Source: https://www.everycrsreport.com/reports/RL33243.html
Timestamp: 2019-04-20 18:23:28+00:00

Document:
The Small Business Administration (SBA) 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 the SBA’s loan, venture capital, training, and contracting programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA’s programs.
capital investment programs (including the Small Business Investment Company program, the New Markets Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators).
The report also discusses recent programmatic changes resulting from the enactment of legislation (such as P.L. 111-5, the American Recovery and Reinvestment Act of 2009, P.L. 111-240, the Small Business Jobs Act of 2010, P.L. 114-38, the Veterans Entrepreneurship Act of 2015, P.L. 114-88, the Recovery Improvements for Small Entities After Disaster Act of 2015 [RISE After Disaster Act of 2015], P.L. 115-123, the Bipartisan Budget Act of 2018, and P.L. 115-189, the Small Business 7(a) Lending Oversight Reform Act of 2018).
In addition, it provides an overview of the SBA’s budget and references other CRS reports that examine these programs in greater detail.
Congressional interest in the SBA's loan, venture capital, training, and contracting programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs.
In addition, it provides an overview of the SBA's budget and references other CRS reports that examine these programs in greater detail.
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. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs.
9. executive direction programs (the National Women's Business Council, Office of Ombudsman, and Faith-Based Initiatives).
Table 1 shows the SBA's estimated costs in FY2019 for these program areas. 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.
Source: U.S. Small Business Administration, FY2020 Congressional Budget Justification and FY2018 Annual Performance Report, pp. 16, 17, at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
Notes: 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.
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.
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.13 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.
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.
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.
FY2019 appropriations for these programs are $131 million for SBDCs, $31 million for the Microloan Technical Assistance Program, $18.5 million for WBCs, $11.7 million for SCORE, $5 million for PRIME, $12.7 million for Veterans Programs, $2 million for NAO, $5 million for the Entrepreneurial Development Initiative (Regional Innovation Clusters), and $3.5 million for the Entrepreneurship Education Initiative.
Four additional programs are provided recommended funding in appropriations acts under ED programs, but are discussed in other sections of this report because of the nature of their assistance: (1) the SBA's Growth Accelerators Initiative ($2 million in FY2019) is a capital investment program and is discussed in the capital access programs section; (2) the SBA's 7(j) Technical Assistance Program ($2.8 million in FY2019) provides contacting assistance and is discussed in the contracting programs section; (3) the National Women's Business Council ($1.5 million in FY2019) is a bipartisan federal advisory council and is discussed in the executive direction programs section; and (4) the State Trade Expansion Program (STEP, $18 million in FY2019) provides grants to states to support export programs that assist small business concerns. STEP is discussed in the capital access programs' international trade and export promotion programs subsection.
The SBA reports that over 1 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. Some of this training is free, and some is offered at low cost.
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 63 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.
WBCs are similar to SBDCs, except they concentrate on assisting women entrepreneurs. There are currently 121 WBCs, with at least one WBC in most states and territories.
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 320 chapters and more than 800 branch offices are located throughout the United States and partner with more than 11,000 volunteer counselors, who are working or retired business owners, executives, and corporate leaders, to provide management and training assistance to small businesses.
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.
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."22 The SBA has supported the Entrepreneurial Development Initiative (Regional Innovation Clusters) since FY2009, and the initiative has received recommended appropriations from Congress since FY2010.
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 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 provides loan guarantees for small businesses that cannot obtain credit elsewhere. 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.
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.38 In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses.
The SBA's goal is to achieve a zero subsidy rate, meaning that the appropriation of budget authority for new loan guaranties is not required.
Sources: SBA, Congressional Budget Justification (Summary of Credit Programs & Revolving Fund), various years, at https://www.sba.gov/about-sba/sba-performance/performance-budget-finances/congressional-budget-justification-annual-performance-report; P.L. 111-117, the Consolidated Appropriations Act, 2010; P.L. 112-10, the Department of Defense and Full-Year Continuing Appropriations Act, 2011; P.L. 112-74, the Consolidated Appropriations Act, 2012; P.L. 112-175, the Continuing Appropriations Resolution, 2013; SBA, "General Statement Regarding the Implications of Sequestration;" P.L. 113-76, the Consolidated Appropriations Act, 2014; P.L. 113-235, the Consolidated and Further Continuing Appropriations Act, 2015; P.L. 114-113, the Consolidated Appropriations Act, 2016; P.L. 115-31, the Consolidated Appropriations Act, 2017; P.L. 115-141, the Consolidated Appropriations Act, 2018; and P.L. 116-6, the Consolidated Appropriations Act, 2019.
a. In FY2011, there was a 0.2% across-the-board rescission. Before the rescission, the authorized subsidy amounts were $80.0 million for the 7(a) program, $0.0 for the 504/ Certified Development Companies (CDC) program, and $3.0 million for the Microloan program.
b. In FY2013, there was a 0.2% across-the-board rescission and sequestration. Before these reductions, the authorized subsidy amounts were $225.5 million for the 7(a) program, $108.1 million for the 504/CDC program, $3.678 million for the Microloan program, and $337.278 million total.
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.
The 7(a) program's current guaranty rate is 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). Although the SBA's offer to guarantee a loan provides an incentive for lenders to make the loan, lenders are not required to do so.
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).47 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.
Fixed assets, working capital, financing of start-ups, or to purchase an existing business; some debt payment allowed, but lender's loan exposure may not be reduced with the Express products. Lines of credit are offered with the Express programs.
5 years to 7 years for working capital, up to 25 years for equipment and real estate. All other loan purposes have a maximum term of 10 years.
For fixed rate loans of $25,000 or less, prime plus 800 basis points; for fixed rate loans over $25,000 but not exceeding $50,000, prime plus 700 basis points; for fixed rate loans greater than $50,000 but not exceeding $250,000, prime plus 600 basis points; and for fixed rate loans over $250,000, prime plus 500 basis points.
For loans with a maturity of 12 months or less, the SBA normally charges an up-front guaranty fee of 0.25% of the guaranteed portion of the loan (0.25% in FY2019). For loans with maturities of more than 12 months, the SBA is authorized to charge an up-front guaranty fee on the guaranteed portion of the loan of: up to 2% for loans of $150,000 or less (2% in FY2019 for most loans); up to 3% for loans of $150,001 to $700,000 (3% in FY2019 for most loans); up to 3.5% for loans of more than $700,000 (3.5% in FY2019); and up to 3.75% for the guaranty portion over $1 million (3.75% in FY2019). The SBA is also allowed to charge an ongoing, annual servicing fee of up to 0.55% (0.55% in FY2019).
Source: Table compiled by CRS from data from the SBA.
Notes: In FY2019, the SBA is waiving 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 is reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan. The SBA is also waiving the up-front, one-time loan guaranty fee for all veteran loans under the 7(a) SBAExpress program (loans of up to $350,000) because the subsidy rate for the 7(a) program for FY2019 is zero.
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 $350,000 or less), 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 $250,000 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. It provides a 50% loan guarantee on loan amounts of $350,000 or less.48 The 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.
Lenders must receive SBA approval to participate in these 7(a) specialized programs.
In addition to the 7(a) loan guaranty program, the SBA has special purpose loan guaranty programs for small businesses adjusting to the North American Free Trade Agreement (NAFTA), to support Employee Stock Ownership Program trusts, pollution control facilities, and working capital.
Community Adjustment and Investment Program. The Community Adjustment and Investment Program (CAIP) uses federal funds to pay the fees on 7(a) and 504/CDC loans to businesses located in communities that have been adversely affected by NAFTA.
Employee Trusts. The SBA will guarantee loans to Employee Stock Ownership Plans (ESOPs) that are used either to lend money to the employer or to purchase control from the owner. ESOPs must meet regulations established by the IRS, Department of the Treasury, and Department of Labor. These are 7(a) loans.
Pollution Control. In 1976, the SBA was provided authorization to guarantee the payment of rentals or other amounts due under qualified contracts for pollution control facilities. P.L. 100-590, the Small Business Reauthorization and Amendment Act of 1988, eliminated the revolving fund for pollution control guaranteed loans and transferred its remaining funds to the SBA's business loan and investment revolving fund. Since 1989, loans for pollution control have been guaranteed under the 7(a) loan guaranty program.
CAPLines. CAPLines are five special 7(a) loan guaranty programs designed to meet the requirements of small businesses for short-term or cyclical working capital. The maximum term is five years.
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.53 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.
Table 4 summarizes the 504/CDC loan guaranty program's key features.
Fixed assets only—no working capital.
Maximum 504/CDC participation in a single project is $5 million and $5.5 million for manufacturers and specified energy-related projects; minimum is $25,000. There is no limit on the project size.
10 years for equipment; 20 or 25 years for real estate. Unguaranteed financing may have a shorter term.
Fixed rate is established when the debenture backing the loan is sold and is pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues.
504/CDC projects generally have three main participants: a third-party lender provides 50% or more of the financing; a CDC provides up to 40% of the financing through a 504/CDC debenture, which is guaranteed 100% by the SBA; and the borrower contributes at least 10% of the financing. For good cause shown, the SBA may authorize an increase in the CDC's percentage of project costs covered up to 50%. No more than 50% of eligible costs can be from federal sources.
The SBA is authorized to charge CDCs a one-time, up-front guaranty fee of up to 0.5% of the debenture (0.5% in FY2019), an annual servicing fee of up to 0.9375% of the unpaid principal balance (0.368% for regular 504/CDC loans and 0.395% for 504/CDC debt refinance loans in FY2019), a funding fee (not to exceed 0.25% of the debenture), an annual development company fee (0.125% of the debenture's outstanding principal balance), and a one-time participation fee (0.5% of the senior mortgage loan if in a senior lien position to the SBA and the loan was approved after September 30, 1996). In addition, CDCs are allowed to charge borrowers a processing (or packaging) fee of up to 1.5% of the net debenture proceeds and a closing fee, servicing fee, late fee, assumption fee, Central Servicing Agent (CSA) fee, other agent fees, and an underwriters' fee.
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 it meets any one of 15 community or public policy goals.
Notes: The maximum loan amount is the total financial package, including the commercial loan and the CDC loan. It does not include the owner's minimum 10% equity contribution. It assumes the CDC loan is 40% of the total package.
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.
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.
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.
Table 5 summarizes the Microloan program's key features.
Working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. Loans cannot be made to acquire land or property.
The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate, adjusted to the nearest one-eighth percent (called the Base Rate), less 1.25% if the intermediary maintains a historic portfolio of Microloans averaging more than $10,000 and less 2.0% if the intermediary maintains a historic portfolio of Microloans averaging $10,000 or less. The Base Rate, after adjustment, is called the Intermediary's Cost of Funds. The Intermediary's Cost of Funds is initially calculated one year from the date of the note and is reviewed annually and adjusted as necessary (called recasting). The interest rate cannot be less than zero.
On loans of more than $10,000, the maximum interest rate that can be charged to the borrower is the interest rate charged by the SBA on the loan to the intermediary, plus 7.75%. On loans of $10,000 or less, the maximum interest rate that can be charged to the borrower is the interest charged by the SBA on the loan to the intermediary, plus 8.5%. Rates are negotiated between the borrower and the intermediary and typically range from 7% to 9%.
The SBA does not charge intermediaries up-front or ongoing service fees under the Microloan program.
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).
8(a) Program.62 The 8(a) Minority Small Business and Capital Ownership 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.63 In addition, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. 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 may participate in the 8(a) Program for no more than nine years.
Historically Underutilized Business Zone Program.65 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.
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.
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. Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do.
Federal agencies must negotiate "subcontracting plans" with the apparently successful bidder or offeror 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.
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."83 The SBA was required to report to the President annually on the attainment of these goals and to include this information in an annual report to Congress.84 The SBA negotiates the goals with each federal agency and establishes a "small business eligible" baseline for evaluating the agency's performance.
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 Federal Procurement Data System (such as contracts valued below $10,000 and government procurement card purchases).85 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 annually, using data from the Federal Procurement Data System—Next Generation, managed by the U.S. General Services Administration, to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually.
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).
Although there are no punitive consequences for not meeting the small business procurement goals, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings.
As shown in Table 6, the FY2017 Small Business Goaling Report, using data in the Federal Procurement Data System, indicates that federal agencies met the federal contracting goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017.
The percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017 is also provided in the table for comparative purposes.
Sources: SBA, "Statutory Guidelines," at https://www.sba.gov/content/statutory-guidelines-0 (federal goals); U.S. General Services Administration (GSA), Federal Procurement Data System—Next Generation, "Small Business Goaling Report: Fiscal Year 2017," at https://www.fpds.gov/downloads/top_requests/FPDSNG_SB_Goaling_FY_2017.pdf; and GSA, Federal Procurement Data System—Next Generation, at https://www.fpds.gov/fpdsng/ (contract dollars).
Notes: The Federal Procurement Data System (FPDS) is a dynamic system with records updated daily. The Small Business Goaling Report for FY2017 reports that small business eligible contracts, as of May 18, 2018, totaled $442.5 billion and that $105.7 billion was awarded to small businesses, $40.2 billion to small disadvantaged businesses, $20.8 billion to women-owned small businesses, $7.3 billion to SBA-certified HUBZone small businesses, and $17.9 billion to service-disabled veteran-owned small businesses. The Small Business Goaling Report for FY2017 does not indicate the total amount of federal contracts reported in the FPDS on May 18, 2018. The percentages provided in the column for all reported contracts in FY2017 were calculated using FPDS data for all contracts as reported on June 5, 2018: $508.8 billion in total contracts; $110.4 billion to small businesses, $42.8 billion to small disadvantaged businesses, $21.4 billion to women-owned small businesses, $7.5 billion to SBA-certified HUBZone small businesses, and $18.3 billion to service-disabled veteran-owned small businesses.
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).
As mentioned previously, 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.
The SBA has several programs to improve small business access to capital markets, including the Small Business Investment Company program, the New Market Venture Capital Program (now inactive), two special high technology contracting programs (the Small Business Innovative Research and Small Business Technology Transfer programs), and the growth accelerators initiative.
The SBA works with 305 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).
To purchase small business equity securities, make loans to small businesses, purchase debt securities from small businesses, and provide, subject to limitations, small businesses a guarantee of their monetary obligations to creditors not associated with the SBIC.
A licensed SBIC in good standing with a demonstrated need for funds may apply to the SBA for financial assistance (called leverage) of up to 300% of its private capital. However, most SBICs are approved for a maximum of 200% of their private capital, and no fund management team may exceed the allowable maximum amount of leverage, currently $175 million per SBIC and $350 million for two or more licenses under common control.
SBA-guaranteed debenture participation certificates can have a term of up to 15 years, although currently only one outstanding SBA-guaranteed debenture participation certificate has a term exceeding 10 years and all recent public offerings have specified a term of 10 years. SBA-guaranteed debentures provide for semiannual interest payments and a lump sum principal payment to investors at maturity. SBICs are allowed to prepay SBA-guaranteed debentures without penalty. However, a SBA-guaranteed debenture must be prepaid in whole and not in part and can only be prepaid on a semiannual payment date. Also, low-to-moderate income area (LMI) debentures are available in two maturities, for 5 years and 10 years (plus the stub period).
The debenture's coupon (interest) rate is determined by market conditions and the interest rate of 10-year Treasury securities at the time of the sale.
The SBA requires the SBIC to pay a 3% origination fee for each debenture issued (1% at commitment and 2% at draw), an annual fee on the leverage drawn, which is fixed at the time of the leverage commitment, and other administrative and underwriting fees, which are adjusted annually.
The now inactive New Market Venture Capital (NMVC) program encourages equity investments in small businesses in low-income areas that meet specific statistical criteria established by regulation. The program operates through public-private partnerships between the SBA and newly formed NMVC investment companies and existing Specialized Small Business Investment Companies (SSBICs) that operate under the Small Business Investment Company program.
The NMVC program's objective is to serve the unmet equity needs of local entrepreneurs in low-income areas by providing developmental venture capital investments and technical assistance, helping to create quality employment opportunities for low-income area residents, and building wealth within those areas.
The SBA's role is essentially the same as with the SBIC program. The SBA selects participants for the NMVC program, provides funding for their investments and operational assistance activities, and regulates their operations to ensure public policy objectives are being met. The SBA requires the companies to provide regular performance reports and have annual financial examinations by the SBA.
The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is composed of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' active unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018.
Agency SBIR efforts involve a three-phase process. During Phase I, awards of up to $163,952 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. Projects that demonstrate potential after the initial endeavor may compete for Phase II awards of up to $1.09 million, lasting one to two years.107 Phase II awards are for the performance of the principal R&D by the small business. 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).108 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.
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.109 Up to $163,952 in Phase I financing is available for approximately one year to fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. Phase II awards of up to $1.09 million may be made for two years, during which time the developer performs R&D work and begins to consider commercial potential. Agencies may issue an award exceeding these award guidelines by no more than 50%.110 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.111 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.
The SBA's executive direction programs consist of the National Women's Business Council, the Office of Ombudsman, and Faith-Based Initiatives.
P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA) provided the SBA an additional $730 million in temporary funding, including $375 million to subsidize fees for the SBA's 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies and loan modification was exhausted.
P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011.
During the 112th Congress, the SBA's statutory authorization expired (on July 31, 2011).124 Since then, the SBA has been operating under authority provided by annual appropriations acts. Prior to July 31, 2011, the SBA's authorization had been temporarily extended 15 times since 2006.
P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, increased the SBA's surety bond limit from $2 million to $6.5 million (and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary); required the SBA to oversee and establish standards for most federal mentor-protégé programs and establish a mentor-protégé program for all small business concerns; required the SBA's Chief Counsel for Advocacy to enter into a contract with an appropriate entity to conduct an independent assessment of the small business procurement goals, including an assessment of which contracts should be subject to the goals; and addressed the SBA's recent practice of combining size standards within industrial groups as a means to reduce the complexity of its size standards by requiring the SBA to make available a justification when establishing or approving a size standard that the size standard is appropriate for each individual industry classification.
During the 113th Congress, P.L. 113-76, the Consolidated Appropriations Act, 2014, increased the SBA's SBIC program's annual authorization amount to $4 billion from $3 billion.
P.L. 114-38, the Veterans Entrepreneurship Act of 2015, authorized and made permanent the SBA's administrative decision to waive the SBAExpress loan program's one time, up-front loan guaranty fee for veterans (and their spouse). The act also increased the 7(a) loan program's FY2015 authorization limit from $18.75 billion to $23.5 billion (later increased to $26.5 billion).
P.L. 114-88, the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE After Disaster Act of 2015), includes several provisions designed to assist individuals and small businesses affected by Hurricane Sandy in 2012, and, among other things, authorizes the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area; authorizes SBDCs to provide assistance to small businesses outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area; and temporarily increases, for three years, the minimum disaster loan amount for which the SBA may require collateral, from $14,000 to $25,000 (or, as under existing law, any higher amount the SBA determines appropriate in the event of a disaster).
P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, includes a provision that expands the definition of a Base Realignment and Closure Act (BRAC) military base closure area under the HUBZone program to include the lands within the external boundaries of the closed base and the census tract or nonmetropolitan county in which the lands of the closed base are wholly contained, intersect it, or are contiguous to it. This change is designed to make it easier for businesses located in those areas to meet the HUBZone program's requirement that at least 35% of its employees reside in a HUBZone area. The act also extends BRAC base closure area HUBZone eligibility from five years to not less than eight years, provides HUBZone eligibility to qualified disaster areas, and adds Native Hawaiian Organizations to the list of HUBZone eligible small business concerns.125 Starting one year from enactment (effective November 25, 2016), the act also adds requirements concerning the pledge of assets by individual sureties participating in the SBA's Surety Bond Guarantee Program and increases the guaranty rate from not less than 70% to not less than 90% for preferred sureties participating in that program.
P.L. 114-113, the Consolidated Appropriations Act, 2016, expands the projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs, generally limits refinancing under this provision to no more than 50% of the dollars loaned under the 504/CDC program during the previous fiscal year, and increases the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. The act also provided the 7(a) loan program a FY2016 authorization limit of $26.5 billion.
P.L. 114-125, the Trade Facilitation and Trade Enforcement Act of 2015, renamed the "State Trade and Export Promotion" grant initiative to the "State Trade Expansion Program." P.L. 114-125 also reformed some of the program's procedures and provided $30 million in annual authorization for STEP grants from FY2016 through FY2020.126 In terms of program administration, P.L. 114-125 allows the SBA's Associate Administrator (AA) for International Trade to give priority to STEP proposals from states that have a relatively small share of small businesses that export or would assist rural, women-owned, and socially and economically disadvantaged small businesses and small business concerns.
P.L. 114-328, the National Defense Authorization Act for Fiscal Year 2017, authorizes the SBA to establish different size standards for various types of agricultural enterprises (previously statutorily set at not more than $750,000 in annual receipts), standardizes definitions used by the SBA and the Department of Veterans Affairs concerning service-disabled veteran owned small businesses, requires the SBA to track companies that outgrow or no longer qualify for SBA assistance due to the receipt of a federal contract or being purchased by another entity after an initial federal contract is awarded, and, among other provisions, clarifies the duties of the Offices of Small and Disadvantaged Utilization within federal agencies.
P.L. 115-31, the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion in FY2017 from $26.5 billion in FY2016.
P.L. 115-56, the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, provided the SBA an additional $450 million for disaster assistance.
P.L. 115-123, the Bipartisan Budget Act of 2018, provided the SBA an additional $1.652 billion for disaster assistance and $7.0 million to the SBA's OIG for disaster assistance oversight.
P.L. 115-141, the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion in FY2018. The act also relaxed requirements on Microloan intermediaries that prohibited them from spending more than 25% of their technical assistance grant funds on prospective borrowers and more than 25% of those grant funds on contracts with third parties to provide that technical assistance by increasing those percentages to 50%.
P.L. 115-189, the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year.
P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year 2019, included provisions originally in H.R. 5236, the Main Street Employee Ownership Act of 2018, to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives. The act clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership. The act also directs the SBA to create outreach programs and an interagency working group to promote lending to ESOPs and cooperatives.
P.L. 116-6, the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30.0 billion in FY2019.
The SBA's received an appropriation of $887.604 million for FY2015, $871.042 million for FY2016, $1.337 billion for FY2017, $2.360 billion for FY2018, and $715.370 million for FY2019.
Sources: P.L. 113-76, the Consolidated Appropriations Act, 2014, P.L. 113-235, the Consolidated and Further Continuing Appropriations Act, 2015; P.L. 114-113, the Consolidated Appropriations Act, 2016; P.L. 115-31, the Consolidated Appropriations Act, 2017; P.L. 115-56, the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017; P.L. 115-123, the Bipartisan Budget Act of 2018; P.L. 115-141, the Consolidated Appropriations Act, 2018; and P.L. 116-6, the Consolidated Appropriations Act, 2019.
Notes: The sum of the amounts appropriated for each of the program accounts may not equal the total amount appropriated for that fiscal year due to rounding. P.L. 115-123 provided the Office of the Inspector General $7 million in supplemental funding for FY2018 for disaster assistance oversight.
N. Eric Weiss, specialist in Financial Economics, authored earlier versions of this report.
U.S. Congress, Senate Committee on Expenditures, Subcommittee on Investigations, Influence in Government Procurement, 82nd Cong., 1st sess., September 13-15, 17, 19-21, 24-28, October 3-5, 1951 (Washington: GPO, 1951) and U.S. Congress, Senate Banking and Currency, RFC Act Amendments of 1951, hearing on bills to amend the Reconstruction Finance Corporation Act, 82nd Cong., 1st sess., April 27, 30, May 1, 2, 22, 23, 1951 (Washington: GPO, 1951).
P.L. 83-163, the Small Business Act of 1953 (as amended), see http://legcoun.house.gov/members/Comps/SBA.pdf.
The Small Business Administration's (SBA's) programs have detailed rules on program requirements and administration that are not covered in this report. More detailed information concerning the SBA's programs is available in the CRS reports referenced later in this report, on the SBA's website at https://www.sba.gov/, in 15 U.S.C. §631 et seq., and in Title 13 of the Code of Federal Regulations, see https://www.govinfo.gov/content/pkg/CFR-2018-title13-vol1/pdf/CFR-2018-title13-vol1.pdf.
For additional information and analysis, see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress, by Bruce R. Lindsay.
13 C.F.R. §123.105 and 13 §123.203.
SBA, Office of Legislative and Congressional Affairs, correspondence with the author, December 18, 2018.
The SBA also offers military reservist economic injury disaster loans. These loans are available when economic injury is incurred as a direct result of a business owner or an essential employee being called to active duty. Generally, these loans are not associated with disasters. See CRS Report R42695, SBA Veterans Assistance Programs: An Analysis of Contemporary Issues, by Robert Jay Dilger and Sean Lowry.
P.L. 93-288, Disaster Relief Act Amendments and 42 U.S.C. §5721 et seq.
Disaster declarations are published in the Federal Register and can also be found on the SBA website at https://disasterloan.sba.gov/ela/Declarations/Index.
13 C.F.R. §123.105(a)(2). For mitigation measures implemented after a disaster has occurred to protect the damaged property from a similar disaster in the future, a homeowner can request that the approved loan amount be increased by the lesser of the cost of the mitigation measure or up to 20% of the verified loss (before deducting compensation from other sources), to a maximum of $200,000. 13 C.F.R. §127.
See 13 C.F.R. §123.300 for eligibility requirements. Size standards vary according to a variety of factors, including industry type, average firm size, and start-up costs and entry barriers. Size standards can be located in 13 C.F.R. 121. For further information and analysis, see CRS Report R40860, Small Business Size Standards: A Historical Analysis of Contemporary Issues, by Robert Jay Dilger.
For further information and analysis, see CRS Report R41352, Small Business Management and Technical Assistance Training Programs, by Robert Jay Dilger.
For further analysis of the SBA's Microloan program, see CRS Report R41057, Small Business Administration Microloan Program, by Robert Jay Dilger.
SBA, FY2020 Congressional Budget Justification and FY2018 Annual Performance Report, p. 38, at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report. As of June 27, 2018, there were no Microloan intermediaries serving Alaska. An intermediary may not operate in more than one state unless the SBA determines that it would be in the best interests of the small business community for it to operate across state lines. For example, a Microloan intermediary located in Taunton, Massachusetts is allowed to serve small businesses located in Rhode Island because of its proximity to the state and there are currently no Microloan intermediaries located in Rhode Island.
P.L. 106-102, the Gramm-Leach-Bliley Act, Section 173. Establishment of Program and Section 175. Qualified Organizations.
SBA, "Office of Veterans Business Development: Resources," at https://www.sba.gov/offices/headquarters/ovbd/resources/1548576.
SBA, FY2017 Congressional Budget Justification and FY2015 Annual Performance Report, p. 64, at https://www.sba.gov/sites/default/files/FY17-CBJ_FY15-APR.pdf.
SBA, FY2019 Congressional Budget Justification and FY2017 Annual Performance Report, p. 89, at https://www.sba.gov/sites/default/files/aboutsbaarticle/SBA_FY_2019_CBJ_APR_2_12_post.pdf.
SBA, FY2014 Congressional Budget Justification and FY2012 Annual Performance Report, p. 71, at https://www.sba.gov/sites/default/files/files/1-508-Compliant-FY-2014-CBJ%20FY%202012%20APR.pdf.
SBA, FY2019 Congressional Budget Justification and FY2017 Annual Performance Report, p. 88, at https://www.sba.gov/sites/default/files/aboutsbaarticle/SBA_FY_2019_CBJ_APR_2_12_post.pdf.
Prior to October 1, 1985, the SBA provided direct business loans to qualified small businesses. From October 1, 1985, to September 30, 1994, SBA direct business loan eligibility was limited to qualified small businesses owned by individuals with low incomes or located in areas of high unemployment, owned by Vietnam-era or disabled veterans, owned by the handicapped or certain organizations employing them, and certified under the minority small business capital ownership development program. Microloan program intermediaries were also eligible. On October 1, 1994, SBA direct loan eligibility was limited to Microloan program intermediaries and small businesses owned by the handicapped. Funding to support direct loans to the handicapped through the Handicapped Assistance (renamed the Disabled Assistance) Loan program ended in 1996. The last loan under the Disabled Assistance Loan program was issued in FY1998. See U.S. Congress, House Committee on Small Business, Summary of Activities, 105rd Cong., 2nd sess., January 2, 1999, H.Rept. 105-849 (Washington: GPO, 1999), p. 8.
U.S. Congress, Senate Committee on Small Business, Hearing on the Proposed Fiscal Year 1995 Budget for the Small Business Administration, 103rd Cong., 2nd sess., February 22, 1994, S. Hrg. 103-583 (Washington: GPO, 1994), p. 20.
SBA, Fiscal Year 2010 Congressional Budget Justification, p. 30, at https://www.sba.gov/sites/default/files/Congressional_Budget_Justification_2010.pdf.
The SBA provides financial assistance to nonprofit organizations to provide training to small business owners and to provide loans to small businesses through the SBA Microloan program. Also, nonprofit child care centers are eligible to participate in SBA's Microloan program.
P.L. 111-240, the Small Business Jobs Act of 2010, requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards every 18 months beginning on the new law's date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years.
For additional information and analysis, see CRS Report R40860, Small Business Size Standards: A Historical Analysis of Contemporary Issues, by Robert Jay Dilger.
13 C.F.R. §121.201 and P.L. 111-240, the Small Business Act of 2010, §1116. Alternative Size Standards.
SBA, Office of Government Contracting and Business Development, "SBA Size Standards Methodology," April 2018, pp. 29, 30, at http://www.sba.gov/sites/default/files/size_standards_methodology.pdf.
Title 13 of the Code of Federal Regulations can be viewed at https://www.gpo.gov/fdsys/browse/collectionCfr.action?selectedYearFrom=2016&go=Go.
P.L. 105-135, the Small Business Reauthorization Act of 1997, expanded the SBA's Microloan program's eligibility to include borrowers establishing a nonprofit child care business.
SBA, "SBA Information Notice: 7(a) Fees Effective on October 1, 2018," at https://www.sba.gov/document/information-notice-5000-180010-7a-fees-effective-october-1-2018.
The SBA had waived the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program from January 1, 2014, through the end of FY2015. P.L. 114-38 made the SBAExpress program's veteran fee waiver permanent, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. The SBA waived the fee, pursuant to P.L. 114-38, in FY2016, FY2017, and FY2018.
SBA, FY2016 Congressional Budget Justification and FY2014 Annual Performance Report, p. 6, at https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF; U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2017; Appendix: Small Business Administration, pp. 1213-1223, at https://www.gpo.gov/fdsys/pkg/BUDGET-2017-APP/pdf/BUDGET-2017-APP-1-29.pdf; U.S. Office of Management and Budget, "Appendix: Budget of the U. S. Government, Fiscal Year 2018," p. 1105, at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/sba.pdf; and SBA, FY2019 Congressional Budget Justification and FY2017 Annual Performance Report, pp. 8, 14, at https://www.sba.gov/sites/default/files/aboutsbaarticle/SBA_FY_2019_CBJ_APR_2_12_post.pdf.
For further information and analysis, see CRS Report R41146, Small Business Administration 7(a) Loan Guaranty Program, by Robert Jay Dilger.
SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2018)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_20180930.pdf.
SBA, FY2020 Congressional Budget Justification and FY2018 Annual Performance Report, p. 162, at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
SBA, "Maximum Allowable 7(a) Fixed Interest Rates," 83 Federal Register 55478, November 6, 2018. For the previously used fixed interest rates formula, see SBA, "Business Loan Program Maximum Allowable Fixed Rate," 74 Federal Register 50263-50264, September 30, 2009. The SBA has a separate formula for Community Advantage loan interest rates and does not prescribe interest rates for the Export Working Capital Loans, but it does monitor the rates charged for reasonableness.
SBA, "SOP 50 10 5(J): Lender and Development Company Loan Programs," (effective January 1, 2018), p. 147, at https://www.sba.gov/sites/default/files/2017-11/SOP%2050%2010%205%28J%29.pdf.
P.L. 111-240, the Small Business Jobs Act of 2010, temporarily increased the SBAExpress program's loan limit to $1 million for one year following enactment (through September 26, 2011).
SBA, "Community Advantage Pilot Program," 77 Federal Register 67433, November 9, 2012; SBA, "Community Advantage Pilot Program," 80 Federal Register 80873, December 28, 2015; and SBA, "Community Advantage Pilot Program," 83 Federal Register 46238, September 12, 2018.
SBA, "Community Advantage Pilot Program," 83 Federal Register 46238, September 12, 2018.
The SBA indicated that "Given the increased risk of CA loans as compared to other 7(a) loans, the need for more resource-intensive oversight of CA Lenders, and the fact that the CA Pilot Program already includes a sufficient number of geographically dispersed CA Lenders, SBA has decided to place a moratorium on acceptance of new CA Lender applications. Effective October 1, 2018, SBA will no longer accept CA Lender Applications (SBA Form 2301)." See SBA, "Community Advantage Pilot Program," 83 Federal Register 46239, September 12, 2018.
For further information and analysis, see CRS Report R41184, Small Business Administration 504/CDC Loan Guaranty Program, by Robert Jay Dilger.
A debenture is a bond that is not secured by a lien on specific collateral.
For further information and analysis, see CRS Report R43155, Small Business Administration Trade and Export Promotion Programs, by Sean Lowry.
The International Trade loan program limits its guaranty for working capital to $4 million ($4.444 million gross loan amount).
P.L. 114-125, the Trade Facilitation and Trade Enforcement Act of 2015, provided the STEP program explicit statutory authorization and authorized to be appropriated $30 million for STEP grants from FY2016 through FY2020. The act also included provisions intended to improve coordination between the federal government and the states, among other provisions.
For further information and analysis, see CRS Report R41057, Small Business Administration Microloan Program, by Robert Jay Dilger.
SBA, "Nationwide Microloan Report, October 1, 2017 through September 30, 2018," October 26, 2018.
These programs apply government-wide but are implemented under the authority of the Small Business Act, pursuant to regulations promulgated by the SBA that determine, in part, eligibility for the programs.
For additional information and analysis, see CRS Report R44844, SBA's "8(a) Program": Overview, History, and Current Issues, by Robert Jay Dilger.
Section 8(a) of the Small Business Act, P.L. 85-536, as amended, can be found at 15 U.S.C. 637(a). Regulations are in 13 C.F.R. §124.
U.S. General Services Administration (GSA), Federal Procurement Data System—Next Generation, accessed on June 5, 2018, at https://www.fpds.gov/fpdsng/.
For additional information and analysis, see CRS Report R41268, Small Business Administration HUBZone Program, by Robert Jay Dilger.
GSA, Federal Procurement Data System—Next Generation, accessed on June 5, 2018, at https://www.fpds.gov/fpdsng/.
Veteran-owned small businesses and service-disabled veteran-owned small businesses are eligible for separate preferences in procurements conducted by the Department of Veterans Affairs under the authority of the Veterans Benefits, Health Care, and Information Technology Act, as amended by the Veterans' Benefits Improvements Act of 2008.
P.L. 113-291, the Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015.
SBA, "Dynamic Small Business Search," at http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
SBA, FY2018 Congressional Budget Justification and FY2016 Annual Performance Report, p. 44, at https://www.sba.gov/sites/default/files/aboutsbaarticle/FINAL_SBA_FY_2018_CBJ_May_22_2017c.pdf.
SBA, FY2020 Congressional Budget Justification and FY2018 Annual Performance Report, p. 76, at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
For additional information and analysis, see CRS Report R42037, SBA Surety Bond Guarantee Program, by Robert Jay Dilger.
Ancillary bonds are also eligible if they are incidental and essential to a contract for which the SBA has guaranteed a final bond. A reclamation bond is eligible if it is issued to reclaim an abandoned mine site and for a project undertaken for a specific period of time.
P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, includes a provision that increased the Preferred Surety Bond Guarantee Program's guarantee rate from not to exceed 70% to not to exceed 90% of losses starting one year from enactment (effective November 25, 2016). For additional information and analysis, see CRS Report R42037, SBA Surety Bond Guarantee Program, by Robert Jay Dilger.
SBA Office of Congressional and Legislative Affairs, correspondence with the author, February 15, 2019.
SBA, "Surety Bonds," at https://www.sba.gov/category/navigation-structure/loans-grants/bonds/surety-bonds.
P.L. 95-507, a bill to amend the Small Business Act and the Small Business Investment Act of 1958.
P.L. 100-656, the Business Opportunity Development Reform Act of 1988.
SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, "FY 2018 Goaling Guidelines," August 30, 2017, p. 3, at https://www.sba.gov/document/report—sba-goaling-guidelines and U.S. General Services Administration (GSA), Federal Procurement Data System—Next Generation, "What's In FPDS-NG," at https://www.fpds.gov/wiki/index.php/FPDS-NG_FAQ.
U.S. General Services Administration, Federal Procurement Data System—Next Generation, "Small Business Goaling Report: Fiscal Year 2017," at https://www.fpds.gov/downloads/top_requests/FPDSNG_SB_Goaling_FY_2017.pdf.
SBA, FY2018 Congressional Budget Justification and FY2016 Annual Performance Report, p. 104, at https://www.sba.gov/sites/default/files/aboutsbaarticle/FINAL_SBA_FY_2018_CBJ_May_22_2017c.pdf.
SBA, FY2019 Congressional Budget Justification and FY2017 Annual Performance Report, p. 73, at https://www.sba.gov/sites/default/files/aboutsbaarticle/SBA_FY_19_508Final5_1.pdf; and SBA, FY2020 Congressional Budget Justification and FY2018 Annual Performance Report, p. 76, at https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report.
For additional information and analysis, see CRS Report R44589, SBA's Office of Inspector General: Overview, Impact, and Relationship with Congress, by Robert Jay Dilger.
SBA, "Office of Inspector General," at https://www.sba.gov/office-of-inspector-general.
SBA, "Office of the Inspector General Strategic Plan for FY 2012–2017," p. 3, at https://www.sba.gov/sites/default/files/oig/SBA-OIG%202012-2017%20Strategic%20Plan%20.pdf.
For further information and analysis, see CRS Report R41456, SBA Small Business Investment Company Program, by Robert Jay Dilger.
13 C.F.R. §107.800. The SBIC is not allowed to become a general partner in any unincorporated business or become jointly or severally liable for any obligations of an unincorporated business.
13 C.F.R. §107.810 and 13 C.F.R. §107.840.
13 C.F.R. §107.815. Debt securities are instruments evidencing a loan with an option or any other right to acquire equity securities in a small business or its affiliates, or a loan which by its terms is convertible into an equity position, or a loan with a right to receive royalties that are excluded from the cost of money.
SBA, "Small Business Investment Company (SBIC) Program Overview, as of September 30, 2018," at https://www.sba.gov/article/2018/nov/16/fiscal-year-data-period-ending-september-30-2018.
For further information and analysis of the New Markets Venture Capital program, see CRS Report R42565, SBA New Markets Venture Capital Program, by Robert Jay Dilger.
For further information and analysis of the SBIR program, see CRS Report R43695, Small Business Innovation Research and Small Business Technology Transfer Programs, by John F. Sargent Jr.
See P.L. 97-219, the Small Business Innovation Development Act of 1982 and 15 U.S.C. §638.
The percentage of each designated agency's applicable extramural research and development budget to be used to support mission-related work in small businesses was scheduled to increase to not less than 2.7% in FY2013, not less than 2.8% in FY2014, not less than 2.9% in FY2015, not less than 3.0% in FY2016, and not less than 3.2% in FY2017 and each fiscal year thereafter. See P.L. 112-81, the National Defense Authorization Act for Fiscal Year 2012 and SBA, "Small Business Innovation Research Program Policy Directive," 77 Federal Register 46806-46855.
See SBA, "About SBIR: Dollar Amount of Awards Adjusted for Inflation," at https://www.sbir.gov/about/about-sbir. Agencies may issue an award exceeding these award guideline amounts by no more than 50%.
See SBA, "About SBIR: SBIR Participating Agencies," at https://www.sbir.gov/about/about-sbir.
See P.L. 102-564, the Small Business Research and Development Enhancement Act of 1992 and 15 U.S.C. §638.
See SBA, "About STTR: Dollar Amount of Awards Adjusted for Inflation," at https://www.sbir.gov/about/about-sttr. Agencies may issue an award exceeding these award guideline amounts by no more than 50%.
The STTR program's set-aside was not less than 0.4% in FY2015, and was increased to 0.45% in FY2016 and each fiscal year thereafter. See P.L. 112-81, the National Defense Authorization Act for Fiscal Year 2012 and SBA, "Small Business Technology Transfer Program Policy Directive," 77 Federal Register 46855-46908.
SBA, FY2018 Congressional Budget Justification and FY2016 Annual Performance Report, p. 75, at https://www.sba.gov/sites/default/files/aboutsbaarticle/FINAL_SBA_FY_2018_CBJ_May_22_2017c.pdf.
SBA, "SBA Growth Accelerator Fund Competition: The 2017 Growth Accelerator Fund Competition," at https://www.sba.gov/node/1428931/leadership/.
For further information and analysis of the Office of Advocacy, see CRS Report R43625, SBA Office of Advocacy: Overview, History, and Current Issues, by Robert Jay Dilger.
SBA, "Office of Advocacy: About Us," at https://www.sba.gov/category/advocacy-navigation-structure/about-us-0.
SBA, Office of Advocacy, FY2013 Congressional Budget Justification, p. 2, at https://www.sba.gov/sites/default/files/files/1-508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR%281%29.pdf.
The National Women's Business Council, "About the Council," Washington, DC, at https://www.nwbc.gov/about/.
For further information and analysis see CRS Report R45071, SBA Office of the National Ombudsman: Overview, History, and Current Issues, by Robert Jay Dilger.
SBA, "Office of the National Ombudsman and Assistant Administrator for Regulatory Enforcement Fairness," at https://www.sba.gov/ombudsman.
SBA, "National Ombudsman's Fiscal Year Reports to Congress," at https://www.sba.gov/ombudsman/national-ombudsmans-fiscal-year-reports-congress.
SBA, "SBA and NAGGL Launch Business Smart Toolkit," September 4, 2015, at https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-and-naggl-launch-business-smart-toolkit.
P.L. 111-240, the Small Business Jobs Act of 2010, made several changes relating to the SBA's loan guaranty programs. The legislation increased loan limits for the 7(a) program from $2 million to $5 million and raised the 504/CDC program's loan limits from $2 million to $5 million for standard borrowers and from $4 million to $5.5 million for manufacturers. It temporarily expanded for two years the eligibility for low-interest refinancing under the SBA's 504/CDC program for qualified debt. It also amended the SBAExpress program, the SBA Microloan program, the SBA secondary market program, the SBA size standards, and the SBA International Trade Finance program. For further information and analysis concerning P.L. 111-240, see CRS Report R40985, Small Business: Access to Capital and Job Creation, by Robert Jay Dilger.
P.L. 112-17, the Small Business Additional Temporary Extension Act of 2011.
The act redefined a BRAC base closure area under the HUBZone program to include the lands within the external boundaries of the closed base and the census tract or nonmetropolitan county in which the lands of the closed base are wholly contained, intersect it, or are contiguous to it.
P.L. 114-125 also included provisions intended to improve coordination between the federal government and the states, among other provisions.
For further information concerning SBA appropriations, see CRS Report R43846, Small Business Administration (SBA) Funding: Overview and Recent Trends, by Robert Jay Dilger.
P.L. 116-6, the Consolidated Appropriations Act, 2019.

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