25

SMALL BUSINESSADMINISTRATION
Karen Kerrigan

MISSION STATEMENTThe U.S. Small Business Administration (SBA) supports U.S. entrepreneurshipand small business growth by strengthening free enterprise through policy advocacy and facilitating programs that help entrepreneurs to launch and grow theirbusinesses and compete effectively in the global marketplace.
OVERVIEW

Created almost 70 years ago, the SBA was launched under the Small Business
Act with a mission to “aid, counsel, assist and protect, insofar as is possible, theinterests of small business concerns.”1 According to its current mission statement:
The U.S. Small Business Administration (SBA) helps Americans start, grow,and build resilient businesses.
SBA was created in 1953 as an independent agency of the federal government
to aid, counsel, assist and protect the interests of small business concerns;
preserve free competitive enterprise; and maintain and strengthen the overall
economy of our nation.2

The SBA’s founding mission has evolved over time as programs have been
expanded or implemented, subject to the philosophical grounding of each Administration as well as assorted economic challenges and the occurrence of natural
disasters. Because of its distinct role in the federal government, the SBA became— 745 —

Mandate for Leadership: The Conservative Promise

the default agency for providing disaster loans to small businesses, homeowners,
renters, and organizations. As a result, hundreds of billions of taxpayer dollars havebeen funneled through the agency to businesses and individuals over the years.
Some SBA programs are effective; others are not. The largest program in SBA’s
history, the Paycheck Protection Program (PPP), has been credited with saving
millions of jobs during the COVID-19 pandemic.3 A conservative Administration
would rightly focus on saving small businesses during such a crisis. At the sametime, however, various SBA programs have generated waste, fraud, and mismanagement of taxpayer dollars.
For example, and more recently, more than $1 trillion in COVID-19 relief wasdistributed through the SBA.4 The SBA’s EIDL (Economic Injury Disaster Loan)
Advance program in particular shows the dangers that can come with directgovernment lending. EIDL Advance provided direct cash grants and loans tosmall businesses. The SBA Office of Inspector General “identified $78.1 billion in
potentially fraudulent EIDL loans and grants paid to ineligible entities,”5 which
represented more than half of all funds spent through the program. Although PPP
worked through private lenders and as a result experienced relatively less fraud
than EIDL experienced, it is estimated “that at least 70,000 [PPP] loans werepotentially fraudulent.”6
ORIGIN, HISTORY, AND CORE FUNCTIONSIn 1954, the agency began to execute such core functions as “making andguaranteeing loans for small businesses,” “ensuring that small businesses earna ‘fair proportion’ of government contracts and sales of surplus property,” and“provid[ing] business owners with management and business training.”7
In 1970, President Richard Nixon’s Executive Order 11518 enhanced the agency’s advocacy role by providing for the “increased representation of the interestsof small business concerns before departments and agencies of the United States
Government.”8 This advocacy role was strengthened with the adoption of the Small
Business Amendments of 1974,9 which established the Chief Counsel for Advocacy,
and was then reinforced and expanded in 1976 with the creation of the Office ofAdvocacy, providing additional resources to ensure that small businesses had avoice in the regulatory process.
In 1980, the Regulatory Flexibility Act (RFA)10 further strengthened the Officeof Advocacy’s role, providing accountability across federal agencies to ensure thatthey considered the impact of their rulemakings on small businesses. The RFA
requires federal agencies “to consider the effects of their regulations on small
businesses and other small entities,”11 and the Office of Advocacy is charged withensuring that federal agencies abide by the law and is required to provide an annual
report to the President and the Senate and House Committees on Small Business.12
In addition, the Trade Facilitation and Trade Enforcement Act (TFTEA) of 201613— 746 —

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established a new role for the Office of Advocacy: “to facilitate greater consideration of small business economic issues during international trade negotiations.”14This small office has been relatively effective over the years—and more productive during periods when a strong Chief Counsel for Advocacy has been installed
to utilize the Office of Advocacy’s authority aggressively to provide a check onregulatory overreach. The office is one of the bright spots within the SBA that a
conservative Administration could supercharge to dismantle extreme regulatory
policies and advance limited-government reforms that promote economic freedom
and opportunity.
Currently, the SBA’s four core functions include:
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Access to capital. SBA maintains assorted financing and lending
programs for small businesses, from microlending to debt and equity
investment capital.
Entrepreneurial development programs. SBA provides “free” or lowcost training at more than 1,800 locations and through online platforms
and webinars.
Government contracting support programs. Through goals establishedby the SBA for federal departments and agencies, the broader goal is toensure that small businesses win 23 percent of prime contracts.
Advocacy. This independent office within the SBA works to ensurethat federal agencies consider small businesses’ concerns and impact inrulemakings. The office also conducts small-business research.

BUDGETARY FLUCTUATION

SBA’s budget and programs have expanded significantly under some Administrations and have been scaled back under others. President Ronald Reagan cut
the SBA’s budget by more than 30 percent, and his annual budgets regularly proposed to eliminate the agency altogether.15 Under President George W. Bush, SBA
Administrator Hector Barreto said that SBA’s goal was “to do more with less,”16
but this changed because of Hurricane Katrina and a surge in disaster funding.
In 2016, President Barack Obama considered streamlining and combining SBA
programs and other business-related agencies and programs under one entity at
the U.S. Department of Commerce, but opposition within the small-business lobby
in Washington scuttled the effort.17
In general, SBA budget fluctuations have been driven by several factors such asefforts by Administrations either to cut or to greatly expand programs, the need toboost disaster assistance because of economic or weather-related events, business— 747 —

Mandate for Leadership: The Conservative Promiseloan credit subsidy costs, and miscellaneous program “enhancements” to support
small businesses through economic challenges or circumstances. As noted by theCongressional Research Service:
Overall, the SBA’s appropriations have ranged from a high of over $761.9
billion in FY2020 to a low of $571.8 million in FY2007. Much of this volatility
is due to significant variation in supplemental appropriations for disasterassistance to address economic damages caused by major hurricanes and for
SBA lending program enhancements to help small businesses access capitalduring and immediately following recessions. For example, in FY2020, the
SBA received over $760.9 billion in supplemental appropriations to assist
small businesses adversely affected by the novel coronavirus (COVID19) pandemic.18

The CRS further notes that “[o]verall, since FY2000, appropriations for SBA’s
other programs, excluding supplemental appropriations, have increased at a pacethat exceeds inflation.”19
In terms of current loan volume, the SBA “reached nearly $43 billion in funding to small businesses, providing more than 62,000 traditional loans through its
7(a), 504, and Microloan lending partners and over 1,200 investments through
SBA licensed Small Business Investment Companies (SBICs) for Fiscal Year (FY)2022.”20 The agency’s total budgetary resources for FY 2022 amount to $44.25
billion, which represents 0.4 percent of the FY 2022 U.S. federal budget.21
HISTORY OF MISMANAGEMENT

Throughout its history, various SBA programs and practices have generated
negative news headlines and scathing Government Accountability Office (GAO)
and Inspector General (IG) reports that have centered on mismanagement, lackof competent personnel and/or systems, and waste, fraud and abuse.22 From the 8a
program23 to Hurricane Katrina24 to the more current COVID-19 (EIDL) programand PPP lending program,25 the SBA has managed to maintain its lending role evenwhen repeated system failures have affected its distribution of funds.
Congress has been somewhat responsive, pressuring the SBA to clean up
fraud-related matters within its COVID-19 lending and grant programs.26 Republicans in the U.S. House of Representatives have gone farther, specifying that the
SBA needs to improve transparency and accountability and deal with mission creep,
the expansion of unauthorized programs, and structural and reporting deficiencies
that have allowed mismanagement and fraud to reoccur, largely through massive
supplemental appropriations.27
The SBA is led by an Administrator (currently a member of the President’s
Cabinet) and a Deputy Administrator. Senate-confirmed appointees include— 748 —

2025 Presidential Transition Project

the Administrator, Deputy Administrator, Chief Counsel for Advocacy, andInspector General.
Entrepreneurs and small businesses require limited-government policies that
do not impede their risk-taking and growth. A future Administration can leverageand strengthen core SBA functions that have been fairly effective at reining inand calling attention to costly regulations and policies that are harmful to small
businesses. This core advocacy function is aided both by statutory authority andby a network of small-business organizations and allies that support limited-government policies.28
Moreover, an effective SBA Administrator and leadership team can work andadvocate across the federal government to ensure that extreme regulatory policies—or anticompetitive rules and actions that may favor big businesses over small
businesses or international competitors over American small businesses—are
dismantled or do not progress when proposed.
MISSION CREEP AND ENLARGEMENT

As noted, Republicans in the U.S. House of Representatives have evidenced concern about SBA mission creep and the need to make a sprawling, unaccountableagency more focused and operationally sound. Moreover, there is unease that theagency has moved from being open to any eligible small business searching for support to being hyperfocused on “disproportionately impacted,” politically favored,
or geographically situated small businesses and entrepreneurs.
Today, initiatives aimed at “inclusivity” are in fact creating exclusivity andstringent selectivity in deciding what types of small businesses and entities canuse SBA programs. For example, even though the SBA under President Donald
Trump proposed a rule to remove all of the unconstitutional religious exclusions
from its regulations29 to conform with Supreme Court decisions that have madetheir unconstitutionality clear, the SBA has not acted on the proposed rule andstill uses religious exclusions in determining eligibility for business loans. Several
other specific concerns include but are not limited to:lll

The SBA’s request to become a “designated voter agency” in response to
President Biden’s executive order on “Promoting Access to Voting.”30
The creation of duplicative channels and “pilot programs” for the delivery ofbusiness training rather than working through existing counseling partners.
The programs are largely duplicative of private, state and local government,
and educational system offerings.31
A push to expand direct government lending.32— 749 —

Mandate for Leadership: The Conservative Promise

THE SBA IN A CONSERVATIVE ADMINISTRATION

Reforming and restructuring the SBA under a conservative Administration
would meet the needs of America’s small-business owners and entrepreneurs,
not special interests in Washington, D.C. Entrepreneurs believe the SBA is fairly
archaic in its operations and programming and must be transformed to serve
small businesses in the modern economy effectively.33 Therefore, a restructured
and reformed SBA would end the long-term deficiencies, practices, and problems
that have prolonged the decades-long cycle of waste, fraud, and mismanagement.
Moreover, the SBA Administrator and leadership can provide significant value toall small businesses by strongly advocating for their policy needs and fostering anagencywide culture that values all small-business owners and does not exclude
certain groups. Under a conservative Administration, success would yield:
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A highly qualified SBA Administrator and leadership team that cancompetently run the agency and enthusiastically advocate for the policy
issues and needs of small-business owners and entrepreneurs.
A tighter, more focused SBA that concentrates on congressionallyauthorized programs.
An accountable SBA Administrator and staff who report regularly toCongress, respond on a timely basis to requests from individual Membersof Congress, and satisfactorily implement or respond to IG and GAO
recommendations.
A full accounting of and an end to waste, fraud, and abuse in all COVID-19
relief programs, including the PPP and EIDL programs, and action that
follows the rule of law by ensuring that loan recipients who are not eligible
for loan forgiveness or who falsified loan applications either pay back thefunds or are referred to law enforcement.
An end to SBA direct lending.
An approach to small-business lending and capital programs that supports
a resilient small-business supply chain (for example, by financing
technological upgrades and capital expenditures).
Outreach to all small businesses and those that are eligible for programsupport across sectors and geographic areas. Through congressionallyauthorized programs and collaboration with partners and businessassociations, the SBA could use the latest technology and platforms to— 750 —

2025 Presidential Transition Project

implement relevant initiatives to reach small businesses. Programs would
be nonduplicative and implemented on a first-come, first-served basis.
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A modern, revamped, and streamlined SBA that better utilizes current
technology and platforms for operations, for reporting, and in its programs
to reach, service, and engage small businesses.
An Office of Advocacy that is strengthened by a renewed mandate andadditional resources to protect against overregulation along with a research
agenda that includes measuring the total cost that federal regulation
imposes on small businesses.

Accountability and Managerial Practice. The SBA lacks accountability andmanagerial practices to measure the effectiveness, success, and integrity of its
various programs. As a future Administration evaluates agency structure and theparticulars of how the SBA is spending appropriated funds, it should immediately
require actions and procedures to compel a culture of accountability and performance. Specifically:llRequire performance metrics and internal procedures to safeguard
taxpayer dollars and program integrity. As noted in an October 2022
IG report, failure to adopt procedures that would reliably capture data andinformation for various programs, coupled with significant challenges andweaknesses regarding IT investments, systems development, and security
controls, presents significant risks to program integrity and increased
risk of waste, fraud, and abuse.34 Addressing these shortcomings and risks
should be a priority challenge and action item for the next Administration.
As underscored by the Inspector General in his introduction to the report,“Pandemic response has, in many instances, magnified the challenging
systemic issues in SBA’s mission-related work.”35
Review all internal government watchdog recommendations andrequire that SBA management implement or address outstanding
and ongoing OIG and GAO recommendations within a specified
time frame (ideally within 90 days of a recommendation) and on an
ongoing basis.

Strengthening the Office of Advocacy. The SBA Office of Advocacy (Advocacy) is “an independent office” within the SBA.36 It accounts for about one
one-thousandth of SBA spending and 0.75 percent of SBA personnel. Under the
Regulatory Flexibility Act, both under its current authority and with suggested— 751 —

Mandate for Leadership: The Conservative Promisereforms, the Office of Advocacy could be a powerful weapon against the administrative state’s regulatory extremism.
lAmend the RFA so that all agencies are required to provide a copyof any proposed rule (other than bona fide emergency rules) alongwith initial regulatory flexibility analysis to the Office of Advocacy
at least 60 days before a notice of proposed rulemaking is submitted
for publication in the Federal Register. The Office of Advocacy would
submit comments to agencies within 30 days, and each agency would haveto consider these comments, make changes in the proposed rule basedon those comments, or explain in a revised regulatory flexibility analysis
why it chose not to change the proposed rule. The Office of Advocacy’s
pre-proposing comments would be published on the agencies’ and its
own websites.
RFA economic analysis should be expanded to include indirect costs
along with direct costs. In addition, the next Administration should
require other agencies to seek Advocacy’s input. Currently, other agencies
deny Advocacy the ability to enforce their duty to consider the effect ofregulations on small entities by construing their regulations as not having
significant economic impact, which would otherwise serve as a trigger for
Advocacy’s input. Congress should presumptively exempt small businesses
from new agency rules to force agencies to seek Advocacy’s input andpermit new rules to apply to small businesses only with Advocacy signoff
under specified criteria.

llIncrease the Office of Advocacy’s budget by at least 50 percent ($4.6
million). This would allow Advocacy to hire approximately 25 attorneys,
economists, and scientists and enhance its role in the regulatory process.
Explicitly direct federal agencies to comply with the RFA. This would
be similar to the approach adopted by President Trump in his January andFebruary 2017 executive orders directing agencies to relieve the cost andburden of regulation on business.37 Advocacy should organize regionalroundtables, onsite small-business visits, and an online platform to heardirectly from small businesses and entities as it did from June 2017 throughSeptember 2018.38 This activity produced 26 letters to federal agencies
and highlighted specific regulations that need reform and how Congress
had addressed the most burdensome rules through the Congressional
Review Act.39— 752 —

2025 Presidential Transition Project

COVID-19 Lending Program Accountability and Cleanup. A major
immediate priority for the next Administration should be a final accounting andaccelerated cleanup of fraudulent COVID-19 loan and grant activity. As noted by
the SBA IG, “managing COVID-19 stimulus lending is the greatest overall challenge
facing SBA, and it may likely continue to be for many years as the agency grapples
with fraud in the programs….”40 The next Administration should:lConsider bringing in private-sector support and expertise to closeout these programs. Forgiveness and fraud must be dealt with as swiftly
as possible, and law enforcement officials must pursue fraud vigorously.
Entities receiving PPP loans that did not meet eligibility for forgivenessmust be required to pay back the money.
For example, under the CARES Act,41 PPP loan applicants generally were
eligible only if, together with all their affiliates, they had no more than 500
employees. Numerous Planned Parenthood affiliates self-certified eligibility
for PPP loans during the initial wave of loans that were governed by the
CARES Act’s size requirement. Many Senators and Representatives asserted
that these Planned Parenthood organizations were ineligible because—
considered together with their affiliates—they exceeded the maximum
eligible size.42 The Trump Administration SBA notified several Planned
Parenthood PPP recipients of its preliminary determination of their
ineligibility and of SBA’s authority to take various actions against applicantsthat falsely certified their eligibility.43
To date, despite continued oversight attempts by Members of Congress,44
the SBA has taken no action on the Planned Parenthood loans otherthan to forgive them, and in 2021, it approved new PPP loans to Planned
Parenthood affiliates.45

lCooperate with ongoing congressional oversight efforts anddetermine whether SBA has authority to reverse the forgivenessdecisions. If it does have that authority, the SBA should reverse theforgiveness decisions for the subject loans, reiterate its preliminary
determinations of ineligibility, investigate the matter more thoroughly, andtake all appropriate action when its investigation concludes. Regardless ofwhether it reverses its forgiveness, if its investigation uncovers evidence
that Planned Parenthood affiliates or any other loan recipients knowingly
misrepresented their eligibility in their applications, the SBA should makeappropriate referrals to the Department of Justice.

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Disaster Loan Program and Direct Lending. The SBA’s disaster loan program provides low-interest loans to personal, business, and nonprofit borrowers
following a federally declared disaster. The program suffers from problems of
coordination with Federal Emergency Management Administration (FEMA) disaster assistance. For example, disaster relief applicants have an incentive to avoid
being approved for SBA disaster loans in order to increase the amount of FEMA
assistance for which they are eligible. Moreover, the availability of disaster loans
reduces individuals’ incentives to purchase disaster-related insurance. More than90 percent of SBA disaster loans are loans to individuals such as homeowners, notto small businesses.
In view of the challenges the SBA has experienced in its administration of thisprogram, as well as the fraud and abuse in the EIDL COVID-19–related program
and the IG’s concern that the systemic problems within this lending program
undermine the SBA’s work, the next Administration should:llWork with Congress to assess the extent to which disaster loans
should be offered by another agency rather than the SBA and explore
private-sector channels for administering the loans.
Specify clearly that no new direct lending programs will be
developed at the SBA.

Eligibility of Religious Entities for SBA Loans. Current SBA regulations46
and SBA Form 197147 make certain religious entities ineligible to participate inseveral SBA loan programs. The Trump Administration proposed a rule that would
remove the provisions on the ground that they violate the First Amendment.48
Subsequent Supreme Court decisions have made their unconstitutionality clearer.49
In an April 3, 2020, letter to Congress pursuant to 28 U.S. Code § 530D,50 the
Trump Administration SBA advised that two such provisions violate the Free Exercise Clause of the First Amendment and that it therefore would not enforce them.
On January 19, 2021, the Trump Administration SBA proposed a rule to remove
all of the unconstitutional religious exclusions from its regulations.51 The SBA has
not acted on the proposed rule.
A similar religious exclusion once appeared in the regulation governing eligibility for SBA Business Loan Programs,52 but it was removed in a June 2022 final rulethat noted tension with the First Amendment and Supreme Court precedent.53 That
final rule announced that the SBA would nonetheless continue to make religious
eligibility determinations for business loan applicants to comply with putative
Establishment Clause requirements,54 but Supreme Court precedent and Office ofLegal Counsel memoranda refute the notion that large government-backed loan
programs raise any Establishment Clause concerns.55— 754 —

2025 Presidential Transition Project

The SBA uses the same “Religious Eligibility Worksheet,” SBA Form 1971, tomake eligibility determinations for all affected programs, including the Business
Loan Programs. Thus, the SBA continues to act as though the unconstitutional
regulation were still in place, and there is no Establishment Clause basis for doing
so. The next Administration should immediately:lll

Notify Congress under 28 U.S. Code § 530D that it will not enforce
these unconstitutional regulations.
Take down SBA Form 1971.
Finalize the Trump Administration’s proposed rule or publish its own
updated proposed rule to remove the unconstitutional regulations.

Small Business Innovation Research and Small Business Technology
Transfer Programs. The SBA “coordinates and monitors the Small Business
Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs for all federal agencies with extramural budgets for research or research anddevelopment (R/R&D) in excess of the expenditures established in sections 9(f )and 9(n) of the Small Business Act.”56 The SBIR and STTR Extension Act of 2022
extended these programs from September 30, 2022, through September 30, 2025.57
SBIR requires that 3.2 percent of spending by agencies with extramural R&D
budgets of $100 million or more must be directed to small businesses. STTR allocates 0.45 percent of federal research spending to small firms.58 Research has shownthat this small portion of federal R&D spending is disproportionately effective.59
The SBIR program has consistently demonstrated its ability to fund advanced
technologies through to private-market viability and invests more in America’s
heartland than venture capital invests.60
SBIR and STTR have overcome the tendency of federal contracting officers
to deal only with large firms that are familiar to them and have the expertise andlobbying clout to navigate the federal procurement process. The next Administration should:lllContinue the SBIR and SBTT programs as they successfully fund thenext wave of technological innovation to compete with Big Tech.
Urge Congress to expand the amount that other agencies are required
to set aside from their general R&D budgets for the SBIR program.
Ensure the enactment of stricter rules requiring that SBIR funds
must be expended on capital investments in the United States.
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Domestic Manufacturing and Small Business. Small businesses in the
manufacturing sector face shortfalls in access to capital.61 As manufacturing
employment, domestic business investment, and non–information technology
output have declined,62 expectations for market returns and the capital available
to small manufacturing enterprises have diminished. This is especially true forcapital-intensive sectors like transportation and energy that require large up-front
investments and relatively lower-margin sectors like plastics, textiles, furniture,
and agriculture. Yet these industries and others like them traditionally have been
the backbone of American manufacturing employment. They also are sources ofself-sufficiency and resilience at a time when global supply chains are increasingly uncertain.
The public policy problems that are caused by declining small manufacturing
are especially acute when it comes to the production of advanced technologies.
Other agencies and programs invest immense taxpayer resources in basic scienceand research. Over time, that research results in some breakthrough technologies,
but when it is time to put these breakthroughs into practice by manufacturing
goods and services, much of the necessary productive capacity is offshore.63 For
many technologies, the American economy lacks the capacity to “scale up” innovations that might not be immediately profitable. Instead, those technologies are
put into practice abroad. In this way, foreign companies and foreign productive
sites buy and implement taxpayer-funded American technologies.
The SBA’s existing programs should be reformed to expand the private market
for capital in small-manufacturer expansion. The next Administration should:ll

Ask Congress to make available a category of Section 7(a) loans witha larger available principal that is used to finance manufacturing
facility construction and equipment upgrading. The proposed SBA
Reauthorization and Improvement Act of 2019, for example, would
have increased the maximum loan principal to $50 million for advanced
manufacturing construction and upgrading.64 The Section 7(a) loan
program operates through private lenders and guarantees a portion ofprivate-sector loans made to qualifying small businesses. The maximum
principal available is $5 million, but small businesses in capital-intensive
sectors require significantly larger amounts of capital to finance up-front
capital costs.
Reform the Small Business Investment Company (SBIC) program
to refocus its support on small businesses rather than technology
startups only. The SBIC program operates through private venture capitaland private equity funds by providing eligible funds with guaranteed debt
financing to support investments in small businesses. However, the program— 756 —

2025 Presidential Transition Projectlargely duplicates private-sector venture capital to the extent that the sector
receiving much of its support is software and information technology, which
already receive the lion’s share of venture capital investment.65
In addition, Congress should reform the SBIC program to make its
financing more favorable to capital-intense investments and small
manufacturers. The Health, Economic Assistance, Liability Protection,and Schools (HEALS) Act, introduced in 2020,66 and American Innovationand Manufacturing Act, introduced in 2021,67 would allow SBIC to offer
longer-term financing to manufacturers and make the program morefiscally sustainable.
Small-Business Size Standard Modernization. Many small-business programs both inside and outside the SBA use the SBA’s definition of “small business.”
Under the Small Business Act, the SBA is tasked with defining what counts as asmall business and ensuring that the definition varies from industry to industry toreflect differences in regular size by industry. However, the SBA’s small-businesssize standards reflect a one-size-fits-all approach under which all businesses within
its size standard are considered small businesses for all eligible purposes, from government contracting preferences to eligibility for SBA loans through private banks.
At the same time, the SBA is an outlier among competing economies in notconsidering medium-sized enterprises along with small businesses, often referred
to collectively as small and medium-sized enterprises (SMEs). Medium-sized andregional businesses are increasingly critical to maintaining competition. The next
Administration should:lEncourage Congress to create a “medium-sized business”
classification with its eligibility for programs confined to accessto capital programs from projects for which credit elsewhere
does not exist.

SBA POLICY PRIORITIES FOR 2025 AND BEYOND

Legislation. The new Administration can support SBA reform legislation proposed in Congress that aligns with key measures outlined in this chapter. It also
can support legislative initiatives that would help SBA to focus on its core statutory
activities such as capital access, federal contracting opportunities, and regulatory
advocacy. For example:l

The IMPROVE the SBA Act68 would strengthen accountability, transparency,
and oversight of the SBA and aligns with many of the reforms outlined inthis chapter.

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Mandate for Leadership: The Conservative Promise

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The Small Business Regulatory Flexibility Improvements Act69 would
require federal agencies to perform more thorough RFA economic analysis
and provide a rationale for proposed regulations. It also would waive fines
for certain first-time paperwork violations.
The Small Business Regulatory Enforcement Fairness Act70 (SBREFA) panel
process allows small businesses to provide input on agency rulemakings,
gives participating small businesses greater procedural rights, and allows forjudicial review of agency violations of the SBREFA panel process. SBREFA
panel requirements should be extended to all federal agencies.
The Fair and Open Competition Act71 would disallow the use of project labor
agreements (PLAs) in federal contracting as required in President Biden’s
Executive Order 14063,72 which puts small businesses at a competitive
disadvantage and works against the SBA’s governmentwide contracting goalfor small businesses.
The JOBS Act 4.073 would advance regulatory improvements andmodernization of various Securities and Exchange Commission (SEC) rules
to enhance capital formation and access.

ORGANIZATIONAL ISSUES AND BUDGET

Administrator and Key Staff. The position of Administrator should not be
considered a symbolic or messaging-related position as some past Administrations
have viewed it. Rather, the Administrator should have the requisite experience,skills, and knowledge to ensure that the SBA fulfills its statutory authorities.
Because much of the SBA’s statutory authority relates to financing and regulatory policy, and in order to make the SBA a more effective agency within the
Administration, the Administrator and his or her key staff should have experiencein small-business finance and investment and/or administrative law. For example,
during the COVID-19 pandemic, the SBA was often forced to outsource key decisions and administrative follow-through to the Department of the Treasury. The
SBA Administrator and leadership team must share the President’s mission andvision and execute the Administration’s policies effectively.
Budget

The next Administration should undertake a comprehensive review of theeffectiveness of its various loan and grant programs and provide a report toCongress within six months. The report should rank programs by cost-effectiveness. In the interim, the roughly $1 billion overall agency budget should be held
constant until the report is considered, after which Congress should terminate— 758 —

2025 Presidential Transition Project

ineffective programs, consolidate duplicative functions, and reallocate resources
to more effective programs (such as the Office of Advocacy) or consider reducing
the SBA budget.
Personnel Challenges

The SBA continues to expand programs and initiatives without first documenting the effectiveness of existing programs or whether they involve areas in which
the agency lacks staff expertise. For example, the SBA wants to expand the numberof licensed Small Business Lending Companies (SBLCs), implement a new “Mission-Based SBLC,” and remove a requirement for loan authorization within the7(a) and 504 Loan programs and rely solely on a lender’s documents.
Various IG reports have noted that the lack of skilled employees within the
SBA has fueled fraud and mismanagement in COVID-19 lending programs, andcongressional leaders have expressed alarm about these “changes that haphazardly
overextend the SBA’s responsibilities at a time when they are devastated by fraud
and underperforming on their core mission of serving the nation’s 33 million small
businesses.”74 A conservative Administration should rein in these idealistic andimpractical efforts, get current programs under control and properly staffed withpeople who can manage and perform competently, and outsource efforts where
private-sector expertise is appropriate and more efficient.

AUTHOR’S NOTE: The preparation of this chapter was a collective enterprise of individuals involved in the2025 Presidential Transition Project. All contributors to this chapter are listed at the front of this volume, but David
Burton and Caleb Orr deserve special mention. The author alone assumes responsibility for the content of thischapter, and no views expressed herein should be attributed to any other individual.

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ENDNOTES

1.

2.
3.

4.

5.

6.

7.
8.

9.
10.
11.
12.
13.

14.
15.

16.

H.R. 7953, Small Business Act, Public Law 85-536, 85th Congress, July 18, 1958, § 2, https://uscode.ecfr.io/
statutes/pl/85/536.pdf (accessed February 17, 2023), amended by H.R. 4877, One Stop Shop for Small
Business Compliance Act of 2021, Public Law 117-188, 117th Congress, October 20, 2022, https://www.congress.
gov/117/plaws/publ188/PLAW-117publ188.pdf (accessed February 17, 2023).
U.S. Small Business Administration, “About SBA: Organization: Mission,” https://www.sba.gov/about-sba/organization (accessed February 19, 2023).
Michael Faulkender, Robert Jackman, and Stephen I. Miran, “The Job-Preservation Effects of Paycheck
Protection Program Loans,” U.S. Department of the Treasury, Office of Economic Policy, Working Paper
No. 2020-01, December 2020, p. 9, https://home.treasury.gov/system/files/226/Job-Preservation-EffectsPaycheck-Protection-Program-Loans.pdf (accessed February 16, 2023).
Kate Rogers, Scott Zamost, Karina Hernandez, and Jennifer Schlesinger, “As Pandemic Aid Was Rushed
to Main Street, Criminals Seized on Covid Relief Programs,” CNBC, April 15, 2021, https://www.cnbc.
com/2021/04/15/as-pandemic-aid-was-rushed-to-main-street-criminals-seized-on-ppp-eidl-.html (accessed
February 16, 2023).
Kevin Brewer, “Bills Extend Statute of Limitation for Prosecuting PPP, EIDL Fraud,” Journal of Accountancy,
August 10, 2022, https://www.journalofaccountancy.com/news/2022/aug/bills-extend-statute-limitationprosecuting-ppp-eidl-fraud.html (accessed February 16, 2023).
Sacha Pfeiffer, “Virtually All PPP Loans Have Been Forgiven with Limited Scrutiny,” NPR, October 12, 2022,
https://www.npr.org/2022/10/12/1128207464/ppp-loans-loan-forgiveness-small-business#:~:text=As%20
COVID-19%20shutdowns%20threatened,early%20days%20of%20the%20pandemic (accessed
February 16, 2023).
U.S. Small Business Administration, “About SBA: Organization: SBA History,” https://www.sba.gov/about-sba/organization (accessed February 19, 2023).
President Richard Nixon, Executive Order 11518, “Providing for the Increased Representation of the Interestsof Small Business Concerns Before Departments and Agencies of the United States Government,” March 20,
1970, in Federal Register, Vol. 35, No. 56 (March 21, 1970), pp. 4939–4940, https://tile.loc.gov/storage-services/
service/ll/fedreg/fr035/fr035056/fr035056.pdf (accessed February 18, 2023).
S. 3331, Small Business Amendments of 1974, Public Law 93-386, 93rd Congress, August 23, 1974, https://www.
congress.gov/93/statute/STATUTE-88/STATUTE-88-Pg742.pdf (accessed February 19, 2023).
S. 299, Regulatory Flexibility Act, Public Law No. 96-354, 96th Congress, September 19, 1980, https://www.
congress.gov/96/statute/STATUTE-94/STATUTE-94-Pg1164.pdf (accessed February 19, 2023).
Maeve P. Carey, “The Regulatory Flex Act: An Overview,” Congressional Research Service In Focus No. IF11900,
August 16, 2021, https://crsreports.congress.gov/product/pdf/IF/IF11900 (accessed February 18, 2023).
U.S. Small Business Administration, Office of Advocacy, “The Regulatory Flexibility Act,” https://advocacy.sba.
gov/resources/the-regulatory-flexibility-act/ (accessed February 18, 2023).
H.R. 644, Trade Facilitation and Trade Enforcement Act of 2015, Public Law No. 114-125, 114th Congress,
February 24, 2026, https://www.congress.gov/114/statute/STATUTE-130/STATUTE-130-Pg122.pdf (accessed
March 21, 2023).
U.S. Small Business Administration, Office of Advocacy, “Advocacy Releases Trade Report,” December 21, 2018,https://advocacy.sba.gov/2018/12/21/advocacy-releases-trade-report/ (accessed March 21, 2023).
Associated Press, “Reagan Offers $994-Billion ‘Hard-Choices’ 1987 Budget,” Los Angeles Times,
February 5, 1986, http://www.latimes.com/archives/la-xpm-1986-02-05-mn-4369-story.html (accessed
February 18, 2023).
Testimony of Hon. Hector V. Barreto, Administrator, Small Business Administration, in hearing, The President’s
FY 2006 Budget Request for the Small Business Administration, Committee on Small Business andEntrepreneurship, U.S. Senate, 109th Congress, 1st Session, February 17, 2005, p. 8, https://books.google.com/
books?id=UwD-2ICa8k8C&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false(accessed February 18, 2023). See also Report No. 109-49, Summary of Legislative and Oversight Activities
During the 108th Congress, Committee on Small Business and Entrepreneurship, U.S. Senate, 109th Congress,
1st Session, March 30, 2005, p. 21, https://www.congress.gov/109/crpt/srpt49/CRPT-109srpt49.pdf (accessed
February 18, 2023).

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17. Editorial, “The Small Business Administration Needs Reforming,” The Washington Post, December 18, 2016,
https://www.washingtonpost.com/opinions/the-sba-needs-reforming/2016/12/18/b639fc4c-c159-11e6-8422eac61c0ef74d_story.html (accessed February 18, 2023).
18. Robert Jay Dilger, Anthony A. Cilluffo, and R. Corinne Blackford, “Small Business Administration Funding:
Overview and Recent Trends,” Congressional Research Service Report for Members and Committees ofCongress No. R43486, updated July 14, 2022, Summary, https://sgp.fas.org/crs/misc/R43846.pdf (accessed
November 18, 2022).
19. Ibid., p. 2. Emphasis added.
20. Press release, “SBA Announces End-of-Year Capital Benchmarks Showing Historic Support for Small
Businesses Under Administrator Guzman,” U.S. Small Business Administration, December 13, 2022, https://www.sba.gov/article/2022/dec/13/sba-announces-end-year-capital-benchmarks-showing-historic-supportsmall-businesses-under?utm_medium=email&utm_source=govdelivery (accessed February 18, 2023).
21. USASpending,gov, “Agency Profile: Small Business Administration (SBA),” data through September 29, 2022,
https://www.usaspending.gov/agency/small-business-administration?fy=2022 (accessed February 18, 2023).
22. Testimony and prepared statement of Tad DeHaven, Budget Analyst, Cato Institute, in hearing, An
Examination of SBA Programs: Eliminating Inefficiencies, Duplications, Fraud, and Abuse, Committee on Small
Business and Entrepreneurship, U.S. Senate, 112th Congress, 1st Session, June 16, 2011, pp. 80–90, https://www.
govinfo.gov/content/pkg/CHRG-112shrg88373/pdf/CHRG-112shrg88373.pdf (accessed February 18, 2023).
23. Sarah Westwood, “Feds Gave $400 Million in Contracts to Ineligible Firms,” Washington Examiner, September
28, 2014, https://www.washingtonexaminer.com/feds-gave-400-million-in-contracts-to-ineligible-firms(accessed February 18, 2023).
24. Keith Girard, “Inside the SBA’s Monumental Katrina Loan Scandal,” AllBusiness.com, https://www.allbusiness.
com/inside-the-sbas-monumental-katrina-loan-scandal-11793824-1.html (accessed February 18, 2023).
25. Arnold & Porter, “CARES Act Fraud Tracker,” last updated January 2, 2023, https://www.arnoldporter.com/en/
general/cares-act-fraud-tracker (accessed February 18, 2023).
26. Jay Edwards, “Bipartisan Call to Crack Down on COVID-19 PPP/EIDL Fraud, Prosecute Fraudsters to the
Fullest Extent of the Law,” WRNJ Radio (Hackettstown, New Jersey), October 21, 2022, https://wrnjradio.com/
bipartisan-call-to-crack-down-on-covid-19-ppp-eidl-fraud-prosecute-fraudsters-to-the-fullest-extent-of-thelaw/ (accessed March 21, 2023).
27. See, for example, H.R. 7628, IMPROVE the SBA Act, 117th Congress, introduced April 28, 2022, https://www.
congress.gov/117/bills/hr7628/BILLS-117hr7628ih.pdf (accessed February 18, 2023).
28. In varying degrees, almost every small-business advocacy organization and trade association engages
with the SBA. During periods of hyper-regulatory activity fueled by an activist Administration, the smallbusiness community engages more frequently with the Office of Advocacy through its roundtables andother mechanisms in the hope of warding off costly and intrusive rulemakings. A future conservative
Administration can look to the following groups, among others, for support in advancing both SBA
and broader policy reform: American Hotel and Lodging Association; Asian American Hotel Owners
Association; Association of Builders and Contractors; Associated Equipment Distributors; Ceramic Tile
Distributors Association; Consumer Technology Association; Family Business Coalition; Foodservice
Equipment Distributors Association; Heating, Air-conditioning, and Refrigeration Distributors International;
Independent Bakers Association; Independent Community Bankers Association; Independent Electrical
Contractors’ International Association of Plastics Distributors; International Franchise Association;
Metals Service Center Institute; National Association of Electrical Distributors; National Association of
Manufacturers; National Association of Wholesaler-Distributors; National Fastener Distributors Association;
National Marine Distributors Association; National Federation of Independent Business; National Ready Mix
Concrete Association; National Small Business Association; Small Business and Entrepreneurship Council;
and U.S. Hispanic Chamber of Commerce. Additionally, the small-business community is diverse and broad,and several key groups strongly support SBA lending but vigorously oppose tax, regulatory, and spending
policies that are intrusiveness or costly to business. Conservative think tanks and taxpayer organizations
like The Heritage Foundation, the Cato Institute, the National Taxpayers Union, Citizens Against
Government Waste, the Taxpayers Protection Alliance, and Americans for Tax Reform (among others) also
have a stake in an improved and cost-effective SBA.

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29. U.S. Small Business Administration, “Ensuring Equal Treatment for Faith-Based Organizations in SBA’s Loan
and Disaster Assistance Programs,” Proposed Rule, Federal Register, Vol. 86, No. 11 (January 19, 2021), pp.
5036–5040, https://www.federalregister.gov/documents/2021/01/19/2021-00446/ensuring-equal-treatmentfor-faith-based-organizations-in-sbas-loan-and-disaster-assistance-programs (accessed February 18, 2023).
30. President Joseph R. Biden Jr., Executive Order 14019, “Promoting Access to Voting,” March 7, 2021, inFederal Register, Vol. 86, No. 45 (March 10, 2021), pp. 13623–13627, https://www.govinfo.gov/content/pkg/
FR-2021-03-10/pdf/2021-05087.pdf (accessed February 19, 2023). See also press release, “Small BusinessCommittee Republicans: The SBA Should Stay Out of Elections and Focus on Our Small Businesses,” Small
Business Committee Republicans, Committee on Small Business, U.S. House of Representatives, April 4, 2022,
https://republicans-smallbusiness.house.gov/news/documentsingle.aspx?DocumentID=404061 (accessed
February 18, 2023).
31. Press release, “SBA Administrator Guzman, Biden–Harris Administration Announce Community Navigator
Pilot Program Grantees,” U.S. Small Business Administration, October 28, 2021, https://www.sba.gov/
article/2021/oct/28/sba-administrator-guzman-biden-harris-administration-announce-community-navigatorpilot-program (accessed February 18, 2023).
32. John Reosti, “SBA Hasn’t Given Up on Direct Lending,” American Banker, May 2, 2022, https://www.
americanbanker.com/creditunions/news/sba-hasnt-given-up-on-direct-lending (accessed February 18, 2023).
33. Goldman Sachs, 10,000 Small Businesses Voices, “22 Years Is Too Long: Support Small Businesses.
Reauthorize the SBA,” Open Letter to Congress, November 16, 2022, https://www.goldmansachs.com/
citizenship/10000-small-businesses/US/voices/reauthorize-the-sba-letter/index.html (accessed February 18,2023). According to Goldman Sachs, the letter “was published in Politico on Wednesday, November 16 to kickof a broader campaign to prioritize small businesses and modernize the SBA in the next Congress” and “wassigned by over 3,000 small business owners from all 50 states.” Ibid.
34. See, for example, “Challenge 3: SBA Faces Significant Challenges in IT Investment, System Development, andSecurity Controls,” in U.S. Small Business Administration, Office of Inspector General, Top Management andPerformance Challenges Facing the Small Business Administration in Fiscal Year 2023, Report 23-01, October
14, 2022, pp. 16–19, https://www.sba.gov/sites/default/files/2022-10/SBA%20OIG%20Report%2023-01_0.pdf(accessed February 18, 2023).
35. Ibid., p. iv.
36. Appendix M, “Office of Advocacy’s Legislative Priorities,” and Appendix Q, “Memorandum of Understanding
Between the Small Business Administration and the Office of Advocacy,” in U.S. Small Business
Administration, Office of Advocacy, Background Paper, Office of Advocacy, 2017–2020, January 2021, pp. 192
and 197, https://cdn.advocacy.sba.gov/wp-content/uploads/2021/02/09101916/Background-Paper-Office-ofAdvocacy-2017-2020-web.pdf (accessed February 18, 2023).
37. President Donald J. Trump, Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs,”
January 30, 2017, in Federal Register, Vol. 82, No. 22 (February 3, 2017), pp. 9339–9341, https://www.govinfo.
gov/content/pkg/FR-2017-02-03/pdf/2017-02451.pdf (accessed February 19, 2023), and President Donald
J. Trump, Executive Order 13777, “Enforcing the Regulatory Reform Agenda,” February 24, 2017, in Federal
Register, Vol. 82, No. 39 (March 1, 2017), pp. 12285–12287, https://www.govinfo.gov/content/pkg/FR-2017-0301/pdf/2017-04107.pdf (accessed February 19, 2023).
38. U.S. Small Business Administration, Office of Advocacy, What Small Businesses Are Saying and What
Advocacy Is Doing About It: Progress Report on the Office of Advocacy’s Regional Regulatory Reform
Roundtables, June 2017–September 2018, December 2018, https://cdn.advocacy.sba.gov/wp-content/
uploads/2018/12/20091536/What-Small-Businesses-Are-Saying-What-Advocacy-Is-Doing.pdf April 2020,
https://advocacy.sba.gov/regulatory-reform/ (accessed February 18, 2023December 10, 2022). See also U.S.
Small Business Administration, Office of Advocacy, Reforming Regulations and Listening to Small Business:
Second Progress Report on the Office of Advocacy’s Regional Regulatory Roundtables, June 2017–December
2019, https://cdn.advocacy.sba.gov/wp-content/uploads/2020/04/20141200/2nd-Progress-Report-on-RegReform-Roundtables.pdf (accessed February 18, 2023).
39. U.S. Small Business Administration, Office of Advocacy, What Small Businesses Are Saying and What
Advocacy Is Doing About It: Progress Report on the Office of Advocacy’s Regional Regulatory Reform
Roundtables, June 2017–September 2018, pp. 32 and 43.

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2025 Presidential Transition Project
40. U.S. Small Business Administration, Office of Inspector General, Top Management and Performance
Challenges Facing the Small Business Administration in Fiscal Year 2023, p. iv.
41. H.R. 748, CARES (Coronavirus Aid, Relief, and Economic Security) Act, Public Law No. 116-136, 116th
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February 19, 2023).
42. Sarah McCammon, “Planned Parenthood Asked to Return Funds from Paycheck Protection Program,” NPR,
May 21, 2020, https://www.npr.org/2020/05/21/859991359/planned-parenthood-asked-to-return-fundsfrom-paycheck-protection-program (accessed February 18, 2023).
43. Letter from William Manger, Associate Administrator, U.S. Small Business Administration, to Laura Meyers,
Planned Parenthood of Metropolitan Washington, “Re: Notice of Investigation and Request for Records,”
May 19, 2020, https://s3.documentcloud.org/documents/6922122/SBA-Letter-Planned-Parenthood-DC.pdf(accessed February 18, 2023).
44. Press release, “Lankford, HSGAC Republicans Demand Details on Illegal PPP Loans to Planned Parenthood
Affiliates,” Office of U.S. Senator James Lankford, April 28, 2022, https://www.lankford.senate.gov/news/pressreleases/lankford-hsgac-republicans-demand-details-on-illegal-ppp-loans-to-planned-parenthood-affiliates(accessed February 18, 2023).
45. Press release, “Romney, Colleagues Request Information from SBA Administrator Guzman on Illegal PPP
Loans Given to Planned Parenthood Affiliates,” Office of U.S. Senator Mitt Romney, April 28, 2022, https://www.romney.senate.gov/romney-colleagues-request-information-from-sba-administrator-guzman-onillegal-ppp-loans-given-to-planned-parenthood-affiliates/ (accessed February 18, 2023).
46. 13 C.F.R. §§ 109.400(b)(11), https://www.law.cornell.edu/cfr/text/13/109.400; 123.301(g), https://www.law.
cornell.edu/cfr/text/13/123.301; 123.502(n), https://www.law.cornell.edu/cfr/text/13/123.502; and 123.702(b)(6),https://www.law.cornell.edu/cfr/text/13/123.702 (all accessed February 19, 2023).
47. U.S. Small Business Administration, “Religious Eligibility Worksheet for all 7(a) and 504 Loan
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February 18, 2023).
48. U.S. Small Business Administration, “Ensuring Equal Treatment for Faith-Based Organizations in SBA’s Loan
and Disaster Assistance Program.”
49. See, for example, Carson v. Makin, 596 U.S. ___ (2022), https://www.supremecourt.gov/
opinions/21pdf/20-1088_dbfi.pdf (accessed February 19, 2023).
50. 28 U.S. Code § 530d, https://www.law.cornell.edu/uscode/text/28/530D (accessed February 19, 2023).
51. U.S. Small Business Administration, “Ensuring Equal Treatment for Faith-Based Organizations in SBA’s Loan
and Disaster Assistance Program.”
52. 13 CFR 120.110(k), https://www.law.cornell.edu/cfr/text/13/120.110 (accessed February 19, 2023).
53. U.S. Small Business Administration, “Regulatory Reform Initiative: Streamlining and Modernizing the 7(a),Microloan, and 504 Loan Programs to Reduce Regulatory Burden,” Final Rule, Federal Register, Vol. 87, No.
125 (June 30, 2022), pp. 38900–38910, https://www.federalregister.gov/documents/2022/06/30/2022-13483/
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54. Ibid.
55. U.S. Department of Justice, Office of Legal Counsel “Religious Restrictions on Capital Financing for
Historically Black Colleges and Universities,” Memorandum Opinion for the Acting General Counsel,
Department of Education, August 15, 2019, https://www.justice.gov/sites/default/files/opinions/attachments/2021/01/01/2019-08-15-hbcu-capfin-2.pdf. (accessed February 18, 2023).
56. U.S. Small Business Administration, Office of Investment and Innovation, SBIR and STTR Annual Report, Fiscal
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57. S. 4900, SBIR and STTR Extension Act of 2022, Public Law No. 117–183, 117th Congress, September 30, 2022,
https://www.congress.gov/117/plaws/publ183/PLAW-117publ183.pdf (accessed February 18, 2023).
58. U.S. Small Business Administration, Office of Investment and Innovation, SBIR and STTR Annual Report, Fiscal
Year 2019, pp. 6, 40, and 108.

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59. Peter L. Singer, “Federally Supported Innovations: 22 Examples of Major Technology Advances that Stem fromFederal Support,” Information Technology and Innovation Foundation, February 2014, https://wrnjradio.com/
bipartisan-call-to-crack-down-on-covid-19-ppp-eidl-fraud-prosecute-fraudsters-to-the-fullest-extent-of-thelaw/ (accessed March 21, 2023).
60. Wells King, “Uncle Sam’s Top-Performing Venture Fund,” American Compass Case Study, November 2022,
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February 18, 2023).
61. Elisabeth B. Reynolds, Hiram M. Samel, and Joyce Lawrence, “Learning by Building: Complementary Assets
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62. American Compass, “Where’s The Growth? Assessing the Results of the Globalization Experiment,” March
2022, pp. 3–5, https://americancompass.org/wp-content/uploads/2022/10/AC-Atlas-Wheres-the-Growth.pdf(accessed February 18, 2023).
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64. S. ___, SBA Reauthorization and Improvement Act of 2019, 116th Congress, 1st Session, Title III, §303, https://www.rubio.senate.gov/public/_cache/files/80533629-2905-433f-a588-7c4e032f7347/
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nam.org/comm/HEALSActInfo.pdf (accessed February 19, 2023). See also remarks by Senator Mitch
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68. H.R. 7628, IMPROVE (Improve Management, Programs, Resources, and Oversight for Vital Entrepreneurs)
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