The Engine of America: Expanding the SBA to Secure Our Economic Future
Part III: The SBA - Mission, Critique, and the Path Forward
Throughout this series, we have explored my proposals to strengthen and expand the Small Business Administration—to secure the American Dream of ownership and opportunity. In Part I, we focused on the Hometown Economy, the microbusinesses with fewer than 20 employees that serve as the lifeblood of our communities and create jobs. We addressed the capital gap that starves these businesses of funding and proposed doubling the microloan cap to $100,000 alongside a new Main Street Direct Lending authority. In Part II, we shifted our focus to the Missing Middle, the high-growth, mid-size companies that are too large for traditional community banks but too small to access Wall Street. To adequately support these drivers of national productivity, we called for Radical 504 Refinancing Reform and a Sovereign Supply Chain Loan to support small manufacturers in onshoring production. Having explored the needs of these two critical sectors, it is time to examine the SBA itself. To truly understand how to fuel the engine of America will first take identifying the SBA’s current flaws and advocating for a path to modernize programs and guidelines for the modern-day economy.
Created in 1954, the SBA is perhaps the most misunderstood agency in Washington. To its supporters, it is the lifeline that saved the economy during the pandemic. To its critics, it is a slow-moving bureaucratic relic—I am both. I love small businesses, and I think there should be more of them, but there are too many gaps and barriers that are not being addressed. If we are to expand the SBA to save the American economy, then we must reimagine it for the 21st century and beyond. We must build something sustainable. We must think long-term.
Many Americans mistakenly believe the SBA lends money; this is false. The SBA is not a bank; it is an insurance company acting primarily as a guarantor. Think, if you will, of a student renting their first apartment. They often have a co-signer who acts as their “guarantor.” The guarantor acts as a safety, a back-up—in this case, the SBA guarantees loans made by traditional banks and steps in if the borrower—the business—defaults. This guarantor model minimizes risk for the borrower, which encourages private capital to flow into Main Street rather than Wall Street.
In the first part of this series, we learned that there is a record number of small businesses in the U.S., over 33.2 million, accounting for 99.9% of all businesses. Small businesses are everywhere! They drive the American economy, but we also know that many fail within their first decade. Both can be true at once. The SBA’s mission is to aid, counsel, assist, and protect small businesses, and at the core of the problem is efficiency. The SBA 7(a) process takes 30 to 90 days. For microbusinesses, this can mean the difference between survival and failure. I mentioned earlier that the SBA acted as a lifeline and saved the economy during the pandemic; this is still true. While the speed was necessary during the crisis, the lack of controls led to billions in potential fraud. To that end, preventing fraud requires proper oversight and a more robust Inspector General’s office. It requires having a plan in place to meet major needs, not scrambling to patch the plane in mid-air. Critics also argue that too much SBA funding flows to franchises of massive corporations like McDonald’s and other fast-growing franchises.
Despite these flaws, the argument for a massive expansion of the SBA is a matter of national economic security. When the economy crashes, big banks stop lending to small businesses first. We’ve learned in times of crisis that the SBA is the only entity that keeps the credit tap flowing when the market panics. Knowing this, I can argue that expanding the SBA will create a “recession shield,” ensuring that a Wall Street crash does not result in Main Street shutting down. Its expansion can also offer the necessary capital for independent businesses to compete against the “Walmarts” and other corporate giants.
Entrepreneurs are starting new businesses and pushing the limits of modern technology every single day. And they deserve an SBA that can respond to the modern world. We must re-imagine the regulatory framework of this critical agency. While guaranteed lending programs work for many businesses and industries, it can be stifling for microbusinesses. And so, we must meet the need by allowing the SBA to lend directly to mom and pop businesses—by allowing the SBA to lend to Main Streets all across the United States of America. Because I still believe in the American Dream. And I want to allow others to fulfill their American Dream.
In conclusion, small businesses face barriers like regulation, competition, and production when they enter the market. A successful expansion of the SBA is not just throwing money at the problem; it is the path to securing the American Dream of ownership and opportunity for more Americans. Expanding its access to rural towns and inner-city neighborhoods where bank branches have closed—banking deserts—is key. With Direct Lending Authority, the SBA will have the authority to bypass banks entirely and lend directly to entrepreneurs. Expanding the SBA’s funding, modernizing its tools, and broadening its mandate doesn’t just help businesses; it saves the American middle and working classes. The Small Business Administration is the only agency in Washington dedicated solely to the dream of ownership, and it is time to treat it as what it actually is—the Engine of America.
