Biden’s Small Business Administration: More Lenders, Easier Terms, Fewer Hurdles

The face of entrepreneurship in America is becoming less white–and Isabel Guzman is well aware.

The Small Business Administration boss–barely three months on the job–is eager to overhaul the federal agency’s programs to make them more equitable and effective for all small businesses–particularly those that need the most help.

“Everything’s on the table,” Guzman tells Inc. in a recent one-on-one interview. “For our economy to recover,” she adds, “we have to transform our programs and services to really meet these businesses where they are at.”

The pandemic, she says, laid bare key fissures in its small-business resource and financing continuum, which in a typical year, supports a portfolio of $40 billion in loans but jumped to more than $1 trillion in loans and grants since the onset of the pandemic.

Here are three changes to the SBA you’re likely to see while Guzman leads the agency:

1. The lending pool could deepen.

The number of approved SBA lenders, which support borrowers applying through the agency’s regular lending programs like the 7(a) and 504, may well balloon.

While more than 5,000 lenders were approved to support  Paycheck Protection Program loans, around 1,800 institutions were considered active lenders prior to the pandemic. (Active is defined as an institution that’s made a SBA loan in the last two years.) In other words, all of those fintech companies that swooped in to help borrowers without traditional lending relationships during the pandemic aren’t now allowed to facilitate post-crisis-era loans. That could change, says Guzman. “Maintaining the type of reach that we hit through PPP is really definitely a goal.”

2. Friendlier loan terms could continue.

Thanks to the Economic Aid Act, which passed in December 2020–the loan terms for the SBA’s traditional loans were sweetened to include a temporary cessation of fees and interest, and payment subsidies up to $9,000 through September 30 or as long as funds last. Relief efforts also led to a temporary increase in the guaranteed amount of a loan backed by the SBA to 90 percent. Traditionally, loans up to $150,000 were 85 percent backed by the SBA. Loans greater than $150,000 were 75 percent backed. 

Guzman notes that these sweeteners could stick around. “Those are, obviously, really key parts of our tool kit, [and we’re] looking at guarantees and fees,” she says, adding that debt relief is also on the table. “We’ll continue to evaluate [our programs’] impact, and [assess] which ones are best for the small businesses, to meet them where they’re at.”

3. Help is on the way. 

It became abundantly clear during the pandemic that some borrowers were given priority from certain lenders because they had existing relationships. But others simply were too small to care about.

The smallest businesses and those founded by owners less familiar with banking–say, immigrant founders or those located in economically disadvantaged communities–were generally overlooked because they tend to need the most handholding. And, since these businesses tended to be smaller, with reduced financing needs, banks tend to make less money from them. These conditions are true even without the pandemic–but resources shouldn’t just be available to those who can afford them. Rather, they should go first to those who can’t, says Guzman. “I’ve asked my staff to look at all of our programs, from design to implementation, and ask those questions of is this accessible to everyone? Then how do we think about the customer first, be technology forward, and equitable in our design and implementation?”

She highlighted the Restaurant Revitalization Fund (RRF), the $28.6 billion grant program for food-service businesses, as being an important proving ground for a more equitable program. “We were able to critically meet the needs of so many hard-hit small businesses–the smallest of the small, as well as those from underserved communities, women, veterans, and socially, and economically disadvantaged businesses,” says Guzman, who notes that more than half of the 362,000 applications the SBA received were from those targeted entrepreneurs.

From an implementation perspective, she also touted the RRF’s communications efforts: “The outreach that we did–conducting thousands of webinars–reached over 100,000 people.”

She’s also optimistic that the forthcoming Community Navigators program will yield improved results. Authorized by the American Rescue Plan Act, the $100 million program is meant to help community organizations or community financial institutions get funding to provide outreach, education, and technical assistance to help eligible small businesses become aware of and participate in relief programs. It prioritizes increasing access among businesses owned by socially and economically disadvantaged individuals, women, and veterans.