Happy Birthday U.S. Small Business Administration: A Reflection On 67 Years Of Service

This week marks the 67th anniversary of the Small Business Administration (SBA). President Dwight D. Eisenhower signed the law establishing the agency on July 30, 1953, giving it the stated mission to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” In the decades that have followed, the SBA has accomplished a great deal in fostering and supporting small businesses in the United States. It has guaranteed billions of dollars in loan funding and provided guidance to small businesses in all stages of their development and operation. The post-World War II economic success that the U.S. experienced can be credited, in part, to the work of the SBA.

As the country continues to navigate the global health pandemic, we know small business owners continue to be incredibly vulnerable, especially Black and Brown business owners. Recent data shows a grim reality: 41% of Black-owned businesses closed between February and April of 2020, while 36% of Latinx businesses and 25% of women-owned businesses closed. We need the SBA to continue to do what it does well and strengthen its action in other key areas to support the economic recovery of our country. 

Like all government agencies, the SBA has experienced its share of ups and downs. As we reflect on this anniversary and the current moment we are in, here are some key things to consider: 

1. Bipartisan Support, Now and in the Future: Even in a moment where Washington seems more fragmented than ever, the SBA continues to have bipartisan support. It’s true that the SBA faced threats of being eliminated in the 1990s and its funding was frequently cut during President George W. Bush’s Administration. However, since then, its budget has received support from both the Obama and Trump Administrations, and its lending power was changed through the Great Recession and COVID-19 legislative relief packages. It must continue to remain an important endeavor for Republicans, Democrats and anyone in between. 

2. SBA Has Helped Main Street Success - But More Can Be Done: Each year, the SBA provides support to over a million entrepreneurs and small business owners. SBA partners with banks and other lenders to administer loans to small businesses with a 90% guarantee and helps provide 23% of contracts for small businesses working directly with the federal government. It has at least one Small Business Development Center in every U.S. state to assist small businesses and provides grants to support nonprofits with the same goal. The SBA’s loans have supported small businesses for decades, but they do not cover every American who aspires to open one. For example, SBA loans do not cover solo entrepreneurs, gig economy workers and unbanked businesses. The COVID-19 pandemic has shown how these types of businesses can easily slip through the cracks in a crisis. The SBA should consider creating a program that moves beyond its 7(a) model to support them.

3. SBA Strengths and Weaknesses Came Into Focus During COVID-19 Pandemic: To help businesses stay afloat during this crisis, Congress established the Paycheck Protection Program (PPP), poured hundreds of billions of dollars into it and tasked the SBA with administering the program. Unfortunately, the SBA wasn’t prepared and had to lean heavily on the Treasury and other departments. The PPP has certainly had its flaws , but the program has provided necessary support for some small businesses. During this time, the SBA expanded its lender base by establishing collaborations with fintech companies—including Intuit, PayPal and Square—to administer PPP loans. Fintech companies are able to provide smaller loans to individuals who may not have the credit rating to borrow from banks and do a better job of collecting data, allowing for later analysis to inform policymakers, executives and investors. These partnerships played a critical role in administering PPP funding to small businesses and can be a road to democratizing the availability of funding for aspiring entrepreneurs. 

4. SBA Needs More Voice Across the Government: The SBA can often be overshadowed by other agencies. While it has been given cabinet-level status depending on the presidential administration, that does not guarantee it truly has a cabinet-level voice. Often, its coordination with Administration-wide initiatives could be improved. Some of this could've helped ensure the PPP worked for small business and had a better rollout. 

5. SBA Should Collect and Share Better Data: Even though they influence the financial lives of roughly 30% of the population, there is not adequate information from our federal government on small businesses and their owners. This contributes to disparate impact, continued underinvestment and solutions that do not meet actual needs. Historically, the share of SBA 7(a) loans distributed to Black and Latino borrowers has been very small, and their inability to obtain PPP funding helped lead to the closures discussed earlier. For SBA to be fully effective in supporting Black and Brown business owners (as well as other key populations, such as women and the self-employed), it needs to adhere to a data collection practice that is uniform and consistent. 

Making a commitment to ensuring the SBA has the tools, resources and runway to be innovative in service of its core constituency will ultimately net a strong country and a strong step to creating a more equitable society.

This piece originally appeared in Forbes on July 30, 2020. You can view it online here.