of the supporting organization. Phase I awards are capped at $259,613, but higher amounts may be awarded with SBA approval. Projects that demonstrate potential after the initial endeavor may compete for Phase II awards lasting one to two years.¹⁴⁴ Phase II awards, normally up to $1 million, are for the performance of the principal R&D by the small business. Phase II awards are capped at $1.73 million, but higher amounts may be awarded with SBA approval. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. Federal dollars may be used if the government perceives that the final technology or technique will meet public needs.

Eight departments and three other federal agencies currently have SBIR programs, including the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF).¹⁴⁵ Each agency's SBIR activity reflects that organization's management style. Individual departments select R&D interests, administer program operations, and control financial support. Funding can be disbursed in the form of contracts, grants, or cooperative agreements. Separate agency solicitations are issued at established times.

The SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their SBIR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities.

Small Business Technology Transfer Program

The Small Business Technology Transfer program (STTR) provides funding for research proposals that are developed and executed cooperatively between a small firm and a scientist in a nonprofit research organization and meet the mission requirements of the federal funding agency.¹⁴⁶ Phase I financing, normally up to $150,000, is available for approximately one year to fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. Phase 1 financing is capped at $259,613, but higher amounts may be awarded with SBA approval. Phase II awards, normally up to $1 million, may be made for two years, during which time the developer performs R&D work and begins to consider commercial potential. Phase II awards are capped at $1.73 million, but higher amounts may be awarded with SBA approval.¹⁴⁷ Only Phase I award winners are considered for Phase II. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. The small business must find funding in the private sector or other non-STTR federal agency.

The STTR program is funded by a set-aside, initially set at not less than 0.05% in FY1994 and now at not less than 0.45%, of the extramural R&D budget of departments that spend more than $1 billion per year on this effort.¹⁴⁸ The Departments of Energy, Defense, and Health and Human Services participate in the STTR program, as do NASA and NSF.

The SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their STTR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities.

Growth Accelerators Initiative

The SBA describes growth accelerators as "organizations that help entrepreneurs start and scale their businesses."¹⁴⁹ Growth accelerators are typically run by experienced entrepreneurs and help small businesses access seed capital and mentors. The SBA claims that growth accelerators "help accelerate a startup company's path toward success with targeted advice on revenue growth, job, and sourcing outside funding."¹⁵⁰

The SBA's growth accelerator initiative began in FY2014 when Congress recommended in its appropriations report that the initiative be provided $2.5 million. Congress subsequently recommended that it receive $4 million in FY2015; $1 million in FY2016, FY2017, and FY2018; $2 million in FY2019, FY2020, and FY2021, and $3 million in FY2022.

The growth accelerators initiative provides $50,000 matching grants each year to universities and private-sector accelerators to support the development of accelerators and their support of startups in parts of the country where there are fewer conventional sources of access to capital (i.e., venture capital and other investors).

The SBA has awarded 387 $50,000 growth accelerator awards to date: 50 in 2014, 88 in 2015, 85 in 2016, 20 in 2017, 60 in 2019, and 84 in 2021, for a total of $19.35 million.¹⁵¹

The SBA did not issue a competitive announcement for growth accelerator awards in FY2018 and FY2020.

Regional and District Offices

As mentioned, the SBA provides funding to third parties, such as SBDCs, to provide management and training services to small business owners and aspiring entrepreneurs. The SBA also provides management, training, and outreach services to small business owners and aspiring entrepreneurs through its 68 district offices. These offices are overseen by the SBA Office of Field Operations and 10 regional offices.

SBA district office field staff conducted nearly 30,000 outreach and marketing events in FY2021 involving more than 838,000 stakeholders and resource partners.¹⁵² SBA Lender Relation Specialists (LRS) continued "to recruit and retain lenders to support its business loan programs."¹⁵³ SBA Business Opportunity Specialists provided "support to small businesses seeking government contracting certifications and providing technical assistance to those businesses."¹⁵⁴ Economic Development Specialists provided "outreach to small businesses seeking training and counseling assistance and liaising with SBA resource partners to ensure that they meet SBA standards."¹⁵⁵ Outreach and Marking Specialists and Public Affairs Specialists continued "to promote programs and help connect entrepreneurs."¹⁵⁶

Restaurant Revitalization Fund¹⁵⁷

The $28.6 billion Restaurant Revitalization Fund Program (RRF) was authorized by P.L. 117-2, the American Rescue Plan Act of 2021. The RRF provides grants of up to $5 million per permanent physical business location (not to exceed $10 million per applicant and any affiliated businesses) to restaurants and other similar places of business "in which the public or patrons assemble for the primary purpose of being served food or drink" and which have experienced COVID-19-related revenue loss. Unlike most other SBA programs, there is no limit on the number of employees for businesses to qualify for a RRF grant.

To qualify for the RRF, for-profit businesses (together with their affiliated businesses) may not have owned or operated more than 20 locations as of March 13, 2020, regardless of whether those locations do business under the same or multiple names.

RRF grants are designed to assist applicants in remaining open or reopening. Permanently closed businesses are not eligible and temporarily closed businesses must reopen soon, with eligible expenses incurred by March 11, 2021, at the latest.

RRF grants are equal to the amount of COVID-19-related revenue loss (up to the program's limits) the applicant experienced, as determined by formulas. These formulas vary, in part, based on the date an eligible entity began operations (e.g., the date the entity started sales). For example, entities that began operations on or before January 1, 2019, may receive the difference between their gross receipts as reported on their 2019 and 2020 federal income tax returns, excluding any amounts received from a list of specified sources (this includes the SBA's PPP, Economic Injury Disaster Loan (EIDL) Program, EIDL Advance Payment Program, Targeted EIDL Program, and SBA debt relief payments). If the applicant received a PPP loan or EIDL, those amounts will be subtracted from the RRF grant amount.

The SBA is required to set aside $5 billion for applicants with 2019 gross receipts of not more than $500,000 and to distribute the remaining $23.6 billion in an equitable manner to applicants of different sizes based on annual gross receipts. To meet this latter directive, the SBA set aside an additional $4 billion for applicants with 2019 gross receipts from $500,001 to $1.5 million and an additional $500 million for applicants with 2019 gross receipts of not more than $50,000 "to ensure that the smallest businesses and those in underserved communities receive funding."¹⁵⁸

The SBA began accepting RRF applications on May 3, 2021, and announced on May 12, 2021, that it had received requests for more than $65 billion in funds. Because the demand from applicants exceeded the RRF's budgetary authority, the SBA closed the application portal on May 12, 2021, to most applicants. Applications continued to be accepted until May 24 from applicants with revenue up to $50,000 because the budget authority set aside for those applicants had not yet been exhausted.¹⁵⁹

The RRF program received more than 278,000 eligible applications requesting over $72.2 billion in funding.¹⁶⁰ Underserved populations received about $18 billion of the $28.6 billion available ($7.5 billion to women-owned businesses, $6.7 billion to socially and economically disadvantaged businesses, $2.8 billion to businesses owned by representatives of multiple underserved populations, and $1 billion to veteran-owned businesses).¹⁶¹

Office of Advocacy¹⁶²

The SBA's Office of Advocacy is "an independent voice for small business within the federal government."¹⁶³ The Chief Counsel for Advocacy, who is nominated by the President and confirmed by the Senate, directs the office. The Office of Advocacy's mission is to "encourage policies that support the development and growth of American small businesses" by

• intervening early in federal agencies' regulatory development process on proposals that affect small businesses and providing Regulatory Flexibility Act compliance training to federal agency policymakers and regulatory development officials;
• producing research to inform policymakers and other stakeholders on the impact of federal regulatory burdens on small businesses, to document the vital role of small businesses in the economy, and to explore and explain the wide variety of issues of concern to the small business community; and
• fostering a two-way communication between federal agencies and the small business community.¹⁶⁴

Executive Direction Programs

The SBA's executive direction programs consist of the National Women's Business Council, the Office of Ombudsman, and Faith-Based Initiatives.

The National Women's Business Council

The National Women's Business Council is a bipartisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress, and the SBA on economic issues of importance to women business owners. The council's mission "is to promote bold initiatives, policies, and programs designed to support women's business enterprises at all stages of development in the public and private sector marketplaces—from start-up to success to significance."¹⁶⁵

Office of Ombudsman¹⁶⁶

The National Ombudsman's mission "is to assist small businesses when they experience excessive or unfair federal regulatory enforcement actions, such as repetitive audits or investigations, excessive fines, penalties, threats, retaliation or other unfair enforcement action by a federal agency."¹⁶⁷ The Office of Ombudsman works with federal agencies that have regulatory authority over small businesses to provide a means for entrepreneurs to comment about enforcement activities and encourage agencies to address those concerns promptly. It also receives comments from small businesses about unfair federal compliance or enforcement activities and refers those comments to the Inspector General of the affected agency in appropriate circumstances. In addition, the National Ombudsman files an annual report with Congress and affected federal agencies that rates federal agencies based on substantiated comments received from small business owners. Affected agencies are provided an opportunity to comment on the draft version of the annual report to Congress before it is submitted.¹⁶⁸

Faith-Based Initiatives

The SBA sponsors several faith-based initiatives For example, the SBA, in cooperation with the National Association of Government Guaranteed Lenders (NAGGL), created the Business Smart Toolkit, "a ready-to-use workshop toolkit that equips faith-based and community organizations to help new and aspiring entrepreneurs launch and build businesses that are credit ready."¹⁶⁹

Recent Legislative Activity

During the 116^th Congress

• P.L. 116-6, the Consolidated Appropriations Act, 2019, among other provisions, provided the SBA $715.37 million in FY2019 and increased the 7(a) program's authorization limit from $29.0 billion to $30.0 billion.
• P.L. 116-93, the Consolidated Appropriations Act, 2020, among other provisions, provided the SBA $998.46 million in FY2020, including $99 million for 7(a) program loan credit subsidies.
• P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, provided EIDL eligibility to small businesses adversely affected by the coronavirus and appropriated $20 million to the SBA for disaster loan assistance administrative costs.
• P.L. 116-136, the CARES Act, appropriated $377.527 billion for SBA program enhancements, including $349 billion for the Paycheck Protection Program (PPP), $17 billion for six months of 7(a), 504/CDC, and Microloan loan payments, $10 billion for Emergency Economic Injury Disaster Loan (EIDL) grants, $675 million for salaries and expenses, $562 million for disaster assistance, $265 million for entrepreneurial development programs, and $25 million for the SBA Office of Inspector General.
• P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement Act, among other provisions, increased the PPP authorization limit to $659 billion and appropriated an additional $383.435 billion for SBA program enhancements, including $321.335 billion for the PPP, $50 billion for EIDL, $10 billion for Emergency EIDL grants, and $2.1 billion for SBA salaries and expenses.
• P.L. 116-142, the Paycheck Protection Program Flexibility Act, 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 or December 31, 2020. Current PPP borrowers may elect to remain under the 8-week covered period. The act also provided a minimum five-year maturity for all PPP loans made on or after enactment (June 5, 2020).
• P.L. 116-147, to extend the authority for commitments for the paycheck protection program, 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.
• P.L. 116-260, the Consolidated Appropriations Act, 2021, among other provisions, extends the PPP through March 31, 2021, increases the program's authorization amount from $659 billion to $806.45 billion, and allows second-draw PPP loans of up to $2 million. The act also appropriated $324.975 billion for SBA program enhancements, including $284.45 billion for the PPP, $20 billion for the Targeted Economic Injury Disaster Loan Advance payment program, $15 billion for the Shuttered Venue Operators Grant Program, $3.5 billion for SBA debt relief payments, $1.918 billion for the business loans program account, $57 million for the Microloan program ($50 million for technical assistance grants and $7 million for loan credit subsidies), and $50 million for salaries the expenses.

During the 117^th Congress

• P.L. 117-2, the American Rescue Plan Act of 2021, appropriated $53.6 billion for SBA program enhancements, including $28.6 billion for a 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; $10 billion for the Targeted Economic Injury Disaster Loan Advance payment program; $5 billion for the Targeted Economic Injury Disaster Loan Advance supplemental 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, Shuttered Venue Operators Grants (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.¹⁷⁰
• P.L. 117-6, the PPP Extension Act of 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.
• P.L. 117-43, the Extending Government Funding and Delivering Emergency Assistance Act, provides continuing FY2022 appropriations for federal agencies, including the SBA, through December 3, 2021. The SBA was authorized to appropriate available funds up to the rate necessary to accommodate increased demand for commitments for several SBA programs, including 7(a) and 504/CDC business loans.¹⁷¹ The act also appropriated $1.189 billion for SBA disaster loans, including $620 million for disaster loan administrative expenses.
• After a series of continuing appropriations acts, P.L. 117-103, the Consolidated Appropriations Act, 2022, appropriated over $1.03 billion for the SBA in FY2022.

Appropriations¹⁷²

The SBA's FY2022 appropriations, totaling more than $2.219 billion, include over $1.03 billion in regular appropriations and $1.189 billion in supplemental appropriations—to remain until expended—for SBA disaster loan assistance.

As shown in Table 8, the SBA's FY2022 appropriation includes

• $278.378 million for salaries and expenses,
• $290.150 million for entrepreneurial development and noncredit programs,
• $163.000 million for business loan administration,
• $6.000 million for business loan credit subsidies for the Microloan program,
• $22.671 million for Office of Inspector General,
• $9.466 million for the Office of Advocacy,
• $178.000 million for disaster assistance, and
• $1.189 billion in supplemental appropriations for disaster loan assistance.¹⁷³