COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options

Changes from October 6, 2020 to December 2, 2020

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COVID-19 Relief Assistance to Small
~~October 6~~December 2, 2020 , 2020
Businesses: Issues and Policy Options
Robert Jay Dilger
The U.S. Small Business Administration (SBA) administers several types of programs to support The U.S. Small Business Administration (SBA) administers several types of programs to support
Senior Specialist in Senior Specialist in
small businesses, including direct disaster loan programs for businesses, homeowners, and small businesses, including direct disaster loan programs for businesses, homeowners, and
American National American National
renters; loan guaranty and venture capital programs; management and technical assistance renters; loan guaranty and venture capital programs; management and technical assistance
Government Government
training programs; and contracting programs. training programs; and contracting programs.

Bruce R. Lindsay
Congressional interest in these programs has always been high, primarily because small Congressional interest in these programs has always been high, primarily because small
Analyst in American Analyst in American
businesses are viewed as a means to stimulate economic activity and create jobs, but it has businesses are viewed as a means to stimulate economic activity and create jobs, but it has
National Government National Government
become especially acute in the wake of the Coronavirus Disease 2019 (COVID-19) become especially acute in the wake of the Coronavirus Disease 2019 (COVID-19) pandemic’s pandemic’s

widespread adverse economic impact on the national economy. widespread adverse economic impact on the national economy.
Sean Lowry
~~Analyst in Public Finance~~
This report provides a brief description of the SBA’s programs and examines congressional This report provides a brief description of the SBA’s programs and examines congressional

Analyst in Public Finance action to assist small businesses during and immediately following the Great Recession (2007- action to assist small businesses during and immediately following the Great Recession (2007-
2009) and during the COVID-19 pandemic, including the following: 2009) and during the COVID-19 pandemic, including the following:

 P.L. 116-123,  P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020,
provided the SBA an additional $20 million provided the SBA an additional $20 million for SBA disaster assistance administrative expenses and made for SBA disaster assistance administrative expenses and made
economic injury from the coronavirus an eligible expense for SBA’s Economic Injury Disaster Loans economic injury from the coronavirus an eligible expense for SBA’s Economic Injury Disaster Loans
(EIDL). (EIDL).
 P.L. 116-136,  P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), among other the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), among other
provisions, provided $349 billion to support SBA’s Section 7(a) lending programs and create a new provisions, provided $349 billion to support SBA’s Section 7(a) lending programs and create a new
Paycheck Protection Program (PPP). PPP loans have a 100% SBA loan guarantee, a 10-year maximum Paycheck Protection Program (PPP). PPP loans have a 100% SBA loan guarantee, a 10-year maximum
term, and a not-to-exceed 4% interest rate to assist small businesses, small 501(c)(3) nonprofit term, and a not-to-exceed 4% interest rate to assist small businesses, small 501(c)(3) nonprofit
organizations, and small 501(c)(19) veterans organizations that have been adversely affected by COVID-organizations, and small 501(c)(19) veterans organizations that have been adversely affected by COVID-
19. Loan deferment and forgiveness are provided under specified conditions. The loans were originally 19. Loan deferment and forgiveness are provided under specified conditions. The loans were originally
available through June 30, 2020, and had a two-year term at 1% interest. available through June 30, 2020, and had a two-year term at 1% interest.
 P.L. 116-139,  P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement Act (Enhancement Act), the Paycheck Protection Program and Health Care Enhancement Act (Enhancement Act),
among other provisions, appropriated an additional $321.335 billion for the PPP. among other provisions, appropriated an additional $321.335 billion for the PPP.
 P.L. 116-142,  P.L. 116-142, the Paycheck Protection Program Flexibility Act, among other provisions, extended the PPP the Paycheck Protection Program Flexibility Act, among other provisions, extended the PPP
loan forgiveness covered period from 8 weeks after the loan’s origination date to the earlier of 24 weeks or loan forgiveness covered period from 8 weeks after the loan’s origination date to the earlier of 24 weeks or
December 31, 2020. PPP borrowers may elect to remain under the 8-week-covered period.December 31, 2020. PPP borrowers may elect to remain under the 8-week-covered period.
 P.L. 116-147,  P.L. 116-147, to extend the authority for commitments for the paycheck protection program, extended the to extend the authority for commitments for the paycheck protection program, extended the
PPP covered loan period from June 30, 2020, to August 8, 2020, and authorized $659 billion for PPP loan PPP covered loan period from June 30, 2020, to August 8, 2020, and authorized $659 billion for PPP loan
commitments and $30 billion for 7(a) loan commitmentscommitments and $30 billion for 7(a) loan commitments . .
 H.R. 6800, the Heroes Act, S. 4321, the Continuing Small Business Recovery and Paycheck Protection  H.R. 6800, the Heroes Act, S. 4321, the Continuing Small Business Recovery and Paycheck Protection
Program Act, and H.R. 925, the (updated) Heroes Act, would make numerous changes to the PPP program. Program Act, and H.R. 925, the (updated) Heroes Act, would make numerous changes to the PPP program.
Some of the CARES Act’s provisions (e.g., fee waivers and increased loan limits) were used in legislation during the 111th Some of the CARES Act’s provisions (e.g., fee waivers and increased loan limits) were used in legislation during the 111th
Congress to assist small businesses during and immediately following the Great Recession. The main difference between that Congress to assist small businesses during and immediately following the Great Recession. The main difference between that
legislation and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness, and greatly expanded legislation and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness, and greatly expanded
eligibility, including, for the first time, specified types of nonprofit organizations. eligibility, including, for the first time, specified types of nonprofit organizations.
The PPP started on April 3, 2020. The SBA stopped accepting new PPP loan applications on April 15, 2020, because the The PPP started on April 3, 2020. The SBA stopped accepting new PPP loan applications on April 15, 2020, because the
SBA neared its $349 billion authorization limit for Section 7(a) lending, which includes the PPP. The SBA started accepting SBA neared its $349 billion authorization limit for Section 7(a) lending, which includes the PPP. The SBA started accepting
PPP loan applications once again on April 27, 2020, following the Enhancement Act’s appropriating an additional $321.335 PPP loan applications once again on April 27, 2020, following the Enhancement Act’s appropriating an additional $321.335
billion to support up to $659 billion in Section 7(a) lending. As required by the CARES Act, the SBA stopped accepting new billion to support up to $659 billion in Section 7(a) lending. As required by the CARES Act, the SBA stopped accepting new
PPP loan applications at midnight on June 30, 2020. The SBA resumed accepting PPP loan applications on July 6, 2020, PPP loan applications at midnight on June 30, 2020. The SBA resumed accepting PPP loan applications on July 6, 2020,
following P.L. 116-147’s enactment and, as required by that act, stopped accepting PPP loan applications on August 8, 2020. following P.L. 116-147’s enactment and, as required by that act, stopped accepting PPP loan applications on August 8, 2020.
One lesson learned from the actions taken during the 111th Congress to assist small businesses during and immediately One lesson learned from the actions taken during the 111th Congress to assist small businesses during and immediately
following the Great Recession is the potential benefits that can be derived from providing additional funding for the SBA’s following the Great Recession is the potential benefits that can be derived from providing additional funding for the SBA’s
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COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options

Office of Inspector General (OIG) and the Government Accountability Office (GAO). GAO and the SBA’s OIG can provide Office of Inspector General (OIG) and the Government Accountability Office (GAO). GAO and the SBA’s OIG can provide
Congress information that could prove useful as Congress engages in congressional oversight of the SBA’s administration of Congress information that could prove useful as Congress engages in congressional oversight of the SBA’s administration of
legislation to address COVID-19’s adverse economic impact on small businesses, provide an early warning if unforeseen legislation to address COVID-19’s adverse economic impact on small businesses, provide an early warning if unforeseen
administrative problems should arise, and, through investigations and audits, serve as a deterrent to fraud. Requiring the SBA administrative problems should arise, and, through investigations and audits, serve as a deterrent to fraud. Requiring the SBA
to report regularly on its implementation of the CARES Act could promote transparency and assist Congress in performing to report regularly on its implementation of the CARES Act could promote transparency and assist Congress in performing
its oversight responsibilities. In addition, requiring both output and outcome performance measures and requiring the SBA to its oversight responsibilities. In addition, requiring both output and outcome performance measures and requiring the SBA to
report this information to Congress and the public by posting that information on the SBA’s website could enhance report this information to Congress and the public by posting that information on the SBA’s website could enhance
congressional oversight and public confidence in the SBA’s efforts to assist small businesses. congressional oversight and public confidence in the SBA’s efforts to assist small businesses.
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Introduction
The The ~~Small~~ Smal Business Administration (SBA) administers several types of programs to support Business Administration (SBA) administers several types of programs to support ~~small~~
smal businesses, including businesses, including
 direct disaster loan programs for businesses, homeowners, and renters to assist  direct disaster loan programs for businesses, homeowners, and renters to assist
their recovery from natural disasters; their recovery from natural disasters;
 loan guaranty and venture capital programs to enhance  loan guaranty and venture capital programs to enhance ~~small~~ smal business access to business access to
capital; capital;
  ~~small~~ smal business management and technical assistance training programs to assist business management and technical assistance training programs to assist
business formation and expansion; and business formation and expansion; and
 contracting programs to increase  contracting programs to increase ~~small~~ smal business opportunities in federal business opportunities in federal
contracting. contracting.
Congressional interest in the SBA’s programs has increased in recent years, primarily because Congressional interest in the SBA’s programs has increased in recent years, primarily because
~~small~~ smal businesses are viewed as a means to stimulate economic activity and create jobs. businesses are viewed as a means to stimulate economic activity and create jobs.
Congressional interest, however, has become Congressional interest, however, has become ~~especially~~especial y acute in the wake of the Coronavirus acute in the wake of the Coronavirus
Disease 2019 (COVID-19) pandemic’s widespread adverse economic impact on the national Disease 2019 (COVID-19) pandemic’s widespread adverse economic impact on the national
economy, including productivity losses, supply chain disruptions, major labor dislocation, and economy, including productivity losses, supply chain disruptions, major labor dislocation, and
significant financial pressure on both businesses and households.significant financial pressure on both businesses and households.
P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act,
2020, was the first act to include provisions targeting SBA assistance to 2020, was the first act to include provisions targeting SBA assistance to ~~small~~ smal businesses businesses
adversely affected by COVID-19. The act provided the SBA an additional $20 adversely affected by COVID-19. The act provided the SBA an additional $20 ~~million~~ mil ion for SBA for SBA
disaster assistance administrative expenses and deemed the coronavirus to be a disaster under the disaster assistance administrative expenses and deemed the coronavirus to be a disaster under the
SBA’s Economic Injury Disaster Loan (EIDL) program. This change made economic injury from SBA’s Economic Injury Disaster Loan (EIDL) program. This change made economic injury from
the coronavirus an eligiblethe coronavirus an eligible EIDL expense. EIDL expense.
Congress followed with P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act Congress followed with P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act). The CARES Act made numerous changes to SBA programs, including the creation (CARES Act). The CARES Act made numerous changes to SBA programs, including the creation
of the Paycheck Protection Program (PPP), which are loans 100% guaranteed by the SBA with a of the Paycheck Protection Program (PPP), which are loans 100% guaranteed by the SBA with a
maximum term of 10 years and a maximum interest rate of no more than 4%. These loans are maximum term of 10 years and a maximum interest rate of no more than 4%. These loans are
availableavailable ~~to small~~ to smal businesses, businesses, ~~small~~ smal 501(c)(3) nonprofit organizations, and 501(c)(3) nonprofit organizations, and ~~small~~ smal 501(c)(19) 501(c)(19)
veterans organizations—and are eligibleveterans organizations—and are eligible for loan forgiveness. The SBA announced that the loans for loan forgiveness. The SBA announced that the loans
would have a two-year term at a 1.0% interest rate. would have a two-year term at a 1.0% interest rate.
The CARES Act provides deferment relief for PPP loans and existing loans made under the 7(a), The CARES Act provides deferment relief for PPP loans and existing loans made under the 7(a),
504/CDC, and Microloan programs. The act also appropriates $349 504/CDC, and Microloan programs. The act also appropriates $349 ~~billion~~bil ion for PPP loan for PPP loan
guarantees and subsidies (to remain availableguarantees and subsidies (to remain available through FY2021), $10 through FY2021), $10 ~~billion~~bil ion for Emergency EIDL for Emergency EIDL
Advance Payment grants, $675 Advance Payment grants, $675 ~~million~~mil ion for the SBA’s salaries and expenses account, $562 for the SBA’s salaries and expenses account, $562 ~~million~~mil ion
for disaster loans, $25 for disaster loans, $25 ~~million~~mil ion for the SBA’s Office of Inspector General (OIG), $265 for the SBA’s Office of Inspector General (OIG), $265 ~~million~~mil ion for for
entrepreneurial development programs ($192 entrepreneurial development programs ($192 ~~million for small~~ mil ion for smal business development centers business development centers
(SBDCs), $48 (SBDCs), $48 ~~million~~ mil ion for women’s business centers (WBCs), and $25 for women’s business centers (WBCs), and $25 ~~million~~mil ion for SBA for SBA resource resource
partners to provide online information and training), and $17 partners to provide online information and training), and $17 ~~billion~~ bil ion for six months of debt relief for six months of debt relief
for the SBA’s 7(a), 504/CDC, and Microloan programs. for the SBA’s 7(a), 504/CDC, and Microloan programs.
A summary of the CARES Act’s major A summary of the CARES Act’s major ~~small~~ smal business-related provisions is presented in the business-related provisions is presented in the
Appendix.
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The CARES Act was enacted on March 27, 2020. On March 30, 2020, the SBA updated its The CARES Act was enacted on March 27, 2020. On March 30, 2020, the SBA updated its
website to website to ~~allow~~al ow COVID-19-related EIDL applicants an option to request an Emergency EIDL COVID-19-related EIDL applicants an option to request an Emergency EIDL
Advance Payment grant.1Advance Payment grant.1
The SBA started accepting PPP loan applications on April 3, 2020.2 Because the SBA neared its The SBA started accepting PPP loan applications on April 3, 2020.2 Because the SBA neared its
$349 $349 ~~billion~~ bil ion authorization limitauthorization limit for Section 7(a) lending, which at that time included the PPP, the for Section 7(a) lending, which at that time included the PPP, the
SBA stopped accepting new PPP loan applications on AprilSBA stopped accepting new PPP loan applications on April 15, 2020.3 A total of 1,661,367 PPP 15, 2020.3 A total of 1,661,367 PPP
loans were approved by 4,975 lenders, totaling $342,277,999,103. Most of the loans (74%) were loans were approved by 4,975 lenders, totaling $342,277,999,103. Most of the loans (74%) were
for less than $150,000. The average loan amount was $206,022.4 for less than $150,000. The average loan amount was $206,022.4
The SBA The SBA also stopped accepting COVID-19-related EIDL and Emergency EIDL Advance also stopped accepting COVID-19-related EIDL and Emergency EIDL Advance
Payment grant applications on April 15, because the SBA was approaching its disaster loan Payment grant applications on April 15, because the SBA was approaching its disaster loan
assistance credit subsidy limit.5 COVID-19-related EIDL and Emergency EIDL Advance assistance credit subsidy limit.5 COVID-19-related EIDL and Emergency EIDL Advance
Payment grant applications already received continued to be processed on a first-in first-out basis. Payment grant applications already received continued to be processed on a first-in first-out basis.
The SBA began accepting new EIDL and Emergency EIDL Advance Payment grant applications The SBA began accepting new EIDL and Emergency EIDL Advance Payment grant applications
on a limited basis on May 4 to accommodate agricultural businesses that were provided EIDL on a limited basis on May 4 to accommodate agricultural businesses that were provided EIDL
~~eligibility~~ eligibility by the Paycheck Protection Program and Healthcare Enhancement Act (P.L. 116-139). by the Paycheck Protection Program and Healthcare Enhancement Act (P.L. 116-139).
The SBA also processed applications from agricultural businesses that had submitted an EIDL The SBA also processed applications from agricultural businesses that had submitted an EIDL
application prior to the legislativeapplication prior to the legislative change. Those agricultural businesses did not need to reapply. change. Those agricultural businesses did not need to reapply.
~~All~~ Al other EIDL loan applications that were submitted before the SBA stopped accepting new other EIDL loan applications that were submitted before the SBA stopped accepting new
applications on Aprilapplications on April 15 continued to be processed on a first-in, first-out basis.6 The SBA resumed 15 continued to be processed on a first-in, first-out basis.6 The SBA resumed
the acceptance of new EIDL and Emergency EIDL Advance Payment applications from the acceptance of new EIDL and Emergency EIDL Advance Payment applications from ~~all~~
al borrowers on June 15, 2020.7 borrowers on June 15, 2020.7
A summary of the Paycheck Protection Program and Healthcare Enhancement Act’s major A summary of the Paycheck Protection Program and Healthcare Enhancement Act’s major ~~small~~
smal business-related provisions is presented in business-related provisions is presented in thethe Appendix.
On July 11, 2020, the SBA announced that it had stopped accepting Emergency EIDL Advance On July 11, 2020, the SBA announced that it had stopped accepting Emergency EIDL Advance
Payment grant applications because the program had reached its authorization limit of $20 Payment grant applications because the program had reached its authorization limit of $20 ~~billion~~

bil ion 1 EIDL applicants that applied for a COVID-19-related EIDL prior to March 30, 2020, were required1 EIDL applicants that applied for a COVID-19-related EIDL prior to March 30, 2020, were required to reapply for an to reapply for an
Emergency EIDL Advance Payment grant. Emergency EIDL Advance Payment grant.
~~2 The SBA~~ 2 T he SBA accepted PPP loan applications from independent contractors and selfaccepted PPP loan applications from independent contractors and self -employed starting on April 10, 2020. -employed starting on April 10, 2020.
3 U.S.3 U.S. ~~Small Business~~ Small Business Administration (SBA), “Statement by Secretary Mnuchin and Administrator Carranza on the Administration (SBA), “Statement by Secretary Mnuchin and Administrator Carranza on the
Paycheck Protection Program and Economic Injury Disaster Loan ProgramPaycheck Protection Program and Economic Injury Disaster Loan Program ,” April 15, 2020, at https://www.sba.gov/,” April 15, 2020, at https://www.sba.gov/
about-sba/sba-newsroom/press-releases-media-advisories/statementabout-sba/sba-newsroom/press-releases-media-advisories/statement -secretary-mnuchin-and-administrator-carranza--secretary-mnuchin-and-administrator-carranza-
paycheck-protection-program-and-economic (hereinafter SBA, “paycheck-protection-program-and-economic (hereinafter SBA, “ Statement by Secretary Mnuchin and Administrator Statement by Secretary Mnuchin and Administrator
Carranza on the Paycheck Protection Program and Economic Injury Disaster Loan Program”). Carranza on the Paycheck Protection Program and Economic Injury Disaster Loan Program”).
P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)Act) authorized $349 billion for authorized $349 billion for
general businessgeneral business loans authorized under Section 7(a) of the Small Businessloans authorized under Section 7(a) of the Small Business Act. Act. ~~This~~T his authorization authorization limit applied to the limit applied to the
7(a) lending programs as well7(a) lending programs as well as to the Paycheck Protection Program (PPP).as to the Paycheck Protection Program (PPP).
4 SBA, 4 SBA, “Paycheck Protection Program (PPP) Report through April 16, 2020, at 12 PM EST“Paycheck Protection Program (PPP) Report through April 16, 2020, at 12 PM EST ,” at https://content.sba.gov/,” at https://content.sba.gov/
sites/default/files/2020-05/PPP%20Deck%20copy.pdf. sites/default/files/2020-05/PPP%20Deck%20copy.pdf.
5 SBA, 5 SBA, “Statement by Secretary Mnuchin and Administrator Carranza on the Paycheck Protection Program and “Statement by Secretary Mnuchin and Administrator Carranza on the Paycheck Protection Program and
Economic Injury Disaster Loan Program.” Economic Injury Disaster Loan Program.”
6 SBA,6 SBA, “Economic Injury Disaster Loan Emergency Advance,” May 4, 2020, at https://www.sba.gov/funding-“Economic Injury Disaster Loan Emergency Advance,” May 4, 2020, at https://www.sba.gov/funding-
programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance. programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance.
7 SBA, 7 SBA, “SBA’s“SBA’s Economic Injury Disaster Loans and Advance Program Reopened to All EligibleEconomic Injury Disaster Loans and Advance Program Reopened to All Eligible ~~Small Businesses~~ Small Businesses and and
Non-Profits Impacted by COVID-19 Pandemic,” JuneNon-Profits Impacted by COVID-19 Pandemic,” June 15, 2020, at https://www.sba.gov/about15, 2020, at https://www.sba.gov/about -sba/sba-newsroom/-sba/sba-newsroom/
press-releases-media-advisories/sbas-economic-injury-disaster-loans-and-advance-program-reopened-all-eligible-press-releases-media-advisories/sbas-economic-injury-disaster-loans-and-advance-program-reopened-all-eligible-
small-businesses-and?utm_medium=email&utm_source=govdelivery. small-businesses-and?utm_medium=email&utm_source=govdelivery.
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in grants.8 The SBA approved 5,781,390 Emergency EIDL Advance Payment grant applications.9 in grants.8 The SBA approved 5,781,390 Emergency EIDL Advance Payment grant applications.9
As of As of ~~September 13~~November 22, 2020, the SBA had approved 3,, 2020, the SBA had approved 3,~~589,667~~645,556 COVID-19-related EIDL loans, COVID-19-related EIDL loans,
totaling over $totaling over $~~190.3 billion~~194.3 bil ion.10 .10
The SBA resumed the acceptance of new PPP loan applications on April 27, 2020, following The SBA resumed the acceptance of new PPP loan applications on April 27, 2020, following
enactment of the Paycheck Protection Program and Health Care Enhancement Act. The act enactment of the Paycheck Protection Program and Health Care Enhancement Act. The act
increased the SBA’s Section 7(a) loan authorization limitincreased the SBA’s Section 7(a) loan authorization limit from $349 from $349 ~~billion~~ bil ion to $659 to $659 ~~billion,~~ bil ion, and and
appropriated $321.335 appropriated $321.335 ~~billion~~bil ion to support that level of lending. The act also appropriated $50 to support that level of lending. The act also appropriated $50
~~billion~~ bil ion for EIDL, $10 for EIDL, $10 ~~billion~~ bil ion for Emergency EIDL grants, and $2.1 for Emergency EIDL grants, and $2.1 ~~billion~~bil ion for SBA salaries and for SBA salaries and
expenses.expenses.
As of August 8, 2020, the SBA had approved, after As of August 8, 2020, the SBA had approved, after ~~cancellations~~cancel ations, 5,212,128 PPP loans totaling , 5,212,128 PPP loans totaling
over $525 over $525 ~~billion (see~~bil ion (see Table 1). For comparative purposes, that loan approval amount is more . For comparative purposes, that loan approval amount is more
than the amount the SBAthan the amount the SBA has approved in has approved in ~~all~~ al of its loan programs, including disaster loans, during of its loan programs, including disaster loans, during
the last 29 years (from October 1, 1991, through December 31, 2019; $509.9 the last 29 years (from October 1, 1991, through December 31, 2019; $509.9 ~~billion~~bil ion).11 ).11
Table 1. Paycheck Protection Program Loan Approvals, After Cancellations,
Through August 8, 2020
Average Loan
Number of Loans
Amount
Characteristic
Approved
Amount Approved
Approved
Lenders
Approvals Approvals
5,212,128 5,212,128
$525,012,201,124 $525,012,201,124
$100,729 $100,729
5,460 5,460
(after (after ~~cancellations~~cancel ations) )
Source: ~~Small~~ Smal Business AdministrationBusiness Administration (SBA), “Additional Program Information: approvals as of August 8, 2020,” (SBA), “Additional Program Information: approvals as of August 8, 2020,”
at https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program. at https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
Note: ~~Cancellations~~Cancel ations include duplicative loans, loans not closed for any reason, include duplicative loans, loans not closed for any reason, and loans that have been paid off. and loans that have been paid off.
As of August 8, 2020, four industry sectors had received at least 10% of PPP net loan amounts: As of August 8, 2020, four industry sectors had received at least 10% of PPP net loan amounts:
 Health Care and Social Assistance (12.9%);  Health Care and Social Assistance (12.9%);
 Professional, Scientific, and Technical Services (12.7%);  Professional, Scientific, and Technical Services (12.7%);
 Construction (12.4%); and  Construction (12.4%); and
 Manufacturing (10.3%).12  Manufacturing (10.3%).12

~~8 SBA, “SBA~~ 8 SBA, “SBA provided $20 billion to Small Businessesprovided $20 billion to Small Businesses and Non-Profits and Non-Profits ~~Through~~T hrough the Emergency Economic Injury the Emergency Economic Injury
Disaster Loan Advance Program,” press release, July 11, 2020, at https://www.sba.gov/aboutDisaster Loan Advance Program,” press release, July 11, 2020, at https://www.sba.gov/about -sba/sba-newsroom/press--sba/sba-newsroom/press-
releases-media-advisories/sba-provided-20-billion-small-businesses-and-non-profits-through-economic-injury-disaster-releases-media-advisories/sba-provided-20-billion-small-businesses-and-non-profits-through-economic-injury-disaster-
loan. loan.
As of April 24, 2020, the SBA had approved nearly 1.2 million Emergency EIDL grants, totaling $4.8 billion As of April 24, 2020, the SBA had approved nearly 1.2 million Emergency EIDL grants, totaling $4.8 billion . See . See
SBA,SBA, “COVID-19 EIDL Advance Reports, April 24, 2020,” at https://www.sba.gov/document/report-covid-19-eidl-“COVID-19 EIDL Advance Reports, April 24, 2020,” at https://www.sba.gov/document/report-covid-19-eidl-
advance-reportadvance-report -04-24-20. -04-24-20.
9 SBA, 9 SBA, “Disaster Assistance Update EIDL Advance July“Disaster Assistance Update EIDL Advance July 15, 2020 (figures as of July15, 2020 (figures as of July 14, 2020),” at 14, 2020),” at
https://www.sba.gov/sites/default/files/2020-07/EIDL%20COVID-19%20Advance%207.15.20.pdf. https://www.sba.gov/sites/default/files/2020-07/EIDL%20COVID-19%20Advance%207.15.20.pdf.
10 SBA,10 SBA, “ “Disaster Assistance Update NationwideDisaster Assistance Update Nationwide EIDL Loans EIDL Loans ~~September 14, 2020~~ November 23, 2020 (figures as of (figures as of ~~September 13~~November 22, 2020),” , 2020),”
at https://www.sba.gov/document/reportat https://www.sba.gov/document/report -covid-19-eidl-loans-report--covid-19-eidl-loans-report-~~9-14~~11-23-20. -20.
11 SBA, 11 SBA, “WDS Lending Data File,”“WDS Lending Data File,” October 18, 2019; and SBA,October 18, 2019; and SBA, “Small Business“Small Business Administration loan program Administration loan program
performance: performance: ~~Table~~T able 2 - Gross 2 - Gross Approval Amount by Program, December 31, 2019,” at https://www.sba.gov/document/Approval Amount by Program, December 31, 2019,” at https://www.sba.gov/document/
reportreport -small-business-administration-loan-program-performance. -small-business-administration-loan-program-performance.
12 SBA,12 SBA, “Paycheck Protection Program (PPP) Report: Approvals through August 8, 2020; Industry by NAICS“Paycheck Protection Program (PPP) Report: Approvals through August 8, 2020; Industry by NAICS Sector,” Sector,”
at https://www.sba.gov/document/reportat https://www.sba.gov/document/report -paycheck-protection-program-report-paycheck-protection-program-report -through-august-8-2020. -through-august-8-2020.
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On May 15, 2020, the House passed H.R. 6800, the Health and Economic Recovery Omnibus On May 15, 2020, the House passed H.R. 6800, the Health and Economic Recovery Omnibus
Emergency Solutions Act (Heroes Act). The Heroes Act, among other provisions, would Emergency Solutions Act (Heroes Act). The Heroes Act, among other provisions, would
 expand PPP eligibility  expand PPP eligibility to include to include ~~all~~ al 501(c) nonprofit organizations; 501(c) nonprofit organizations;
 provide  provide ~~small~~ smal businesses additional flexibilitybusinesses additional flexibility by extending the PPP loan by extending the PPP loan
forgiveness covered period from 8 weeks to the earlier of 24 weeks or December forgiveness covered period from 8 weeks to the earlier of 24 weeks or December
31, 2020; 31, 2020;
 eliminate  eliminate the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness
purposes; purposes;
 provide borrowers a “safe harbor” from the loan forgiveness rehiring requirement  provide borrowers a “safe harbor” from the loan forgiveness rehiring requirement
if the borrower is unable to rehire an individual if the borrower is unable to rehire an individual who was an employee of the who was an employee of the
recipient on or before February 15, 2020, or if the borrower can demonstrate an recipient on or before February 15, 2020, or if the borrower can demonstrate an
inabilityinability to hire similarlyto hire similarly qualified employees on or before December 31, 2020; qualified employees on or before December 31, 2020;
 establish a minimum PPP loan maturity of five years to enable  establish a minimum PPP loan maturity of five years to enable ~~small~~ smal businesses businesses
to amortize the loan over a longer period of time, which lowers monthly to amortize the loan over a longer period of time, which lowers monthly
payments; and payments; and
 appropriate another $10  appropriate another $10 ~~billion~~ bil ion for Emergency EIDL grants. for Emergency EIDL grants.
A summary of the Heroes Act’s major A summary of the Heroes Act’s major ~~small~~ smal business-related provisions is presented in the business-related provisions is presented in the
Appendix.
P.L. 116-142, the Paycheck Protection Program Flexibility Act, was enacted on June 5, 2020. The P.L. 116-142, the Paycheck Protection Program Flexibility Act, was enacted on June 5, 2020. The
act, among other provisions,act, among other provisions,
 extends the PPP loan forgiveness covered period from 8 weeks after the loan’s  extends the PPP loan forgiveness covered period from 8 weeks after the loan’s
origination date to the earlier of 24 weeks after the loan’s origination date or origination date to the earlier of 24 weeks after the loan’s origination date or
December 31, 2020;December 31, 2020;
 provides borrowers that received a PPP loan prior to the date of enactment (June  provides borrowers that received a PPP loan prior to the date of enactment (June
5, 2020) the option to use the CARES Act’s loan forgiveness covered period of 5, 2020) the option to use the CARES Act’s loan forgiveness covered period of
eight weeks after the loan’s origination date; eight weeks after the loan’s origination date;
 replaces the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness  replaces the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness
purposes with the requirement that at least 60% of the loan proceeds be used for purposes with the requirement that at least 60% of the loan proceeds be used for
payroll costs and up to 40% be used for covered mortgage interest, rent, and payroll costs and up to 40% be used for covered mortgage interest, rent, and
utility payments;13 utility payments;13
 provides borrowers a “safe harbor” from the loan forgiveness rehiring  provides borrowers a “safe harbor” from the loan forgiveness rehiring
requirement if the borrower is unable to rehire an individual requirement if the borrower is unable to rehire an individual who was an who was an
employee of the recipient on or before February 15, 2020, or if the borrower can employee of the recipient on or before February 15, 2020, or if the borrower can
demonstrate an inability to hire similarlydemonstrate an inability to hire similarly qualified employees on or before qualified employees on or before
December 31, 2020; December 31, 2020;
 provides borrowers another “safe harbor” from the loan forgiveness rehiring  provides borrowers another “safe harbor” from the loan forgiveness rehiring
requirement if the business can document that it was unable to operate between requirement if the business can document that it was unable to operate between
February 15, 2020, and the end of the covered period at the same level of February 15, 2020, and the end of the covered period at the same level of
business activity as before February 15, 2020, due to compliance with business activity as before February 15, 2020, due to compliance with
requirements established or guidance issued between March 1, 2020, and requirements established or guidance issued between March 1, 2020, and
December 31, 2020, by the U.S. Department of Health and Human Services, the December 31, 2020, by the U.S. Department of Health and Human Services, the

13 If a borrower uses13 If a borrower uses ~~less~~ less than 60% of the PPP loan amount for payroll costs during the forgiveness covered period, the than 60% of the PPP loan amount for payroll costs during the forgiveness covered period, the
borrower willborrower will ~~continue~~ cont inue to be eligible to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amountfor partial loan forgiveness, subject to at least 60% of the loan forgiveness amount
having been usedhaving been used for payroll costs. for payroll costs.
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Centers for Disease Control and Prevention, or the Occupational Safety and Centers for Disease Control and Prevention, or the Occupational Safety and
Health Administration, related to the maintenance of standards for sanitation, Health Administration, related to the maintenance of standards for sanitation,
social distancing, or any other worker or customer safety requirement related to social distancing, or any other worker or customer safety requirement related to
COVID-19 (the SBACOVID-19 (the SBA indicates that this safe harbor includes state and local indicates that this safe harbor includes state and local
government directives based on these requirements or guidance);14 government directives based on these requirements or guidance);14
 establishes a minimum PPP loan maturity of five years for loans made on or after  establishes a minimum PPP loan maturity of five years for loans made on or after
the date of enactment; and the date of enactment; and
 extends the PPP loan deferral period from six months (under SBA regulations) to  extends the PPP loan deferral period from six months (under SBA regulations) to
the date that the SBA remits the borrower’s loan forgiveness amount to the lender the date that the SBA remits the borrower’s loan forgiveness amount to the lender
or, if the borrower does not apply for loan forgiveness, 10 months after the end of or, if the borrower does not apply for loan forgiveness, 10 months after the end of
the borrower’s loan forgiveness covered period. the borrower’s loan forgiveness covered period.
Under the act, June 30, 2020, remained the last date on which a PPP loan application could be Under the act, June 30, 2020, remained the last date on which a PPP loan application could be
approved. A summary of the Paycheck Protection Program Flexibility Act is presented in the approved. A summary of the Paycheck Protection Program Flexibility Act is presented in the
Appendix.
As required by the CARES Act, the SBA As required by the CARES Act, the SBA stopped accepting new PPP loan applications at stopped accepting new PPP loan applications at
midnight on June 30, 2020.midnight on June 30, 2020.
On July 4, 2020, President Trump signed into law P.L. 116-147, to extend the authority for On July 4, 2020, President Trump signed into law P.L. 116-147, to extend the authority for
commitments for the paycheck protection program and separate amounts authorized for other commitments for the paycheck protection program and separate amounts authorized for other
loans under Section 7(a) of the loans under Section 7(a) of the ~~Small~~ Smal Business Act, and for other purposes. The law extended the Business Act, and for other purposes. The law extended the
PPP covered loan period from June 30, 2020, to August 8, 2020, and authorized $659 PPP covered loan period from June 30, 2020, to August 8, 2020, and authorized $659 ~~billion~~bil ion for for
PPP loan commitments and $30 PPP loan commitments and $30 ~~billion~~bil ion for 7(a) loan commitments. The Senate passed the for 7(a) loan commitments. The Senate passed the ~~bill by~~
bil by voice vote on June 30, 2020, and the House passed it by unanimous consent on July 1, 2020.voice vote on June 30, 2020, and the House passed it by unanimous consent on July 1, 2020.
As required by P.L. 116-147, the SBA stopped accepting PPP loan applications on August 8, As required by P.L. 116-147, the SBA stopped accepting PPP loan applications on August 8,
2020. 2020.
S. 4321, the Continuing S. 4321, the Continuing ~~Small~~ Smal Business Recovery and Paycheck Protection Program Act, was Business Recovery and Paycheck Protection Program Act, was
introduced on July 27, 2020. Among other provisions, it would introduced on July 27, 2020. Among other provisions, it would
 extend the PPP loan covered period to December 31, 2020, and reduce the  extend the PPP loan covered period to December 31, 2020, and reduce the
maximum PPP loan amount from $10 maximum PPP loan amount from $10 ~~million~~mil ion to $2 to $2 ~~million~~mil ion; ;
 expand PPP forgivable expenses to include covered operations expenditures (e.g.,  expand PPP forgivable expenses to include covered operations expenditures (e.g.,
software, cloud computing, and other human resources and accounting needs), software, cloud computing, and other human resources and accounting needs),
property damages due to public disturbances that occurred during 2020 (not property damages due to public disturbances that occurred during 2020 (not
covered by insurance or other compensation), covered supplier costs essential to covered by insurance or other compensation), covered supplier costs essential to
the recipient’s current operations, and covered worker protection expenditures to the recipient’s current operations, and covered worker protection expenditures to
comply with federal health and safety guidelines related to COVID-19;comply with federal health and safety guidelines related to COVID-19;
  ~~allow~~al ow borrowers to select a preferred 8-week period after the loan’s origination borrowers to select a preferred 8-week period after the loan’s origination
date through December 31, 2020, for determining loan forgiveness; date through December 31, 2020, for determining loan forgiveness;
 create simplified loan  create simplified loan forgiveness application processes for loans under $150,000 forgiveness application processes for loans under $150,000
and for loans between $150,000 and $2 and for loans between $150,000 and $2 ~~million~~mil ion. The SBA. The SBA would retain the right would retain the right
to review and audit these loans for fraud. Reporting of demographic information to review and audit these loans for fraud. Reporting of demographic information
would be optional; would be optional;
 expand eligibility  expand eligibility to include certain 501(c)(6) organizations, including Chambers to include certain 501(c)(6) organizations, including Chambers
of Commerce and Destination Marketing Organizations, that have 300 or fewer of Commerce and Destination Marketing Organizations, that have 300 or fewer

~~14 SBA and Treasury~~ 14 SBA and T reasury, “Business Loan Program , “Business Loan Program ~~Temporary~~T emporary Changes; Paycheck Protection Program – Revisions to Loan Changes; Paycheck Protection Program – Revisions to Loan
Forgiveness and Loan ReviewForgiveness and Loan Review Procedures Interim Final Rules,”Procedures Interim Final Rules,” 8585 Federal Register 38309, June 26, 2020. 38309, June 26, 2020.
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employees, do not receive more than 10% of their receipts from lobbying, and employees, do not receive more than 10% of their receipts from lobbying, and
whose lobbying activities do not comprise more than 10% of their total activities. whose lobbying activities do not comprise more than 10% of their total activities.
Recipients cannot use any loan proceeds for lobbying activities;Recipients cannot use any loan proceeds for lobbying activities;
  ~~allow~~al ow second PPP “draw” loans through December 31, 2020, for PPP borrowers second PPP “draw” loans through December 31, 2020, for PPP borrowers
that meet the SBA’s revenue standard, if applicable, have not more than 300 that meet the SBA’s revenue standard, if applicable, have not more than 300
employees, and can demonstrate at least a 50% reduction in gross receipts in the employees, and can demonstrate at least a 50% reduction in gross receipts in the
first or second quarter of 2020 relative to the same 2019 quarter. Several types of first or second quarter of 2020 relative to the same 2019 quarter. Several types of
PPP eligiblePPP eligible entities, such as publicly traded companies, would be ineligibleentities, such as publicly traded companies, would be ineligible for a for a
second loan. The maximum loan size would equal 2.5 times average monthly second loan. The maximum loan size would equal 2.5 times average monthly
payroll costs, up to $2 payroll costs, up to $2 ~~million~~mil ion (not more than $10 (not more than $10 ~~million~~ mil ion in the aggregate). Full in the aggregate). Full
loan forgiveness would be based on a 60/40 cost loan forgiveness would be based on a 60/40 cost ~~allocation~~al ocation between payroll and between payroll and
eligibleeligible nonpayroll costs; and nonpayroll costs; and
 increase the PPP authorization amount from $659  increase the PPP authorization amount from $659 ~~billion~~bil ion to $749 to $749 ~~billion,~~ bil ion, rescind rescind
$100 $100 ~~billion~~ bil ion from the SBA’s business loan program account, and appropriate an from the SBA’s business loan program account, and appropriate an
additional $190 additional $190 ~~billion~~ bil ion for the cost of PPP and PPP second draw loans. In for the cost of PPP and PPP second draw loans. In
funding, $25 funding, $25 ~~billion~~ bil ion would be set-aside for entities employing 10 or fewer would be set-aside for entities employing 10 or fewer
employees and $10 employees and $10 ~~billion~~ bil ion would be set-aside for community lenders. would be set-aside for community lenders.
A summary of the Continuing A summary of the Continuing ~~Small~~ Smal Business Recovery and Paycheck Protection Program Act’s Business Recovery and Paycheck Protection Program Act’s
major major ~~small~~ smal business-related provisions is presented in tbusiness-related provisions is presented in the Appendix.
On October 1, 2020, the House passed H.R. 925, the (updated) Heroes Act. Among other On October 1, 2020, the House passed H.R. 925, the (updated) Heroes Act. Among other
provisions, it would make numerous changes to the PPP. For example, the provisions, it would make numerous changes to the PPP. For example, the ~~bill~~ bil would would
  ~~allow~~al ow PPP borrowers that have less than 200 employees and can document PPP borrowers that have less than 200 employees and can document
quarterly revenue losses of at least 25% to receive a second PPP loan of up to $2 quarterly revenue losses of at least 25% to receive a second PPP loan of up to $2
~~million~~mil ion; ;
 expand the list of  expand the list of ~~allowable~~al owable uses of proceeds and loan forgiveness to include uses of proceeds and loan forgiveness to include
personal protective equipment, supplier costs, and costs related to property personal protective equipment, supplier costs, and costs related to property
damage from public disturbances; damage from public disturbances;
 exclude publicly traded entities from being eligible  exclude publicly traded entities from being eligible for PPP loans; for PPP loans;
 exclude businesses that are 51% or more foreign owned, controlled, and managed  exclude businesses that are 51% or more foreign owned, controlled, and managed
from receiving a PPP loan; and from receiving a PPP loan; and
 clarify that prior to enactment the current “no credit elsewhere test” remains in  clarify that prior to enactment the current “no credit elsewhere test” remains in
place for PPP loans, but that going forward the 7(a) credit elsewhere test would place for PPP loans, but that going forward the 7(a) credit elsewhere test would
apply for PPP loans greater than $350,000. apply for PPP loans greater than $350,000.
The The ~~bill~~ bil would also prevent the SBA from imposing an EIDL loan cap below the would also prevent the SBA from imposing an EIDL loan cap below the
program’s program’s statutory limit of $2 statutory limit of $2 ~~million and allow~~mil ion and al ow current EIDL borrowers to modify their current EIDL borrowers to modify their
loans to seek additional funds up to the $2 loans to seek additional funds up to the $2 ~~million~~ mil ion maximum loan size. Due to high maximum loan size. Due to high
demand, the SBA currently demand, the SBA currently limits COVID-19-related EIDL at $150,000. limits COVID-19-related EIDL at $150,000.
A summary of the (updated) Heroes Act’s major A summary of the (updated) Heroes Act’s major ~~small~~ smal business-related provisions is presented in business-related provisions is presented in
tthe Appendix.
This report begins with an overview of SBA disaster loans and discusses various issues related to This report begins with an overview of SBA disaster loans and discusses various issues related to
providing disaster assistance to providing disaster assistance to ~~small~~ smal businesses adversely affected by COVID-19. It then businesses adversely affected by COVID-19. It then
presents an overview and discussion of SBA access to capital programs (including the 7(a) loan presents an overview and discussion of SBA access to capital programs (including the 7(a) loan
guarantee, 504/CDC loan guarantee, and Microloan program), SBA management and technical guarantee, 504/CDC loan guarantee, and Microloan program), SBA management and technical
training programs (SBDCs, WBCs, SCORE, and Microloan technical assistance), and SBA training programs (SBDCs, WBCs, SCORE, and Microloan technical assistance), and SBA
contracting programs. contracting programs.
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Disaster Loans
Overview
SBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the SBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the
federal government. The SBA’s disaster loans are unique in two respects: (1) they go directly to federal government. The SBA’s disaster loans are unique in two respects: (1) they go directly to
the ultimate borrower, and (2) they are not limited to the ultimate borrower, and (2) they are not limited to ~~small~~ smal businesses.15 businesses.15
SBA disaster loans for physical damage are available SBA disaster loans for physical damage are available to individuals, businesses of to individuals, businesses of ~~all~~ al sizes, and sizes, and
nonprofit organizations in declared disaster areas.16 SBA disaster loans for economic injury nonprofit organizations in declared disaster areas.16 SBA disaster loans for economic injury
(EIDL) are available(EIDL) are available to eligibleto eligible ~~small~~ smal businesses, businesses, ~~small~~ smal agricultural cooperatives, agricultural cooperatives, ~~small~~
smal businesses engaged in aquaculture, and most private, nonprofit organizations in declared disaster businesses engaged in aquaculture, and most private, nonprofit organizations in declared disaster
areas. The SBA issues about 80% of its direct disaster loans to individuals and households areas. The SBA issues about 80% of its direct disaster loans to individuals and households
(renters and property owners) to repair and replace homes and personal property. The SBA (renters and property owners) to repair and replace homes and personal property. The SBA
disbursed $401 disbursed $401 ~~million~~mil ion in disaster loans in FY2016, $889 in disaster loans in FY2016, $889 ~~million~~ mil ion in FY2017, $3.59 in FY2017, $3.59 ~~billion~~bil ion in in
FY2018, and $1.5 FY2018, and $1.5 ~~billion~~ bil ion in FY2019.17 in FY2019.17
Types of Disaster Loans
The SBA Disaster Loan Program includes home disaster loans, business physical disaster loans, The SBA Disaster Loan Program includes home disaster loans, business physical disaster loans,
and EIDLs.18 This report focuses on the EIDL program because it is currently being used to and EIDLs.18 This report focuses on the EIDL program because it is currently being used to
address the adverse economic impact of COVID-19 on address the adverse economic impact of COVID-19 on ~~small~~ smal businesses and other EIDL-eligible businesses and other EIDL-eligible
organizations. organizations.
P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act,
2020, deemed the coronavirus to be a disaster under the EIDL program. This change made 2020, deemed the coronavirus to be a disaster under the EIDL program. This change made
economic injury from the coronavirus an eligibleeconomic injury from the coronavirus an eligible EIDL expense. The act also provided the SBA EIDL expense. The act also provided the SBA
an additionalan additional ~~$20 million~~ $20 mil ion for disaster loan administrative expenses. for disaster loan administrative expenses.
For a discussion of For a discussion of ~~all SBA~~ al SBA disaster loans, see CRS Report R41309, disaster loans, see CRS Report R41309, The SBA Disaster Loan
Program: Overview and Possible Issues for Congress, by Bruce R. Lindsay. , by Bruce R. Lindsay.
Economic Injury Disaster Loans
EIDLs provide up to $2 EIDLs provide up to $2 ~~million~~ mil ion for working capital (including fixed debts, payroll, accounts for working capital (including fixed debts, payroll, accounts
payable and other payable and other ~~bills~~bil s that cannot be paid because of the disaster’s impact) to help that cannot be paid because of the disaster’s impact) to help ~~small~~
smal businesses, businesses, ~~small~~ smal agricultural cooperatives, agricultural cooperatives, ~~small~~ smal businesses engaged in aquaculture, and most businesses engaged in aquaculture, and most
private, nonprofit organizations meet their financial obligations and operating expenses that private, nonprofit organizations meet their financial obligations and operating expenses that
cannot be met as a direct result of the disaster.19cannot be met as a direct result of the disaster.19

15 13 C.F.R. §123.200. 15 13 C.F.R. §123.200.
16 13 C.F.R. §123.105 and 13 C.F.R. §123.203. 16 13 C.F.R. §123.105 and 13 C.F.R. §123.203.
17 SBA,17 SBA, Office of Legislative and Congressional Affairs, “WDS Report Amount Fiscal Year 2019, Office of Legislative and Congressional Affairs, “WDS Report Amount Fiscal Year 2019, ~~Table~~T able 1.4 1.4
DisbursementsDisbursements by Program,” October 18, 2019. by Program,” October 18, 2019.
18 18 ~~The~~T he SBA SBA also offers military reservist economic injury disaster loans. also offers military reservist economic injury disaster loans. ~~These~~T hese loans are available when economic loans are available when economic
injury is incurred as a direct result of a businessinjury is incurred as a direct result of a business owner or an essential employee being calledowner or an essential employee being called to active duty. to active duty. ~~These~~T hese loans loans
are generally not associated with disasters.are generally not associated with disasters. ~~See CRS~~ See CRS Report R42695, Report R42695, SBA Veterans Assistance ~~Programs~~ Program s: An Analysis
of ~~Contemporary~~Contem porary Issues, by Robert Jay Dilger, by Robert Jay Dilger and Seanand Sean Lowry. Lowry.
19 SBA,19 SBA, “Fact Sheet – Economic Injury Disaster Loans, California Declaration #16332,” March 19, 2020, at “Fact Sheet – Economic Injury Disaster Loans, California Declaration #16332,” March 19, 2020, at
https://disasterloan.sba.gov/ela/Declarations/DeclarationDetails?declNumber=3485&direct=false (hereinafter cited as https://disasterloan.sba.gov/ela/Declarations/DeclarationDetails?declNumber=3485&direct=false (hereinafter cited as
SBA,SBA, “Fact Sheet”). “Fact Sheet”).
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Public nonprofit organizations and several specific business types are not eligible for EIDL Public nonprofit organizations and several specific business types are not eligible for EIDL
assistance. Ineligible businesses include, but are not limited to, the following: assistance. Ineligible businesses include, but are not limited to, the following:
 businesses that do not meet the SBA’s  businesses that do not meet the SBA’s ~~small~~ smal business eligibilitybusiness eligibility criteria, criteria,
including the SBA’s size standards; including the SBA’s size standards;
 businesses that derive more than one-third of their annual gross revenue from  businesses that derive more than one-third of their annual gross revenue from
legal gambling activities; legal gambling activities;
 casinos and racetracks;  casinos and racetracks;
 religious organizations;  religious organizations;
 political and lobbying concerns;  political and lobbying concerns;
 government-owned concerns (expect for businesses owned or controlled by a  government-owned concerns (expect for businesses owned or controlled by a
Native American tribe); and Native American tribe); and
 businesses determined by the SBA to have credit available  businesses determined by the SBA to have credit available elsewhere.20 elsewhere.20
EIDL loan amounts are based on actual economic injury and financial needs, regardless of EIDL loan amounts are based on actual economic injury and financial needs, regardless of
whether the business or eligible nonprofit suffered any property damage. If an applicant is a whether the business or eligible nonprofit suffered any property damage. If an applicant is a
major source of employment, the SBA may waive the $2 major source of employment, the SBA may waive the $2 ~~million~~ mil ion statutory limit.21 In addition, statutory limit.21 In addition,
EIDL loan proceeds cannot be used to refinance long-term debt, expand facilities, pay dividends EIDL loan proceeds cannot be used to refinance long-term debt, expand facilities, pay dividends
or bonuses, or for relocation.22 or bonuses, or for relocation.22
Applicants must have a credit history acceptable to the SBA, the ability Applicants must have a credit history acceptable to the SBA, the ability to repay the loan, and to repay the loan, and
present collateral for present collateral for ~~all~~ al EIDL loans over $25,000 if available. The SBAEIDL loans over $25,000 if available. The SBA ~~collateralizes~~ collateralizes real estate real estate
or other assets when available, but it or other assets when available, but it ~~will~~ wil not deny a loan for lack of collateral.23 not deny a loan for lack of collateral.23
EIDL interest rates are determined by formulas established in law (discussed later) and are fixed EIDL interest rates are determined by formulas established in law (discussed later) and are fixed
for the life of the loan. EIDL interest rate ceilings are statutorily set at no more than 4% per for the life of the loan. EIDL interest rate ceilings are statutorily set at no more than 4% per
annum. EIDL applicants are not eligibleannum. EIDL applicants are not eligible if the SBAif the SBA determines that the applicant has credit determines that the applicant has credit
~~available~~ available elsewhere.elsewhere.
EIDL loans can have maturities up to 30 years. The SBA determines an appropriate EIDL loans can have maturities up to 30 years. The SBA determines an appropriate ~~installment~~instal ment
payment based on each borrower’s financial condition, which, in turn, determines the loan term.24 payment based on each borrower’s financial condition, which, in turn, determines the loan term.24
There are no prepayment penalties. There are no prepayment penalties.
SBA EIDL SBA EIDL assistance is not assistance is not ~~automatically~~automatical y available. It must be requested in one of two ways: (1) available. It must be requested in one of two ways: (1)
a state or territory governor can submit a request to the President for a major disaster declaration a state or territory governor can submit a request to the President for a major disaster declaration
under the Robert T. Stafford Disaster Relief and Emergency Assistance Act25 or (2) a state or under the Robert T. Stafford Disaster Relief and Emergency Assistance Act25 or (2) a state or
governor can submit a request for SBA EIDL from the SBA Administrator under the governor can submit a request for SBA EIDL from the SBA Administrator under the ~~Small~~
Smal Business Act. Business Act.
There was some initial concern that COVID-19 would not be a declarable disaster under the There was some initial concern that COVID-19 would not be a declarable disaster under the
~~Small~~ Smal Business Act because it did not meet the legal definition for a disaster. As mentioned, to Business Act because it did not meet the legal definition for a disaster. As mentioned, to
prevent any potential ambiguity, Title II of P.L. 116-123 deemed the coronavirus a disaster under prevent any potential ambiguity, Title II of P.L. 116-123 deemed the coronavirus a disaster under

~~20 SBA,~~ 20 SBA, “Disaster Assistance Program, SOP 50 30 9, pp. 70, 71, at https://www.sba.gov/document/sop-50-30-9-“Disaster Assistance Program, SOP 50 30 9, pp. 70, 71, at https://www.sba.gov/document/sop-50-30-9-
disaster-assistance-program-posted-05-31 (hereinafter cited as SBA,disaster-assistance-program-posted-05-31 (hereinafter cited as SBA, “ “Disaster Assistance Program SOP”). Disaster Assistance Program SOP”).
21 SBA, 21 SBA, “Fact Sheet.” “Fact Sheet.”
22 For the full list of ineligible22 For the full list of ineligible ~~uses~~ uses of EIDL loan proceeds, see SBA,of EIDL loan proceeds, see SBA, “Disaster Assistance Program SOP“Disaster Assistance Program SOP ,” pp. 75-76. ,” pp. 75-76.
23 SBA,23 SBA, “Fact Sheet.” “Fact Sheet.”
24 SBA,24 SBA, “Fact Sheet.” “Fact Sheet.”
25 P.L. 93-288, as amended. 25 P.L. 93-288, as amended. ~~Tribal~~T ribal nations are also authorized to request and receive major disaster assistance. nations are also authorized to request and receive major disaster assistance.
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Section 7(b)(2)(D) of the Section 7(b)(2)(D) of the ~~Small~~ Smal Business Act, making economic injury from the coronavirus an Business Act, making economic injury from the coronavirus an
~~eligible~~ eligible expense under the SBA’s Economic Injury Disaster Loan program. expense under the SBA’s Economic Injury Disaster Loan program.
Initial EIDL Response to COVID-19
On March 16, 2020, the SBA Administrator began issuing declarations for SBA EIDLs in On March 16, 2020, the SBA Administrator began issuing declarations for SBA EIDLs in
response to states seeking SBA disaster assistance for response to states seeking SBA disaster assistance for ~~small~~ smal businesses.26 The SBA changed its businesses.26 The SBA changed its
requirement that a state or territory “provide documentation certifying that at least five requirement that a state or territory “provide documentation certifying that at least five ~~small~~
smal businesses have suffered substantial economic injury as a result of the disaster, with at least one businesses have suffered substantial economic injury as a result of the disaster, with at least one
business located in each declared county/parish.”27 Under new criteria, states and territories now business located in each declared county/parish.”27 Under new criteria, states and territories now
“are only required to certify that at least five “are only required to certify that at least five ~~small~~ smal businesses within the state/territory have businesses within the state/territory have
suffered substantial economic injury, regardless of where the businesses are located.”28 The SBA suffered substantial economic injury, regardless of where the businesses are located.”28 The SBA
announced that under the new criteria EIDL assistance may be available statewide instead of just announced that under the new criteria EIDL assistance may be available statewide instead of just
within specific identified counties in declarations related to COVID-19. within specific identified counties in declarations related to COVID-19.
EIDL Funding
Prior to the CARES Act’s enactment, the SBA had about $1.1 Prior to the CARES Act’s enactment, the SBA had about $1.1 ~~billion~~ bil ion in disaster loan credit in disaster loan credit
subsidy availablesubsidy available to support about $7 to support about $7 ~~billion to $8 billion~~ bil ion to $8 bil ion in disaster loans. Loan credit subsidy is in disaster loans. Loan credit subsidy is
the amount provided to cover the government’s cost of extending or guaranteeing credit.29 The the amount provided to cover the government’s cost of extending or guaranteeing credit.29 The
loan credit subsidy amount is about one-seventh of the cost of each disaster loan.30 The credit loan credit subsidy amount is about one-seventh of the cost of each disaster loan.30 The credit
subsidy amount is used to protect the government against the risk of estimated subsidy amount is used to protect the government against the risk of estimated ~~shortfalls~~shortfal s in loan in loan
repayments. There was some concern that the SBA’s funding for disaster loan credit subsidies repayments. There was some concern that the SBA’s funding for disaster loan credit subsidies
would have proven to be insufficient to meet the demand for disaster loans now that EIDL would have proven to be insufficient to meet the demand for disaster loans now that EIDL
~~eligibility~~ eligibility has been extended to economic injuries related to COVID-19. has been extended to economic injuries related to COVID-19.
The CARES Act addressed this issue by providing an additional $562 The CARES Act addressed this issue by providing an additional $562 ~~million~~ mil ion to support disaster to support disaster
loans and $10 loans and $10 ~~billion~~ bil ion to support the Emergency EIDL grant program. As mentioned, the Paycheck to support the Emergency EIDL grant program. As mentioned, the Paycheck
Protection Program and Health Care Enhancement Act (P.L. 116-139) appropriated an additional Protection Program and Health Care Enhancement Act (P.L. 116-139) appropriated an additional
$50 bil ion ~~$50 billion~~ for EIDL and $10 for EIDL and $10 ~~billion~~ bil ion for Emergency EIDL grants. for Emergency EIDL grants.

26 A similar definitional issue26 A similar definitional issue may exist under the Stafford Act which does not specify an infectious diseasemay exist under the Stafford Act which does not specify an infectious disease as an as an
incident in its definition of a major disaster. incident in its definition of a major disaster. ~~There~~T here are, however, indications that the President considers COVID are, however, indications that the President considers COVID -19 a -19 a
major disaster. Seemajor disaster. See the White House, the White House, Letter ~~from~~ from President Donald J. ~~Trump on Emergency Determination~~Trum p on Em ergency Determ ination Under the
Stafford Act, March 13, 2020, at https://www.whitehouse.gov/briefings-statements/letter-president, March 13, 2020, at https://www.whitehouse.gov/briefings-statements/letter-president -donald-j-trump--donald-j-trump-
emergency-determination-stafford-act/. emergency-determination-stafford-act/.
27 SBA,27 SBA, SBA Updates Criteria on States for Requesting Disaster Assistance Loans for Small Businesses Impacted by
Coronavirus (COVID-19), March 17, 2020, at https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-, March 17, 2020, at https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-
advisories/sba-updates-criteria-states-requesting-disaster-assistance-loans-small-businesses-impacted (hereinafter cited advisories/sba-updates-criteria-states-requesting-disaster-assistance-loans-small-businesses-impacted (hereinafter cited
as SBA,as SBA, SBA Updates Criteria on States for Requesting Disaster Assistance). ).
28 SBA, 28 SBA, SBA Updates Criteria on States for Requesting Disaster Assistance. .
29 “29 “~~The~~T he Federal Credit Reform Act of 1990 (FCRA) requires Federal Credit Reform Act of 1990 (FCRA) requires ~~agencies~~ agencies to estimate the cost to the government of to estimate the cost to the government of
extending or guaranteeing credit. extending or guaranteeing credit. ~~This~~T his cost, referred to as subsidy cost, referred to as subsidy cost, equalscost, equals the net present value of estimated cash the net present value of estimated cash
flowsflows from the government (e.g., loan disbursements and claim payments to lenders) minus estimated cash flowsfrom the government (e.g., loan disbursements and claim payments to lenders) minus estimated cash flows to the to the
government (e.g., loan repayments, interest payments, fees, and recoveries on defaultedgovernment (e.g., loan repayments, interest payments, fees, and recoveries on defaulted loans) over the life of the loan, loans) over the life of the loan,
excludingexcluding administrative costs.” Seeadministrative costs.” See U.S. Government Accountability Office, U.S. Government Accountability Office, Current Method to ~~Estimate~~Estim ate Credit
Subsidy Costs Is More Appropriate for Budget ~~Estimates~~Estim ates Than a Fair Value Approach , GAO-16-41, January 29, 2016, , GAO-16-41, January 29, 2016,
p. i, at https://www.gao.gov/products/GAO-16-41. p. i, at https://www.gao.gov/products/GAO-16-41.
30 SBA, 30 SBA, FY2021 Congressional Budget Justification FY2019 Annual Performance Report,” p. 13, at ,” p. 13, at
https://www.sba.gov/document/reporthttps://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report (hereinafter —congressional-budget-justification-annual-performance-report (hereinafter
cited as SBA,cited as SBA, FY2021 Congressional Budget Justification FY2019 Annual ~~Performance~~Perform ance Report ”). ”).
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Surge Issues and Loan Processing Times
~~Historically~~Historical y, the majority (80%) of SBA disaster loans have been for individuals and households. , the majority (80%) of SBA disaster loans have been for individuals and households.
The significant number of businesses that The significant number of businesses that ~~will likely~~ wil likely apply for EIDL assistance because of the apply for EIDL assistance because of the
economic damage the coronavirus caused may require the SBA to enhance its disaster business economic damage the coronavirus caused may require the SBA to enhance its disaster business
loan portfolio and increase staff to meet demand. As mentioned, in anticipation of increased EIDL loan portfolio and increase staff to meet demand. As mentioned, in anticipation of increased EIDL
demand, Title II of P.L. 116-123 provided the SBA with an additionaldemand, Title II of P.L. 116-123 provided the SBA with an additional ~~$20 million,~~ $20 mil ion, to remain to remain
~~available~~ available until expended, for SBA Disaster Loan Program administrative expenses. until expended, for SBA Disaster Loan Program administrative expenses.
A Government Accountability Office (GAO) report found that the SBA provided disaster loans in A Government Accountability Office (GAO) report found that the SBA provided disaster loans in
roughly 18 days or less in response to Hurricanes Harvey, Irma, and Maria in 2017.31 Although roughly 18 days or less in response to Hurricanes Harvey, Irma, and Maria in 2017.31 Although
the 2017 hurricanes created a high demand at that time for SBA disaster loans, it is unclear if the 2017 hurricanes created a high demand at that time for SBA disaster loans, it is unclear if
GAO’s findings can be extrapolated to the current COVID-19 pandemic. The sheer volume of GAO’s findings can be extrapolated to the current COVID-19 pandemic. The sheer volume of
EIDL applications in response to COVID-19 could be significantly higher because COVID-19 EIDL applications in response to COVID-19 could be significantly higher because COVID-19
affects a much larger number of affects a much larger number of ~~small~~ smal businesses and organizations. In addition, the time needed businesses and organizations. In addition, the time needed
for the SBA to expand the disaster loan portfolio and hire and train new and existing staff could for the SBA to expand the disaster loan portfolio and hire and train new and existing staff could
compromise loan processing times. compromise loan processing times.
Loan processing times may be of significant concern to Congress and business owners alike. If Loan processing times may be of significant concern to Congress and business owners alike. If
loans are not processed quickly enough, businesses nationwide may suffer economic damage and, loans are not processed quickly enough, businesses nationwide may suffer economic damage and,
~~potentially,~~ potential y, collapse. Consequently, Congress may examine options that could expedite loan collapse. Consequently, Congress may examine options that could expedite loan
processing, such as increased staffing and surge capabilities, waiving application requirements, processing, such as increased staffing and surge capabilities, waiving application requirements,
and the use of expedited loans or bridge loans. and the use of expedited loans or bridge loans.
Expedited Disaster Loans and Bridge Loans
In response to criticism of SBA’s disaster loan processing following the Gulf Coast hurricanes of In response to criticism of SBA’s disaster loan processing following the Gulf Coast hurricanes of
2005 and 2008, Congress passed P.L. 110-234, the 2005 and 2008, Congress passed P.L. 110-234, the ~~Small~~ Smal Business Disaster Response and Loan Business Disaster Response and Loan
Improvements Act of 2008.32 The act created several programs to improve the disaster loan Improvements Act of 2008.32 The act created several programs to improve the disaster loan
processing.33 Among them were the following: processing.33 Among them were the following:
 Expedited Disaster Assistance Loan Program (EDALP) to provide eligible  Expedited Disaster Assistance Loan Program (EDALP) to provide eligible EIDL EIDL
applicants with expedited access to short-term guaranteed loans of up to applicants with expedited access to short-term guaranteed loans of up to
$150,000.34 $150,000.34
 Immediate Disaster Assistance Program (IDAP) to provide eligible EIDL  Immediate Disaster Assistance Program (IDAP) to provide eligible EIDL
applicants with guaranteed bridge loans of up to $25,000 from private-sector applicants with guaranteed bridge loans of up to $25,000 from private-sector
lenders, with an SBA decision within 36 hours of a lender’s application on behalf lenders, with an SBA decision within 36 hours of a lender’s application on behalf
of a borrower.35 of a borrower.35
 Private Disaster Assistance Program (PDAP) to make guaranteed loans available  Private Disaster Assistance Program (PDAP) to make guaranteed loans available
to homeowners and eligible EIDL applicants in an amount up to $2 to homeowners and eligible EIDL applicants in an amount up to $2 ~~million.36~~

~~31 U.S.~~ mil ion.36 31 U.S. Government Accountability Office, Government Accountability Office, Disaster Loan Processing Was Timelier, but Planning Improvements and
Pilot Program Evaluation Needed, GAO-20-369, March 9, 2020, at https://www.gao.gov/products/GAO-20-168. , GAO-20-369, March 9, 2020, at https://www.gao.gov/products/GAO-20-168.
32 P.L. 110-234, the Small Business 32 P.L. 110-234, the Small Business Disaster Response and Loan Improvements Act of 2008 (Disaster Response and Loan Improvements Act of 2008 (~~Title~~T itle XII, subtitle B of the XII, subtitle B of the
Food, Conservation, and Energy Act of 2008Food, Conservation, and Energy Act of 2008 ), as amended by), as amended by P.L. 110-246, the Food, Conservation, and Energy Act of P.L. 110-246, the Food, Conservation, and Energy Act of
2008 (2008 (~~Title~~T itle XII, subtitle B of the Food, Conservation, and Energy Act of 2008) XII, subtitle B of the Food, Conservation, and Energy Act of 2008) (hereinafter cited as P.L. 110-234). (hereinafter cited as P.L. 110-234).
33 SBA,33 SBA, “Immediate, Expedited, and Private Disaster Assistance Loan Programs,” 80 “Immediate, Expedited, and Private Disaster Assistance Loan Programs,” 80 Federal Register 63715-63717, 63715-63717,
October 21, 2015. October 21, 2015.
34 P.L. 110-234, Sec. 12085. 34 P.L. 110-234, Sec. 12085.
35 P.L. 110-234, Sec. 12084. 35 P.L. 110-234, Sec. 12084.
36 P.L. 110-234, Sec. 12083. 36 P.L. 110-234, Sec. 12083.
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The SBA, however, had difficulty implementing these programs. In his statement before the The SBA, however, had difficulty implementing these programs. In his statement before the
House Committee on House Committee on ~~Small~~ Smal Business, then-acting (and now the current) SBA Inspector General, Business, then-acting (and now the current) SBA Inspector General,
~~Hannibal~~ Hannibal “Mike” Ware, stated the following: In the wake of disasters like Hurricane Sandy, congressional representatives expressed concern that SBA did not effectively develop and ~~“Mike” Ware, stated~~
~~In the wake of disasters like Hurricane Sandy, congressional representatives expressed~~
~~concern that SBA did not effectively develop and~~ utilize programmatic innovations utilize programmatic innovations
intended to assist in disbursing funds quickly and effectively. For instance, SBA did not intended to assist in disbursing funds quickly and effectively. For instance, SBA did not
implementimplement ~~statutory provisions of the Immediate Disaster Assistance Program~~ statutory provisions of the Immediate Disaster Assistance Program (IDAP), (IDAP),
Economic Injury Disaster Assistance Program (EDAP), and the Private Disaster Assistance Economic Injury Disaster Assistance Program (EDAP), and the Private Disaster Assistance
Programs (PDAP), collectively known as the “Guaranteed Disaster Assistance Programs” Programs (PDAP), collectively known as the “Guaranteed Disaster Assistance Programs”
mandated by Congress in 2008. These provisions were enacted with the expectation that mandated by Congress in 2008. These provisions were enacted with the expectation that
they would allow SBA to provide expedited disaster loans in partnership with private sector they would allow SBA to provide expedited disaster loans in partnership with private sector
lenders. These provisions remain unimplemented.37 lenders. These provisions remain unimplemented.37
He added that the SBA had difficulty implementing the programs because private lenders were He added that the SBA had difficulty implementing the programs because private lenders were
reluctant to participate in the program. He mentioned the following impediments: reluctant to participate in the program. He mentioned the following impediments:
[the] cost of program participation under the current pricing structure and the lender’s lack [the] cost of program participation under the current pricing structure and the lender’s lack
of infrastructure to deliver loans that meet SBA standards (such as evaluating eligibility of infrastructure to deliver loans that meet SBA standards (such as evaluating eligibility
and duplication of benefits); loan terms that include longer maturities than conventional and duplication of benefits); loan terms that include longer maturities than conventional
lending practices; the high cost of providing these loans; inadequate collateral security; and lending practices; the high cost of providing these loans; inadequate collateral security; and
theirtheir ~~lack of expertise in the home loan sector. Lenders were also concerned that~~ lack of expertise in the home loan sector. Lenders were also concerned that loan loan
guarantees would be denied due to improper eligibility determinations. guarantees would be denied due to improper eligibility determinations.
Because these programs had limited use, Congress included a provision in P.L. 115-141, the Because these programs had limited use, Congress included a provision in P.L. 115-141, the
Consolidated Appropriations Act, 2018, which permanently Consolidated Appropriations Act, 2018, which permanently ~~cancelled $2.6 million~~cancel ed $2.6 mil ion in unobligated in unobligated
balances availablebalances available for the IDAP and the EDALP. for the IDAP and the EDALP.
The CARES Act addressed loan processing issues by authorizing the SBA Administrator, in The CARES Act addressed loan processing issues by authorizing the SBA Administrator, in
response to economic injuries caused by COVID-19, to response to economic injuries caused by COVID-19, to
 waive the “credit not available elsewhere” requirement,  waive the “credit not available elsewhere” requirement,
 approve an applicant based solely on their credit score,  approve an applicant based solely on their credit score,
 not require applicants to submit a tax return or tax return transcript for approval,  not require applicants to submit a tax return or tax return transcript for approval,
 waive any rules related to the personal guarantee on advances and loans of not  waive any rules related to the personal guarantee on advances and loans of not
more than $200,000, and more than $200,000, and
 waive the requirement that the applicant needs to be in business for the one-year  waive the requirement that the applicant needs to be in business for the one-year
period before the disaster declaration (except that no waiver may be made for a period before the disaster declaration (except that no waiver may be made for a
business that was not in operation on January 31, 2020). business that was not in operation on January 31, 2020).
SBA EIDL Repayment and Forgiveness
Under present law and regulations, the first SBA EIDL payment is Under present law and regulations, the first SBA EIDL payment is ~~normally~~normal y due five months after due five months after
disbursement. However, on March 23, 2020, the SBA announced that it would defer payments on disbursement. However, on March 23, 2020, the SBA announced that it would defer payments on
existing disaster loans through December 31, 2020, “to help borrowers during this unprecedented existing disaster loans through December 31, 2020, “to help borrowers during this unprecedented
time.”38 The SBA also announced that payments on new EIDL loans would be deferred for one time.”38 The SBA also announced that payments on new EIDL loans would be deferred for one
year (interest does accrue). year (interest does accrue).

~~37 Testimony~~ 37 T estimony of Hannibal “Mike” Ware, Acting Inspector General, United States Small of Hannibal “Mike” Ware, Acting Inspector General, United States Small ~~Business~~ Business Administration, U.S. Administration, U.S.
Congress, HouseCongress, House Committee on Small Business,Committee on Small Business, Storm Watch: Making Sure SBA’s Disaster Loan Program Is
Prepared, 115th Cong., 1st sess., April 26, 2017, p. 33. , 115th Cong., 1st sess., April 26, 2017, p. 33.
38 SBA,38 SBA, “ “Carranza Implements Automatic Deferment on Existing SBA Disaster Loans Carranza Implements Automatic Deferment on Existing SBA Disaster Loans ~~Through~~T hrough End of 2020 End of 2020 ,” March ,” March
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The CARES Act provides “impacted borrowers” adversely affected by COVID-19 complete The CARES Act provides “impacted borrowers” adversely affected by COVID-19 complete
payment deferment relief on a covered loan in its Paycheck Protection Program (PPP). The payment deferment relief on a covered loan in its Paycheck Protection Program (PPP). The
deferment may be for not less than six months and not more than one year if the borrower was in deferment may be for not less than six months and not more than one year if the borrower was in
operation on February 15, 2020, and has an application for a covered loan approved or pending operation on February 15, 2020, and has an application for a covered loan approved or pending
approval on or after the date of enactment. The SBA announced that PPP loan payments approval on or after the date of enactment. The SBA announced that PPP loan payments ~~will~~ wil be be
deferred for six months. However, interest deferred for six months. However, interest ~~will~~ wil continue to accrue on these loans during the six-continue to accrue on these loans during the six-
month deferment.39 month deferment.39
The CARES Act also provides for PPP loan forgiveness under specified conditions related to the The CARES Act also provides for PPP loan forgiveness under specified conditions related to the
borrower’s retention of employees. Loan forgiveness is rare, but has been used in the past to help borrower’s retention of employees. Loan forgiveness is rare, but has been used in the past to help
businesses that were having difficulty repaying their loans. For example, loan forgiveness was businesses that were having difficulty repaying their loans. For example, loan forgiveness was
granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane
Disaster Relief Act of 1965.40 Section 3 of the act authorized the SBA Administrator to grant Disaster Relief Act of 1965.40 Section 3 of the act authorized the SBA Administrator to grant
disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and
Mississippi as a result of the hurricane. The act stated that Mississippi as a result of the hurricane. The act stated that
to the extent such loss or damage is not compensated for by insurance or otherwise, (1) to the extent such loss or damage is not compensated for by insurance or otherwise, (1)
shall at the borrower’s option on that part of any loan in excess of $500, (A) cancel up to shall at the borrower’s option on that part of any loan in excess of $500, (A) cancel up to
$1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than $1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than
$1,800 over$1,800 over ~~a period not to exceed three years; and (2) may lend to a privately~~ a period not to exceed three years; and (2) may lend to a privately owned owned
school, college, or university without regard to whether the required financial assistance is school, college, or university without regard to whether the required financial assistance is
otherwiseotherwise ~~available~~ available from privatefrom private sources,sources, ~~and may~~ and may waive interest paymentswaive interest payments ~~and~~ and defer defer
principal payments on such a loan for the first three years of the term of the loan.41 principal payments on such a loan for the first three years of the term of the loan.41
Disaster Grants
~~Historically~~Historical y, businesses that suffer uninsured loss as a result of a major disaster declaration are , businesses that suffer uninsured loss as a result of a major disaster declaration are
not eligiblenot eligible for Federal Emergency Management Agency (FEMA) grant assistance, and grant for Federal Emergency Management Agency (FEMA) grant assistance, and grant
assistance from other federal sources is limited. On some occasions, Congress has provided assistance from other federal sources is limited. On some occasions, Congress has provided
disaster assistance to businesses through the Department of Housing and Urban Development’s disaster assistance to businesses through the Department of Housing and Urban Development’s
(HUD’s) Community Development Block Grant (CDBG) program. The CDBG program provides (HUD’s) Community Development Block Grant (CDBG) program. The CDBG program provides
loans and grants to eligibleloans and grants to eligible businesses to help them recover from disasters as businesses to help them recover from disasters as ~~well~~ wel as grants as grants
intended to attract new businesses to the disaster-stricken area. In a few cases, CDBG has also intended to attract new businesses to the disaster-stricken area. In a few cases, CDBG has also
been used to compensate businesses and workers for lost wages or revenues. been used to compensate businesses and workers for lost wages or revenues.
Although the President issued the first major disaster declaration to New York for COVID-19,42 Although the President issued the first major disaster declaration to New York for COVID-19,42
CDBG disaster assistance is not available for CDBG disaster assistance is not available for ~~all~~ al major disasters. States can use CDBG funding to major disasters. States can use CDBG funding to
respond to emergencies or other “urgent needs” through the conventional CDBG entitlement and respond to emergencies or other “urgent needs” through the conventional CDBG entitlement and
states program,43 but existing (or future) CDBG monies states program,43 but existing (or future) CDBG monies ~~generally~~general y must be reprogrammed in must be reprogrammed in

23, 2020, at https://www.sba.gov/about23, 2020, at https://www.sba.gov/about -sba/sba-newsroom/press-releases-media-advisories/carranza-implements--sba/sba-newsroom/press-releases-media-advisories/carranza-implements-
automatic-defermentautomatic-deferment -existing-sba-disaster-loans-through-end-2020. -existing-sba-disaster-loans-through-end-2020.
39 SBA, 39 SBA, “Business“Business Loan Program Loan Program ~~Temporary~~T emporary Changes; Paycheck Protection Program,” 85 Changes; Paycheck Protection Program,” 85 Federal Register 20813, 20813,
April 15, 2020. April 15, 2020.
40 P.L. 89-339, 79 Stat. 1301. 40 P.L. 89-339, 79 Stat. 1301.
41 P.L. 89-339, 79 Stat. 1301. 41 P.L. 89-339, 79 Stat. 1301.
42 Federal Emergency Management Agency, 42 Federal Emergency Management Agency, New York Covid-19 Pandemic (DR-4480), March 3, 2020, at, March 3, 2020, at
https://www.fema.gov/disaster/4480. https://www.fema.gov/disaster/4480.
43 For example, the City of Seattle is 43 For example, the City of Seattle is currently administering $10,000 grants to small businessescurrently administering $10,000 grants to small businesses ~~using CDBG funds~~ using CDBG funds to to
respond to COVID-19. respond to COVID-19.
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consultation with HUD to respond to the emergency.44 For these reasons, CDBG is consultation with HUD to respond to the emergency.44 For these reasons, CDBG is ~~generally~~general y used used
for long-term recovery needs rather than providing immediate, direct disaster assistance. for long-term recovery needs rather than providing immediate, direct disaster assistance.
Thus, Congress could consider providing business grants through FEMA or the SBA. Enlisting Thus, Congress could consider providing business grants through FEMA or the SBA. Enlisting
~~FEMA~~ FEMA to administer the program may offer several benefits. First, FEMA already has grant to administer the program may offer several benefits. First, FEMA already has grant
processing operations in place. It might be relatively easier to expand the operations to include processing operations in place. It might be relatively easier to expand the operations to include
~~small~~ smal businesses disaster grants rather than establishing new grant-making operations within businesses disaster grants rather than establishing new grant-making operations within
SBA. Second, having FEMA administer the SBA. Second, having FEMA administer the ~~small~~ smal business disaster grant program may limit business disaster grant program may limit
duplication of administrative functions between FEMA and SBA. Third, it would provide access duplication of administrative functions between FEMA and SBA. Third, it would provide access
to FEMA’s Disaster Relief Fund (DRF) which, as of July 31, 2020, had roughly $74 to FEMA’s Disaster Relief Fund (DRF) which, as of July 31, 2020, had roughly $74 ~~billion~~bil ion for for
disaster assistance activities.45 disaster assistance activities.45
In contrast, Congress could decide to have SBA administer the program because it already has a In contrast, Congress could decide to have SBA administer the program because it already has a
framework in place to evaluate business disaster needs and disaster loan eligibility.framework in place to evaluate business disaster needs and disaster loan eligibility. Congress may Congress may
need to make statutory changes to SBA’s disaster loan account or authorize a new account to need to make statutory changes to SBA’s disaster loan account or authorize a new account to
receive appropriations for disaster grants. receive appropriations for disaster grants.
Another concern about providing grants to businesses is whether businesses provided SBA EIDL Another concern about providing grants to businesses is whether businesses provided SBA EIDL
~~will~~ wil be eligiblebe eligible for grant assistance. For example, in some cases homeowners and businesses that for grant assistance. For example, in some cases homeowners and businesses that
accepted disaster loans were deemed ineligible for disaster grants. This may make some accepted disaster loans were deemed ineligible for disaster grants. This may make some
businesses reluctant to apply for SBA EIDL and instead hold out for the possibility of a grant. businesses reluctant to apply for SBA EIDL and instead hold out for the possibility of a grant.
Congress may therefore Congress may therefore ~~allow~~al ow businesses to use grant money to pay down their SBA EIDL. businesses to use grant money to pay down their SBA EIDL.
Another potential concern is waste, fraud, and abuse. For example, Section 1210 of the Disaster Another potential concern is waste, fraud, and abuse. For example, Section 1210 of the Disaster
Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254) prohibits the President from Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254) prohibits the President from
determining loans as duplicative assistance provided determining loans as duplicative assistance provided ~~all~~ al federal assistance is used toward loss federal assistance is used toward loss
resulting from an emergency or major disaster under the Stafford Act. Consequently, businesses resulting from an emergency or major disaster under the Stafford Act. Consequently, businesses
that obtain SBA EIDL and a grant for the same purposes would conceivably not be required to that obtain SBA EIDL and a grant for the same purposes would conceivably not be required to
pay back the duplicative award. pay back the duplicative award.
Congress could consider limiting grants to relatively Congress could consider limiting grants to relatively ~~small~~ smal businesses as compared to what is businesses as compared to what is
considered a considered a ~~small~~ smal business according to SBA size standards.46 For example, business grants business according to SBA size standards.46 For example, business grants
could be limitedcould be limited to businesses with 10 or fewer employees. to businesses with 10 or fewer employees.
The CARES Act authorizes the SBA Administrator to provide up to $10,000 as an advance The CARES Act authorizes the SBA Administrator to provide up to $10,000 as an advance
payment in the amount requested within three days after receiving an EIDL application from an payment in the amount requested within three days after receiving an EIDL application from an
eligibleeligible entity. Applicants are not required to repay the advance payment, referred to in the entity. Applicants are not required to repay the advance payment, referred to in the

44 For eligible44 For eligible Community Development Block Grant activities related to COVID-19, see U.S.Community Development Block Grant activities related to COVID-19, see U.S. Department of Housing Department of Housing
and Urban Development, “and Urban Development, “ Quick GuideQuick Guide to CDBGto CDBG ~~Eligible~~ Eligible Activities to Support Infectious Disease Response,” March Activities to Support Infectious Disease Response,” March
19, 2020, at https://files.hudexchange.info/resources/documents/Quick-Guide-CDBG-Infectious-Disease-Response.pdf. 19, 2020, at https://files.hudexchange.info/resources/documents/Quick-Guide-CDBG-Infectious-Disease-Response.pdf.
45 Federal Emergency Management Agency, 45 Federal Emergency Management Agency, Disaster Relief Fund: Monthly Report, August, August 7, 2020, at 7, 2020, at
https://www.fema.gov/about/reports-and-data/disaster-relief-fund-monthly-reports. For more information on the DRF https://www.fema.gov/about/reports-and-data/disaster-relief-fund-monthly-reports. For more information on the DRF
see CRSsee CRS Report R45484, Report R45484, The Disaster Relief Fund: Overview and Issues, by William L. Painter. , by William L. Painter.
Also, on AugustAlso, on August 8, 2020, President 8, 2020, President ~~Trump~~T rump issued a memorandum directing “up to $44 billion from the Disaster Relief issued a memorandum directing “up to $44 billion from the Disaster Relief
FundFund at the statutorily mandated 75 percent Federal cost share be made available for lost wagesat the statutorily mandated 75 percent Federal cost share be made available for lost wages assistance to eligible assistance to eligible
claimants, to supplement State expenditures in providing these payments. At least $25 billion of total DRF balances claimants, to supplement State expenditures in providing these payments. At least $25 billion of total DRF balances
willwill be be set asideset aside to support ongoing disaster response and recovery efforts and potential 2020 major disaster costs.” See to support ongoing disaster response and recovery efforts and potential 2020 major disaster costs.” See
President Donald President Donald ~~Trump, “~~T rump, “ Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster
Declarations Related to Coronavirus DiseaseDeclarations Related to Coronavirus Disease 2019 ~~2019~~,” August 8, 2020, at https://www.whitehouse.gov/presidential-,” August 8, 2020, at https://www.whitehouse.gov/presidential-
actions/memorandum-authorizing-needs-assistance-program-major-disaster-declarations-related-coronavirus-disease-actions/memorandum-authorizing-needs-assistance-program-major-disaster-declarations-related-coronavirus-disease-
2019/. 2019/.
46 For more information and analysis concerning SBA 46 For more information and analysis concerning SBA size standards, see CRSsize standards, see CRS Report R40860, Report R40860, Small Business Size
Standards: A Historical Analysis of ~~Contemporary~~Contem porary Issues, by Robert Jay Dilger. , by Robert Jay Dilger.
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CARES Act as an Emergency EIDL grant, even if subsequently denied an EIDL loan. Due to CARES Act as an Emergency EIDL grant, even if subsequently denied an EIDL loan. Due to
anticipated demand, the SBA limitedanticipated demand, the SBA limited Emergency EIDL grants to $1,000 per employee, up to a Emergency EIDL grants to $1,000 per employee, up to a
maximum of $10,000. maximum of $10,000.
The CARES Act addresses waste, fraud, and abuse by providing the SBA’s OIG $25 The CARES Act addresses waste, fraud, and abuse by providing the SBA’s OIG $25 ~~million~~ mil ion for for
oversight of the SBA’s administration of its lending programs and for investigations to serve as a oversight of the SBA’s administration of its lending programs and for investigations to serve as a
general deterrent to fraud, waste, and abuse. general deterrent to fraud, waste, and abuse.
SBA EIDL Interest Rates
According to the SBA’s March 17, 2020, press release, SBA EIDL interest rates for COVD-19 According to the SBA’s March 17, 2020, press release, SBA EIDL interest rates for COVD-19
are 3.75% for businesses and 2.75% for nonprofit organizations.47are 3.75% for businesses and 2.75% for nonprofit organizations.47
SBA disaster loan interest rates have been a long-standing congressional concern. First, there is SBA disaster loan interest rates have been a long-standing congressional concern. First, there is
concern about the ability of disaster victims to pay off their loans. Second, there is concern about concern about the ability of disaster victims to pay off their loans. Second, there is concern about
how interest rates are determined given the complexity of the statutory language about disaster how interest rates are determined given the complexity of the statutory language about disaster
loan interest rates. 15 U.S.C. §636(d)(5)(C)) states that interest rates are “in the case of a loan interest rates. 15 U.S.C. §636(d)(5)(C)) states that interest rates are “in the case of a
business, private nonprofit organization, or other concern, including agricultural cooperatives, business, private nonprofit organization, or other concern, including agricultural cooperatives,
unable to obtain credit elsewhere, not to exceed 4 per centum per annum.”48 To determine EIDL unable to obtain credit elsewhere, not to exceed 4 per centum per annum.”48 To determine EIDL
interest rates, SBA uses a formula under 15 U.S.C. §636(d)(4)(A): interest rates, SBA uses a formula under 15 U.S.C. §636(d)(4)(A):
Notwithstanding the provisions of the constitution of any Notwithstanding the provisions of the constitution of any State or the laws of anyState or the laws of any State State
limiting the rate or amount of interest which may be charged, taken, received, or reserved, limiting the rate or amount of interest which may be charged, taken, received, or reserved,
the maximumthe maximum legal rate of interest on any financing made on a deferred basis pursuant to legal rate of interest on any financing made on a deferred basis pursuant to
thisthis ~~subsection shall not exceed a rate prescribed by the Administration, and the rate~~ subsection shall not exceed a rate prescribed by the Administration, and the rate of of
interest for the Administration’s share of any direct or immediate participation loan interest for the Administration’s share of any direct or immediate participation loan ~~shall~~
shal not exceed the current average market yield on outstanding marketable obligations of the not exceed the current average market yield on outstanding marketable obligations of the
United States with remaining periods to maturity comparable to the average maturities of United States with remaining periods to maturity comparable to the average maturities of
such loans and adjusted to the nearest one-eighth of 1 per centum, and an additional amount such loans and adjusted to the nearest one-eighth of 1 per centum, and an additional amount
as determined by the Administration, but not to exceed 1 per centum per annum: Provided, as determined by the Administration, but not to exceed 1 per centum per annum: Provided,
That for those loans to assist any public or private organization for the handicapped or to That for those loans to assist any public or private organization for the handicapped or to
assistassist ~~any handicapped individual as provided in paragraph (10) of this subsection,~~ any handicapped individual as provided in paragraph (10) of this subsection, the the
interest rate shall be 3 per centum per annum. interest rate shall be 3 per centum per annum.
Congress could request SBA to reevaluate its interpretation of 15 U.S.C. §636(d)(4)(A) and Congress could request SBA to reevaluate its interpretation of 15 U.S.C. §636(d)(4)(A) and
provide detailed information explaining how the formula provides nonprofit organizations with provide detailed information explaining how the formula provides nonprofit organizations with
lower interest rates than lower interest rates than ~~small~~ smal businesses. Alternatively, Congress could change the formula businesses. Alternatively, Congress could change the formula
under the under the ~~Small~~ Smal Business Act if it considered the language ambiguous, or it could designate an Business Act if it considered the language ambiguous, or it could designate an
interest rate (including a zero interest rate) for interest rate (including a zero interest rate) for ~~all~~ al SBA EIDL for the duration of COVID-19. SBA EIDL for the duration of COVID-19.

~~47 Small Business~~ 47 Small Business Administration, Administration, SBA Updates Criteria on States for Requesting Disaster Assistance Loans for Small
Businesses ~~Impacted~~ Im pacted by Coronavirus (COVID-19), March 17, 2020, at https://www.sba.gov/about-sba/sba-newsroom/, March 17, 2020, at https://www.sba.gov/about-sba/sba-newsroom/
press-releases-media-advisories/sba-updates-criteria-states-requesting-disaster-assistance-loans-small-businesses-press-releases-media-advisories/sba-updates-criteria-states-requesting-disaster-assistance-loans-small-businesses-
impacted. impacted.
48 Only businesses 48 Only businesses and nonprofit organizations that cannot get credit elsewhere are eligibleand nonprofit organizations that cannot get credit elsewhere are eligible for SBAfor SBA EIDL ~~EIDL~~. .
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SBA Capital Access Programs
Overview
The SBA has authority to make direct loans but, with the exception of disaster loans and loans to The SBA has authority to make direct loans but, with the exception of disaster loans and loans to
Microloan program intermediaries, has not exercised that authority since 1998.49 The SBA Microloan program intermediaries, has not exercised that authority since 1998.49 The SBA
indicated that it stopped issuing direct business loans primarily because the subsidy rate was “10 indicated that it stopped issuing direct business loans primarily because the subsidy rate was “10
to 15 times higher” than the subsidy rate for its loan guaranty programs.50 Instead of making to 15 times higher” than the subsidy rate for its loan guaranty programs.50 Instead of making
direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to
provide loans to provide loans to ~~small~~ smal businesses “that might not otherwise obtain financing on reasonable terms businesses “that might not otherwise obtain financing on reasonable terms
and conditions.”51 With few exceptions, to qualify for SBA assistance, an organization must be and conditions.”51 With few exceptions, to qualify for SBA assistance, an organization must be
both a for-profit business and both a for-profit business and ~~small~~smal .52 .52
What Is a “Small Business”?
To participate in any of the SBA loan guaranty programs, a business must meet the To participate in any of the SBA loan guaranty programs, a business must meet the ~~Small~~
Smal Business Act’s definition of Business Act’s definition of small business. This is a business that . This is a business that
 is organized for profit;  is organized for profit;
 has a place of business in the United States;  has a place of business in the United States;
 operates primarily within the United States or makes a significant contribution to  operates primarily within the United States or makes a significant contribution to
the U.S. economy through payment of taxes or use of American products, the U.S. economy through payment of taxes or use of American products,
materials, or labor; materials, or labor;
 is independently owned and operated;  is independently owned and operated;
 is not dominant in its field on a national basis;53 and  is not dominant in its field on a national basis;53 and
 does not exceed size standards established, and updated  does not exceed size standards established, and updated ~~periodically~~periodical y, by the , by the
SBA.54 SBA.54
The business may be a sole proprietorship, partnership, corporation, or any other legal form. The business may be a sole proprietorship, partnership, corporation, or any other legal form.

49 Prior to October 1, 1985, the SBA provided direct business49 Prior to October 1, 1985, the SBA provided direct business loans to qualifiedloans to qualified ~~small~~ small businesses.businesses. From October 1, From October 1,
1985, to September 30, 1994, SBA direct business1985, to September 30, 1994, SBA direct business loan eligibility wasloan eligibility was limited to qualifiedlimited to qualified small businessessmall businesses ~~owned~~ owned by by
individualsindividuals with low incomes or located in areas of high unemployment, owned by Vietnam-era or disabledwith low incomes or located in areas of high unemployment, owned by Vietnam-era or disabled veterans, veterans,
ownedowned by the handicapped or certain organizations employing them, and certified under the minority small business 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.capital ownership development program. Microloan program intermediaries were also eligible. On October 1, 1994, On October 1, 1994,
SBASBA direct loan eligibilitydirect loan eligibility ~~was~~ was limited to Microloan program intermediaries and small businesseslimited to Microloan program intermediaries and small businesses ~~owned~~ owned by the by the
handicapped. Fundinghandicapped. Funding to support direct loans to the handicapped through the Handicapped Assistance (renamed the to support direct loans to the handicapped through the Handicapped Assistance (renamed the
DisabledDisabled Assistance) Loan program endedAssistance) Loan program ended in 1996. in 1996. ~~The~~T he last loan under the Disabled last loan under the Disabled Assistance Loan program was Assistance Loan program was
issuedissued in FY1998. See U.S.in FY1998. See U.S. Congress, HouseCongress, House Committee on Small Business,Committee on Small Business, ~~Summary~~ Sum m ary of Activities, 105rd Cong., 2nd , 105rd Cong., 2nd
sess.,sess., January 2, 1999, H.Rept. 105-849 (Washington, DC: GPO, 1999), p. 8. January 2, 1999, H.Rept. 105-849 (Washington, DC: GPO, 1999), p. 8.
50 U.S. 50 U.S. Congress, Senate Committee on Small Business,Congress, Senate Committee on Small Business, Hearing on the Proposed Fiscal Year 1995 Budget for the
~~Small Business Administration~~Sm all Business Adm inistration, 103rd Cong., 2nd sess., February 22, 1994, S.Hrg., 103rd Cong., 2nd sess., February 22, 1994, S.Hrg. 103-583 (Washington, DC: GPO, 103-583 (Washington, DC: GPO,
1994), p. 20. 1994), p. 20.
51 SBA,51 SBA, Fiscal Year 2010 Congressional Budget Justification, p. 30, at https://www.sba.gov/sites/default/files/p. 30, at https://www.sba.gov/sites/default/files/
Congressional_Budget_Justification_2010.pdf. Congressional_Budget_Justification_2010.pdf.
52 52 ~~The~~T he SBA SBA provides financial assistance to nonprofit organizations to provide training to small businessprovides financial assistance to nonprofit organizations to provide training to small business ~~owners~~ owners and to and to
provide loans to small businessesprovide loans to small businesses through the SBAthrough the SBA Microloan program. Also, nonprofit child care centers are eligible Microloan program. Also, nonprofit child care centers are eligible
to participate in SBA’s Microloan program. to participate in SBA’s Microloan program.
53 13 C.F.R. §121.105. 53 13 C.F.R. §121.105.
54 P.L. 111-240, the Small Business54 P.L. 111-240, the Small Business ~~Jobs~~ Jobs Act of 2010, requires the SBAAct of 2010, requires the SBA to conduct a detailedto conduct a detailed review of not less than review of not less than
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What Is “Small”?55
The SBA uses two measures to determine if a business is The SBA uses two measures to determine if a business is ~~small~~smal : SBA-derived industry specific : SBA-derived industry specific
size standards or a combination of the business’s net worth and net income. For example, size standards or a combination of the business’s net worth and net income. For example,
businesses participating in the SBA’s 7(a) loan guaranty program are deemed businesses participating in the SBA’s 7(a) loan guaranty program are deemed ~~small~~ smal if they either if they either
meet the SBA’s industry-specific size standards for firms in 1,047 industrial classifications in 18 meet the SBA’s industry-specific size standards for firms in 1,047 industrial classifications in 18
subindustry activities described in the North American Industry Classification System (NAICS) subindustry activities described in the North American Industry Classification System (NAICS)
or do not have more than $15 or do not have more than $15 ~~million~~ mil ion in tangible net worth and not more than $5 in tangible net worth and not more than $5 ~~million~~mil ion in in
average net income after federal taxes (excluding any carryover losses) for the two full fiscal average net income after federal taxes (excluding any carryover losses) for the two full fiscal
years before the date of the application. years before the date of the application. ~~All~~ Al of the company’s subsidiaries, parent companies, and of the company’s subsidiaries, parent companies, and
affiliates are considered in determining if it meets the size standard.56 affiliates are considered in determining if it meets the size standard.56
The SBA’s industry size standards vary by industry, and they are based on one of the following 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 (or five) years, (2) four measures: the firm’s (1) average annual receipts in the previous three (or five) years, (2)
number of employees, (3) asset size, or (4) for refineries, a combination of number of employees number of employees, (3) asset size, or (4) for refineries, a combination of number of employees
and barrel per day refining capacity. and barrel per day refining capacity. ~~Historically~~Historical y, the SBA has used the number of employees to , the SBA has used the number of employees to
determine if manufacturing and mining companies are determine if manufacturing and mining companies are ~~small~~ smal and average annual receipts for most and average annual receipts for most
other industries. other industries.
The SBA’s size standards are designed to encourage competition within each industry. They are The SBA’s size standards are designed to encourage competition within each industry. They are
derived through an assessment of the following four economic factors: “average firm size, derived through an assessment of the following four economic factors: “average firm size,
average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as
a measure of industry competition, and size distribution of firms.”57 The SBA also considers the a measure of industry competition, and size distribution of firms.”57 The SBA also considers the
abilityability ~~of small~~ of smal businesses to compete for federal contracting opportunities and, when necessary, businesses to compete for federal contracting opportunities and, when necessary,
several secondary factors “as they are relevant to the industries and the interests of several secondary factors “as they are relevant to the industries and the interests of ~~small~~
smal businesses, including technological change, competition among industries, industry growth businesses, including technological change, competition among industries, industry growth
trends, and impacts of size standard revisions on trends, and impacts of size standard revisions on ~~small~~ smal businesses.”58businesses.”58
SBA Loan Guarantee Programs
Overview
The SBA provides loan guarantees for The SBA provides loan guarantees for ~~small~~ smal businesses that cannot obtain credit elsewhere. Its businesses that cannot obtain credit elsewhere. Its
largest loan guaranty programs are the 7(a) loan guaranty program, the 504/CDC loan guaranty largest loan guaranty programs are the 7(a) loan guaranty program, the 504/CDC loan guaranty
program, and the Microloan program. program, and the Microloan program.
The SBA’s loan guaranty programs require personal guarantees from borrowers and share the risk The SBA’s loan guaranty programs require personal guarantees from borrowers and share the risk
of default with lenders by making the guaranty less than 100%. In the event of a default, the of default with lenders by making the guaranty less than 100%. In the event of a default, the
borrower owes the amount contracted less the value of any collateral liquidated. The SBA can borrower owes the amount contracted less the value of any collateral liquidated. The SBA can
attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund
offset. Most types of businesses are eligible for loan guarantees. A list of ineligibleoffset. Most types of businesses are eligible for loan guarantees. A list of ineligible ~~businesses~~

businesses one-third of the SBA’sone-third of the SBA’s industry sizeindustry size standards every 18 months beginning on the new law’sstandards every 18 months beginning on the new law’s date of enactment date of enactment
(September 27, 2010) and ensure that each size standard is reviewed(September 27, 2010) and ensure that each size standard is reviewed at least once every five years.at least once every five years.
55 For additional information and analysis, see CRS 55 For additional information and analysis, see CRS Report R40860, Report R40860, Small Business Size Standards: A Historical
Analysis of ~~Contemporary~~Contem porary Issues, by Robert Jay Dilger. , by Robert Jay Dilger.
56 13 C.F.R. §121.201 and P.L. 111-240, the Small Business56 13 C.F.R. §121.201 and P.L. 111-240, the Small Business Act of 2010, §1116. Alternative Size Standards. Act of 2010, §1116. Alternative Size Standards.
57 SBA,57 SBA, Office of Government Contracting and BusinessOffice of Government Contracting and Business Development, “SBA SizeDevelopment, “SBA Size ~~Standards~~ Standards Methodology,” April Methodology,” April
2019, p. 29, at https://www.sba.gov/document/support2019, p. 29, at https://www.sba.gov/document/support —size-standards-methodology-white-paper (hereinafter cited as —size-standards-methodology-white-paper (hereinafter cited as
SBA,SBA, “SBA Size“SBA Size ~~Standards~~ Standards Methodology”). Methodology”).
58 SBA,58 SBA, ~~“SBA Size Standards~~ “SBA Size Standards Methodology,” p. 1. Methodology,” p. 1.
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(such as insurance companies, real estate investment firms, firms involved in financial (such as insurance companies, real estate investment firms, firms involved in financial
speculation or pyramid sales, and businesses involved in speculation or pyramid sales, and businesses involved in ~~illegal~~ il egal activities) is contained in 13 activities) is contained in 13
C.F.R. §120.110.59 With one exception, nonprofit and charitable organizations are also C.F.R. §120.110.59 With one exception, nonprofit and charitable organizations are also
ineligible.60 ineligible.60
Most of these programs charge fees to help offset program costs, including costs related to loan 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 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 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 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 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 who have a 7(a) loan that has a SBA guaranteed portion of loans exceeding $700,000. Lenders who have a 7(a) loan that has a SBA
guaranteed portion in excess of $1 guaranteed portion in excess of $1 ~~million~~mil ion can be charged an additional fee not to exceed 0.25% can be charged an additional fee not to exceed 0.25%
of the guaranteed amount in excess of $1 of the guaranteed amount in excess of $1 ~~million~~mil ion. .
7(a) loans are also subject to an ongoing servicing fee not to exceed 0.55% of the outstanding 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.61 In addition, lenders are authorized to collect fees balance of the guaranteed portion of the loan.61 In addition, lenders are authorized to collect fees
from borrowers to offset their administrative expenses. from borrowers to offset their administrative expenses.
In an effort to assist In an effort to assist ~~small~~ smal business owners, the SBA has, from time-to-time, reduced its fees. For business owners, the SBA has, from time-to-time, reduced its fees. For
example, in FY2019, the SBA waived the annual service fee for 7(a) loans of $150,000 or less example, in FY2019, the SBA waived the annual service fee for 7(a) loans of $150,000 or less
made to made to ~~small~~ smal businesses located in a rural area or a HUBZonebusinesses located in a rural area or a HUBZone and reduced the up-front one-time and reduced the up-front one-time
guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan.62guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan.62
In addition, pursuant to P.L. 114-38, the Veterans Entrepreneurship Act of 2015, the SBA is In addition, pursuant to P.L. 114-38, the Veterans Entrepreneurship Act of 2015, the SBA is
required to waive the up-front, one-time guaranty fee on required to waive the up-front, one-time guaranty fee on ~~all~~ al veteran loans under the 7(a) veteran loans under the 7(a)
SBAExpress program (up to and including $350,000) “except during any upcoming fiscal year SBAExpress program (up to and including $350,000) “except during any upcoming fiscal year
for which the President’s budget, submitted to Congress, includes a cost for the 7(a) program, in for which the President’s budget, submitted to Congress, includes a cost for the 7(a) program, in
its entirety, that is above zero.”63 its entirety, that is above zero.”63
The SBA’s goal is to achieve a zero subsidy rate, meaning that the appropriation of budget 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. authority for new loan guaranties is not required.
7(a) Loan Guaranty Program64
The 7(a) loan guaranty program is named after the section of the The 7(a) loan guaranty program is named after the section of the ~~Small~~ Smal Business Act that Business Act that
authorizes it. The loans are made by SBAauthorizes it. The loans are made by SBA lending partners (mostly banks but also some other lending partners (mostly banks but also some other
financial institutions) and financial institutions) and ~~partially~~partial y guaranteed by the SBA. Borrowers may use 7(a) loan proceeds guaranteed by the SBA. Borrowers may use 7(a) loan proceeds

~~59 Title~~ 59 T itle 13 of the Code of Federal 13 of the Code of Federal ~~Regulations~~ Regulations can be viewedcan be viewed at https://www.gpo.gov/fdsys/browse/at https://www.gpo.gov/fdsys/browse/
collectionCfr.action?selectedYearFrom=2016&go=Go. collectionCfr.action?selectedYearFrom=2016&go=Go.
60 P.L. 105-135, the Small Business60 P.L. 105-135, the Small Business Reauthorization Act of 1997, expanded the SBA’s Microloan program’s eligibility Reauthorization Act of 1997, expanded the SBA’s Microloan program’s eligibility
to include borrowersto include borrowers establishing a nonprofit child care business. establishing a nonprofit child care business.
61 15 U.S.C. 61 15 U.S.C. §636(a)(23)(a). §636(a)(23)(a).
62 SBA,62 SBA, “SBA“SBA Information Notice: 7(a) Fees Effective on October 1, Information Notice: 7(a) Fees Effective on October 1, ~~2018~~201 8,” at https://www.sba.gov/document/,” at https://www.sba.gov/document/
information-notice-5000-180010-7a-fees-effective-october-1-2018. information-notice-5000-180010-7a-fees-effective-october-1-2018.
~~63 The SBA~~ 63 T he SBA had waived the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program 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 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,permanent, except during any upcoming fiscal year for which the President’s budget, submitted to Congress, includessubmitted to Congress, includes a a
cost for the 7(a) program, in its entirety, that is above zero. cost for the 7(a) program, in its entirety, that is above zero. ~~The SBA waived~~ T he SBA waived the fee, pursuant to P.L. 114-38, in the fee, pursuant to P.L. 114-38, in
FY2016, FY2017, FY2018, and FY2019. FY2016, FY2017, FY2018, and FY2019.
64 For further information and analysis, see CRS 64 For further information and analysis, see CRS Report R41146, Report R41146, Small Business Administration 7(a) Loan Guaranty
Program , by Robert Jay Dilger. , by Robert Jay Dilger.
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to establish a new business or to assist in the operation, acquisition, or expansion of an existing to establish a new business or to assist in the operation, acquisition, or expansion of an existing
business. 7(a) loan proceeds may be used to business. 7(a) loan proceeds may be used to
 acquire land (by purchase or lease);  acquire land (by purchase or lease);
 improve a site (e.g., grading, streets, parking lots, landscaping), including up to  improve a site (e.g., grading, streets, parking lots, landscaping), including up to
5% for community improvements such as curbs and sidewalks; 5% for community improvements such as curbs and sidewalks;
 purchase one or more existing buildings;  purchase one or more existing buildings;
 convert, expand, or renovate one or more existing buildings;  convert, expand, or renovate one or more existing buildings;
 construct one or more new buildings;  construct one or more new buildings;
 acquire (by purchase or lease) and  acquire (by purchase or lease) and ~~install~~ instal fixed assets; fixed assets;
 purchase inventory, supplies, and raw materials;  purchase inventory, supplies, and raw materials;
 finance working capital; and  finance working capital; and
 refinance certain outstanding debts.65  refinance certain outstanding debts.65
In In ~~FY2019~~FY2020, the SBA, the SBA approved approved ~~51,907 7(a) loans to 46,111 small businesses totaling $23.2 billion.~~
42,302 7(a) loans, totaling $22.6 bil ion.66 In FY2019, there were In FY2019, there were 1,708 active lending partners providing 7(a) loans. 1,708 active lending partners providing 7(a) loans.
The 7(a) program’s current guaranty rate is 85% for loans of $150,000 or less and 75% for loans 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 greater than $150,000 (up to a maximum guaranty of $3.75 ~~million~~mil ion, or 75% of $5 , or 75% of $5 ~~million).66~~mil ion).67
Although the SBA’s offer to guarantee a loan provides an incentive for lenders to make the loan, 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. lenders are not required to do so.
A 7(a) loan is required to have the shortest appropriate term, depending upon the borrower’s A 7(a) loan is required to have the shortest appropriate term, depending upon the borrower’s
abilityability to repay. The maximum term is 10 years, unless the loan finances or refinances real estate to repay. The maximum term is 10 years, unless the loan finances or refinances real estate
or equipment with a useful life exceeding 10 years. In that case, the loan term can be up to 25 or equipment with a useful life exceeding 10 years. In that case, the loan term can be up to 25
years, including extensions.years, including extensions.6768
Lenders are permitted to charge borrowers fees to recoup specified expenses and are Lenders are permitted to charge borrowers fees to recoup specified expenses and are ~~allowed~~al owed to to
charge borrowers “a reasonable fixed interest rate” or, with the SBA’s approval, a variable charge borrowers “a reasonable fixed interest rate” or, with the SBA’s approval, a variable
interest rate. The SBA uses a multistep formula to determine the maximum interest rate. The SBA uses a multistep formula to determine the maximum ~~allowable~~al owable fixed fixed
interest rate for interest rate for ~~all~~ al 7(a) loans (with the exception of the Export Working Capital Program and 7(a) loans (with the exception of the Export Working Capital Program and
Community Advantage loans) and Community Advantage loans) and ~~periodically~~periodical y publishes that rate and the maximum publishes that rate and the maximum ~~allowable~~
al owable variable interest rate in the variable interest rate in the Federal Register..68

~~65 13 C.F.R. §120.120.~~
6669 65 13 C.F.R. §120.120. 66 SBA, “Weekly Approvals Report with data as of 9/30 for each FY,” September 30, 2020, at https://www.sba.gov/sites/default/files/2020-10/WebsiteReport_asof_20200930-508.pdf. 67 Exceptions to this general schedule of guaranty rates include Exceptions to this general schedule of guaranty rates include loans made underloans made under the International the International ~~Trade~~T rade, Export , Export
Working Capital Program, or Export Express (90% guaranty); and the SBAExpressWorking Capital Program, or Export Express (90% guaranty); and the SBAExpress program (50% guaranty).program (50% guaranty).
67 68 13 C.F.R. §120.212. A portion of a 7(a) loan used 13 C.F.R. §120.212. A portion of a 7(a) loan used to acquire or improve real property may have a term of 25 years to acquire or improve real property may have a term of 25 years
plusplus an additional period neededan additional period needed to complete the construction or improvements. to complete the construction or improvements.
6869 For fixed interest rates, the SBA, effective November 6, 2018, uses the prime rate (see 13 C.F.R. For fixed interest rates, the SBA, effective November 6, 2018, uses the prime rate (see 13 C.F.R. §120.214(c)) in §120.214(c)) in
effect on effect on ~~the~~t he first business first business day of the month as the base rate and increases the maximum allowableday of the month as the base rate and increases the maximum allowable interest rate spread interest rate spread
as follows:as follows: for fixed rate loans of $25,000 or less, prime plusfor fixed rate loans of $25,000 or less, prime plus 600 basis600 basis points, points, ~~plus~~p lus the 200 basis points permitted by 13 the 200 basis points permitted by 13
C.F.R.C.F.R. §120.215; for fixed rate loans over $25,000 but not exceeding $50,000, prime plus 600 basis points, plus the 100 §120.215; for fixed rate loans over $25,000 but not exceeding $50,000, prime plus 600 basis points, plus the 100
basisbasis points permitted by 13 C.F.R. §120.215; for fixed rate loans greater than $50,000 but not exceeding $250,000, points permitted by 13 C.F.R. §120.215; for fixed rate loans greater than $50,000 but not exceeding $250,000,
prime plusprime plus 600 basis600 basis points; and for fixed rate loans over $250,000, prime plus 500 basis points. SBA,points; and for fixed rate loans over $250,000, prime plus 500 basis points. SBA, “ “Maximum Maximum
Allowable Allowable 7(a) Fixed Interest Rates,” 837(a) Fixed Interest Rates,” 83 Federal Register 55478, November 6, 2018. For the previously used fixed 55478, November 6, 2018. For the previously used fixed
interest rates formula, see SBA,interest rates formula, see SBA, ~~“Business~~ “ Business Loan Program Maximum AllowableLoan Program Maximum Allowable Fixed Rate,” 74 Fixed Rate,” 74 Federal Register
50263-50264, September 30, 2009. 50263-50264, September 30, 2009.
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In In ~~October~~November 2020, the maximum 2020, the maximum ~~allowable~~al owable fixed interest rates are 11.25% for 7(a) loans of fixed interest rates are 11.25% for 7(a) loans of
$25,000 or less; 10.25% for loans over $25,000 but not exceeding $50,000; 9.25% for loans over $25,000 or less; 10.25% for loans over $25,000 but not exceeding $50,000; 9.25% for loans over
$50,000 up to and including $250,000; and 8.25% for loans greater than $250,000.$50,000 up to and including $250,000; and 8.25% for loans greater than $250,000.6970
Maximum interest rates Maximum interest rates ~~allowed~~al owed on variable-rate 7(a) loans are pegged to either the prime rate, 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, 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 which is a weighted average of rates that the federal government pays for loans with maturities
similar to the guaranteed loan. The similar to the guaranteed loan. The ~~allowed~~al owed spread over the prime rate, LIBOR base rate, or SBA 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 optional peg rate depends on the loan amount and the loan’s maturity (under seven years or seven
years or more).years or more).7071 The adjustment period can be no more than monthly and cannot change over the The adjustment period can be no more than monthly and cannot change over the
life of the loan. life of the loan.
The 504/CDC Loan Guaranty ~~Program71~~Program72
The 504/CDC loan guaranty program uses Certified Development Companies (CDCs), which are The 504/CDC loan guaranty program uses Certified Development Companies (CDCs), which are
private, nonprofit corporations established to contribute to economic development within their private, nonprofit corporations established to contribute to economic development within their
communities. Each CDC has its own geographic territory. The program provides long-term, 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. 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 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 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 CDC’s loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a guaranteed
debenture.debenture.7273 The The ~~small~~ smal business must contribute at least 10% as equity. business must contribute at least 10% as equity.
To participate in the program, To participate in the program, ~~small~~ smal businesses cannot exceed $15 businesses cannot exceed $15 ~~million~~mil ion in tangible net worth in tangible net worth
and cannot have average net income of more than $5 and cannot have average net income of more than $5 ~~million~~ mil ion for two full fiscal years before the 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 date of application. Also, CDCs must intend to create or retain one job for every $75,000 of the
debenture ($120,000 for debenture ($120,000 for ~~small~~ smal manufacturers) or meet an alternative job creation standard if they manufacturers) or meet an alternative job creation standard if they
meet any one of 15 community or public policy goals. meet any one of 15 community or public policy goals.
Maximum 504/CDC participation in a single project is $5 Maximum 504/CDC participation in a single project is $5 ~~million~~ mil ion and $5.5 and $5.5 ~~million~~mil ion for for
manufacturers and specified energy-related projects; the minimum is $25,000. There is no limit manufacturers and specified energy-related projects; the minimum is $25,000. There is no limit
on the project size. Loan maturity is 10 years for equipment and 20 or 25 years for real estate. on the project size. Loan maturity is 10 years for equipment and 20 or 25 years for real estate.
Unguaranteed financing may have a shorter term. The maximum fixed interest rate Unguaranteed financing may have a shorter term. The maximum fixed interest rate ~~allowed~~al owed is is
established when the debenture backing the loan is sold and is pegged to an increment above the 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. current market rate for 5-year and 10-year U.S. Treasury issues.
The SBA is authorized to charge CDCs 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  a one-time, up-front guaranty fee of up to 0.5% of the debenture (0.5% in
FY2021), FY2021),

69 70 Colson Services Corp., “SBA Colson Services Corp., “SBA ~~Base~~ Base Rates,” NewRates,” New York, at https://colsonservices.bnymellon.com/news/sba-base-York, at https://colsonservices.bnymellon.com/news/sba-base-
rates.jsp. rates.jsp.
~~70 The~~71 T he maximum variable interest rates allowed for 7(a) loans with a maturity less than seven years are the base maximum variable interest rates allowed for 7(a) loans with a maturity less than seven years are the base rate rate
plusplus 4.25% for loans less4.25% for loans less than $25,000; the base rate plus 3.25% for loans of $25,000-$50,000; and the base rate plus than $25,000; the base rate plus 3.25% for loans of $25,000-$50,000; and the base rate plus
2.25% for loans over $50,000. 2.25% for loans over $50,000. ~~The~~T he maximum variable interest rates allowed for 7(a) loans with a maturity of seven maximum variable interest rates allowed for 7(a) loans with a maturity of seven
years or longer are the base rate plus 4.75% for loans less than $25,000; the base rate plus 3.75% for loans of $25,000-years or longer are the base rate plus 4.75% for loans less than $25,000; the base rate plus 3.75% for loans of $25,000-
$50,000; and the base rate plus 2.75% for loans over $50,000. See 13 C.F.R. §120.214 and 13 C.F.R.$50,000; and the base rate plus 2.75% for loans over $50,000. See 13 C.F.R. §120.214 and 13 C.F.R. §120.215.§120.215.
71 72 For further information and analysis, see CRS For further information and analysis, see CRS Report R41184, Report R41184, Small Business Administration 504/CDC Loan
Guaranty Program , by Robert Jay Dilger. , by Robert Jay Dilger.
7273 A debenture is a bond that is not secured A debenture is a bond that is not secured by a lien on specific collateral. by a lien on specific collateral.
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 an annual servicing fee of up to 0.9375% of the unpaid principal balance  an annual servicing fee of up to 0.9375% of the unpaid principal balance
(0.4517% for regular 504/CDC loans and 0.4865% for 504/CDC debt refinance (0.4517% for regular 504/CDC loans and 0.4865% for 504/CDC debt refinance
loans in FY2021), loans in FY2021),
 a funding fee (not to exceed 0.25% of the debenture), an annual development  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 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  a one-time participation fee (0.5% of the senior mortgage loan if in a senior lien
position to the SBA position to the SBA and the loan was approved after September 30, 1996). and the loan was approved after September 30, 1996).
In addition, CDCs are In addition, CDCs are ~~allowed~~al owed to charge borrowers a processing (or packaging) fee of up to 1.5% 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 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. Servicing Agent (CSA) fee, other agent fees, and an underwriters’ fee.
In In ~~FY2019~~FY2020, the SBA, the SBA approved approved ~~6,099 504/CDC loans to 6,008 small businesses totaling nearly~~
~~$5.0 billion.73~~ 7,119 504/CDC loans, totaling over $5.8 bil ion.74 In FY2019, 212 ~~In FY2019, 212~~ CDCs provided at least one 504/CDC loan.CDCs provided at least one 504/CDC loan.7475
504/CDC Refinancing Program
During the Great Recession (2007-2009), Congress authorized the SBA to temporarily During the Great Recession (2007-2009), Congress authorized the SBA to temporarily ~~allow~~al ow, ,
under specified circumstances, the use of 504/CDC program funds to refinance existing under specified circumstances, the use of 504/CDC program funds to refinance existing
commercial debt (e.g., not from SBA-guaranteed loans) for business expansion under the commercial debt (e.g., not from SBA-guaranteed loans) for business expansion under the
504/CDC program.504/CDC program.7576 In 2010, Congress authorized, for two years, the expansion of the types of In 2010, Congress authorized, for two years, the expansion of the types of
projects eligibleprojects eligible for refinancing of existing debt under the 504/CDC program to include projects for refinancing of existing debt under the 504/CDC program to include projects
not involving business expansion, provided the projects met specific criteria.not involving business expansion, provided the projects met specific criteria.7677 In the 114th In the 114th
Congress, Congress reinstated the expansion of the types of projects eligible for refinancing under Congress, Congress reinstated the expansion of the types of projects eligible for refinancing under
the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 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.504/CDC program as a whole do not have credit subsidy costs.~~77 Specifically~~78 Specifical y, each CDC is , each CDC is
required to limitrequired to limit its refinancing so that, during any fiscal year, the new refinancing does not its refinancing so that, during any fiscal year, the new refinancing does not
exceed 50% of the dollars it loaned under the 504/CDC program during the previous fiscal year. exceed 50% of the dollars it loaned under the 504/CDC program during the previous fiscal year.

~~73 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/2019),”~~ 74 SBA, “Weekly Approvals Report with data as of 9/30 for each FY,” September 30, 2020, at https://www.sba.gov/sites/default/files/ at https://www.sba.gov/sites/default/files/
~~2019-10/WebsiteReport_asof_20190930.pdf; and SBA,~~ ~~FY2021 Congressional Budget Justification FY2019 Annual~~
~~Performance Report.” pp. 31, 164.~~
~~74 SBA,~~ 2020-10/WebsiteReport_asof_20200930-508.pdf. 75 SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, pp. 41, 166. , pp. 41, 166.
7576 P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA). P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA). ~~The~~T he specified circumstances include specified circumstances include the the
following:following: the amount of existing indebtedness doesthe amount of existing indebtedness does not exceed 50% of the project cost of the expansion; the proceeds not exceed 50% of the project cost of the expansion; the proceeds
of the indebtednessof the indebtedness were usedwere used to acquire land, includingto acquire land, including the buildingthe building situated thereon, to construct a buildingsituated thereon, to construct a building thereon, thereon,
or to purchase equipment; the existing indebtednessor to purchase equipment; the existing indebtedness is collateralized by fixed assets; the existing indebtednessis collateralized by fixed assets; the existing indebtedness was was
incurred for the benefit of a small business;incurred for the benefit of a small business; the financing is usedthe financing is used only for refinancing existing indebtednessonly for refinancing existing indebtedness or costs or costs
related to the project being financed; the refinancing provides a substantial benefit to the borrower; the borrower has related to the project being financed; the refinancing provides a substantial benefit to the borrower; the borrower has
been current on all payments due on the existing debt for not less than one year preceding the date of refinancing; and been current on all payments due on the existing debt for not less than one year preceding the date of refinancing; and
the financing provided willthe financing provided will have better terms or rate of interest than the existing have better terms or rate of interest than the existing ~~indebtedness.~~
76in debtedness. 77 P.L. 111-240, the Small Business P.L. 111-240, the Small Business ~~Jobs~~ Jobs Act of 2010. A project that does not involve the expansion of a small business Act of 2010. A project that does not involve the expansion of a small business
concern may includeconcern may include the refinancing of qualifiedthe refinancing of qualified debt if (I) the amount of the financing is not be more than 90% of the debt if (I) the amount of the financing is not be more than 90% of the
value of the collateral for the financing, except that, if the appraised value of the eligiblevalue of the collateral for the financing, except that, if the appraised value of the eligible fixed assets serving as fixed assets serving as
collateral for the financing is less than the amount equal to 125% of the amount of the financing, the borrower may collateral for the financing is less than the amount equal to 125% of the amount of the financing, the borrower may
provide additional cash or other collateral to eliminate any deficiency; (II) the borrower has been in operation for all of provide additional cash or other collateral to eliminate any deficiency; (II) the borrower has been in operation for all of
the two-year period ending on the date of the loan; and (III) for a financing for which the Administrator determines the two-year period ending on the date of the loan; and (III) for a financing for which the Administrator determines
there willthere will be an additional cost attributable to the refinancing of the qualifiedbe an additional cost attributable to the refinancing of the qualified debt, the borrower agrees to pay a fee in debt, the borrower agrees to pay a fee in
an amount equalan amount equal to the anticipated additional cost. to the anticipated additional cost.
7778 P.L. 114-113, the Consolidated Appropriations Act, 2016. For additional information and analysis, see CRS P.L. 114-113, the Consolidated Appropriations Act, 2016. For additional information and analysis, see CRS Report Report
R41184, R41184, ~~Small Business Administration~~Sm all Business Adm inistration 504/CDC Loan Guaranty Program , by Robert Jay Dilger. , by Robert Jay Dilger.
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This limitation This limitation may be waived if the SBA determines that the refinance loan is needed for good may be waived if the SBA determines that the refinance loan is needed for good
cause.cause.
Commercial loans eligible Commercial loans eligible for the 504/CDC Refinancing program being used to finance long-term for the 504/CDC Refinancing program being used to finance long-term
fixed asset debt cannot have a loan-to-value (LTV) ratio of more than 90% of the fair market fixed asset debt cannot have a loan-to-value (LTV) ratio of more than 90% of the fair market
value of the eligiblevalue of the eligible fixed asset(s) serving as collateral. Loans that are used to partly refinance fixed asset(s) serving as collateral. Loans that are used to partly refinance
eligibleeligible business operating expenses (e.g., salaries, rent, utilities) cannot exceed an LTV ratio of business operating expenses (e.g., salaries, rent, utilities) cannot exceed an LTV ratio of
more than 85% of the fair market value of the collateral. The fees associated with the 504/CDC more than 85% of the fair market value of the collateral. The fees associated with the 504/CDC
Refinancing program are the same as the 504/CDC Loan Guaranty program except the ongoing Refinancing program are the same as the 504/CDC Loan Guaranty program except the ongoing
guaranty servicing fee may vary. In FY2020, the annual guaranty servicing fee is 0.3205% for guaranty servicing fee may vary. In FY2020, the annual guaranty servicing fee is 0.3205% for
regular 504/CDC loans and 0.322% for 504/CDC debt refinance loans. regular 504/CDC loans and 0.322% for 504/CDC debt refinance loans.
In FY2019, the SBA In FY2019, the SBA approved 166 refinancing loans totaling $154.8 approved 166 refinancing loans totaling $154.8 ~~million.78~~mil ion.79
The Microloan ~~Program79~~Program80
The Microloan program provides direct loans to qualified nonprofit intermediary Microloan The Microloan program provides direct loans to qualified nonprofit intermediary Microloan
lenders that, in turn, provide “microloans” of up to $50,000 to lenders that, in turn, provide “microloans” of up to $50,000 to ~~small~~ smal businesses and nonprofit businesses and nonprofit
child care centers. Microloan lenders also provide marketing, management, and technical child care centers. Microloan lenders also provide marketing, management, and technical
assistance to Microloan borrowers and potential borrowers. assistance to Microloan borrowers and potential borrowers.
The program was authorized in 1991 as a five-year demonstration project and became operational 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 in 1992. It was made permanent, subject to reauthorization, by P.L. 105-135, the ~~Small~~ Smal Business Business
Reauthorization Act of 1997. Although the program is open to Reauthorization Act of 1997. Although the program is open to ~~all small~~ al smal businesses, it targets new businesses, it targets new
and early stage businesses in underserved markets, including borrowers with little to no credit 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 history, low-income borrowers, and women and minority entrepreneurs in both rural and urban
areas who areas who ~~generally~~general y do not qualify for conventional loans or other, larger SBA guaranteed loans. do not qualify for conventional loans or other, larger SBA guaranteed loans.
Microloans can be used for working capital and acquisition of materials, supplies, furniture, Microloans can be used for working capital and acquisition of materials, supplies, furniture,
fixtures, and equipment. Loans cannot be made to acquire land or property. Loan terms are up to fixtures, and equipment. Loans cannot be made to acquire land or property. Loan terms are up to
seven years. seven years.
The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate, The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate,
adjusted to the nearest one-eighth percent (adjusted to the nearest one-eighth percent (~~called~~cal ed the Base Rate), less 1.25% if the intermediary 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 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 intermediary maintains a historic portfolio of Microloans averaging $10,000 or less. The Base
Rate, after adjustment, is Rate, after adjustment, is ~~called~~cal ed the Intermediary’s Cost of Funds. The Intermediary’s Cost of the Intermediary’s Cost of Funds. The Intermediary’s Cost of
Funds is Funds is ~~initially~~ initial y calculated one year from the date of the note and is reviewed calculated one year from the date of the note and is reviewed ~~annually and~~
annual y and adjusted as necessary (adjusted as necessary (~~called~~cal ed recasting). The interest rate cannot be less than zero. 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 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 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 $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 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 borrower and the intermediary and typically range from ~~7% to 9%.~~

~~78 SBA,~~ 6% to 9%. 79 SBA, Office of Congressional and Legislative Affairs, “Office of Congressional and Legislative Affairs, “ WDS Report Amount and Count Summary, September 30, WDS Report Amount and Count Summary, September 30,
2019: DRAFT2019: DRAFT ~~Table~~ T able 2.7. Approvals by Program and Cohort,” October 18, 2018. For historical data, see 2.7. Approvals by Program and Cohort,” October 18, 2018. For historical data, see ~~Table~~T able 3 in 3 in
CRSCRS Report R41184, Report R41184, ~~Small Business Administration~~Sm all Business Adm inistration 504/CDC Loan Guaranty Program , by Robert Jay Dilger. , by Robert Jay Dilger.
7980 For further information and analysis, see CRS For further information and analysis, see CRS Report R41057, Report R41057, Small Business Administration Microloan Program , ,
by Robert Jay Dilger. by Robert Jay Dilger.
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The SBA does not charge intermediaries up-front or ongoing service fees under the Microloan The SBA does not charge intermediaries up-front or ongoing service fees under the Microloan
program. program.
In In ~~FY2019, 5,533 small~~ FY2020, 5,890 smal businesses received a Microloan, totaling $businesses received a Microloan, totaling $~~81.5 million.80~~85.0 mil ion.81 The average The average
Microloan was $14,Microloan was $14,~~735~~434 and the average interest rate was and the average interest rate was 76.5%..5%.8182
SBA Loan Enhancements to Address the Great Recession
Many of the proposals under consideration to address the capital needs of Many of the proposals under consideration to address the capital needs of ~~small~~ smal businesses businesses
adversely affected by the COVID-19 pandemic were used to address the severe economic adversely affected by the COVID-19 pandemic were used to address the severe economic
slowdown during and immediately following the Great Recession (2007-2009). The main slowdown during and immediately following the Great Recession (2007-2009). The main
difference is that given the unique nature of the COVID-19 pandemic’s impact on households, difference is that given the unique nature of the COVID-19 pandemic’s impact on households,
~~especially~~especial y physical distancing and the resulting decrease in consumer spending, there is an added physical distancing and the resulting decrease in consumer spending, there is an added
emphasis today on SBAemphasis today on SBA loan deferrals, loan forgiveness, and expanded eligibility,loan deferrals, loan forgiveness, and expanded eligibility, including, for including, for
the first time, specified types of nonprofit organizations. the first time, specified types of nonprofit organizations.
During the 111th Congress, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 During the 111th Congress, P.L. 111-5, the American Recovery and Reinvestment Act of 2009
(ARRA), provided the SBA an additional $730 (ARRA), provided the SBA an additional $730 ~~million,~~ mil ion, including $375 including $375 ~~million~~ mil ion to temporarily to temporarily
subsidize the 7(a) and 504/CDC loan guaranty programs’ fees ($299 subsidize the 7(a) and 504/CDC loan guaranty programs’ fees ($299 ~~million~~mil ion) and to temporarily ) and to temporarily
increase the 7(a) program’s maximum loan guaranty percentage to 90% ($76 increase the 7(a) program’s maximum loan guaranty percentage to 90% ($76 ~~million).82~~mil ion).83 ARRA ARRA
also included provisions designed to increase the amount of leverage issued under the SBA’s also included provisions designed to increase the amount of leverage issued under the SBA’s
~~Small~~ Smal Business Investment Company (SBIC venture capital) program.Business Investment Company (SBIC venture capital) program.8384 SBICs provide loans and SBICs provide loans and
equity investments in equity investments in ~~small~~ smal businesses. businesses.
ARRA’s funding for the fee subsidies and 90% maximum loan guaranty percentage was about to ARRA’s funding for the fee subsidies and 90% maximum loan guaranty percentage was about to
be exhausted in November 2009, when Congress passed the first of six laws to provide additional be exhausted in November 2009, when Congress passed the first of six laws to provide additional
funding to extend the loan subsidies and 90% maximum loan guaranty percentage. funding to extend the loan subsidies and 90% maximum loan guaranty percentage.
 P.L. 111-118, the Department of Defense Appropriations Act, 2010, provided the  P.L. 111-118, the Department of Defense Appropriations Act, 2010, provided the
SBA $125 SBA $125 ~~million~~ mil ion to continue the fee subsidies and 90% maximum loan guaranty to continue the fee subsidies and 90% maximum loan guaranty
percentage through February 28, 2010. percentage through February 28, 2010.
 P.L. 111-144, the Temporary Extension Act of 2010, provided the SBA $60  P.L. 111-144, the Temporary Extension Act of 2010, provided the SBA $60
~~million~~ mil ion to continue the fee subsidies and 90% maximum loan guaranty to continue the fee subsidies and 90% maximum loan guaranty
percentage through March 28, 2010. percentage through March 28, 2010.
 P.L. 111-150, an act to extend the  P.L. 111-150, an act to extend the ~~Small~~ Smal Business Loan Guarantee Program, and Business Loan Guarantee Program, and
for other purposes, provided the SBA authority to reprogram $40 for other purposes, provided the SBA authority to reprogram $40 ~~million~~mil ion in in
previously appropriated funds to continue the fee subsidies and 90% maximum previously appropriated funds to continue the fee subsidies and 90% maximum
loan guaranty percentage through April 30, 2010. loan guaranty percentage through April 30, 2010.
 P.L. 111-157, the Continuing Extension Act of 2010, provided the SBA $80  P.L. 111-157, the Continuing Extension Act of 2010, provided the SBA $80
~~million~~ mil ion to continue the SBA’s fee subsidies and 90% maximum loan guaranty to continue the SBA’s fee subsidies and 90% maximum loan guaranty
percentage through May 31, 2010. percentage through May 31, 2010.
 P.L. 111-240, the  P.L. 111-240, the ~~Small~~ Smal Business Jobs Act of 2010, provided $505 Business Jobs Act of 2010, provided $505 ~~million~~mil ion (plus (plus
an additional an additional ~~$5 million~~ $5 mil ion for administrative expenses) to continue the SBA’s fee for administrative expenses) to continue the SBA’s fee

~~80 SBA,~~ 81 SBA, “Nationwide Microloan Report, October 1, “Nationwide Microloan Report, October 1, ~~2018~~2019 through September 30, through September 30, ~~2019,” October 10, 2019.~~
~~81 SBA,~~ 2020,” November 18, 2020 . 82 SBA, “Nationwide Microloan Report, October 1, “Nationwide Microloan Report, October 1, ~~2018~~2019 through September 30, through September 30, ~~2019,” October 10, 2019.~~
~~82 SBA,~~ 2020,” November 18, 2020. 83 SBA, “Recovery Act Agency Plan,” May 15, 2009, at https://www.sba.gov/sites/default/files/recovery_act_reports/“Recovery Act Agency Plan,” May 15, 2009, at https://www.sba.gov/sites/default/files/recovery_act_reports/
sba_recovery_act_plan.pdf. sba_recovery_act_plan.pdf.
8384 For additional information and analysis, see CRS For additional information and analysis, see CRS Report R41456, Report R41456, SBA Small Business Investment Company
Program , by Robert Jay Dilger. , by Robert Jay Dilger.
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subsidies and 90% maximum loan guaranty percentage from the act’s date of subsidies and 90% maximum loan guaranty percentage from the act’s date of
enactment (September 27, 2010) through December 31, 2010. enactment (September 27, 2010) through December 31, 2010.
 P.L. 111-322, the Continuing Appropriations and Surface Transportation  P.L. 111-322, the Continuing Appropriations and Surface Transportation
Extensions Act, 2011, authorized the SBA Extensions Act, 2011, authorized the SBA to use funds provided under the to use funds provided under the ~~Small~~
Smal Business Jobs Act of 2010 to continue the SBA’s fee subsidies and 90% Business Jobs Act of 2010 to continue the SBA’s fee subsidies and 90%
maximum loan guaranty percentage through March 4, 2011, or until available maximum loan guaranty percentage through March 4, 2011, or until available
funding is exhausted. funding is exhausted.
On January 3, 2011, the SBA announced that the fee subsidies and 90% maximum guarantee On January 3, 2011, the SBA announced that the fee subsidies and 90% maximum guarantee
percentage ended because funding for these enhancements had been exhausted.percentage ended because funding for these enhancements had been exhausted.84
85 In addition to providing additional In addition to providing additional funding for fee subsidies, P.L. 111-240, among other funding for fee subsidies, P.L. 111-240, among other
provisions provisions
 increased the 7(a) program’s gross loan limit from $2  increased the 7(a) program’s gross loan limit from $2 ~~million to $5 million;~~
mil ion to $5 mil ion;  increased the 504/CDC Program’s loan limits from $1.5  increased the 504/CDC Program’s loan limits from $1.5 ~~million to $5 million~~ mil ion to $5 mil ion for for
“regular” borrowers, from $2 “regular” borrowers, from $2 ~~million to $5 million~~ mil ion to $5 mil ion if the loan proceeds are if the loan proceeds are
directed toward one or more specified public policy goals, and from $4 directed toward one or more specified public policy goals, and from $4 ~~million~~ mil ion to to
$5.5 $5.5 ~~million~~ mil ion for manufacturers; for manufacturers;
 temporarily expanded for two years the eligibility  temporarily expanded for two years the eligibility for low-interest refinancing for low-interest refinancing
under the SBA’s 504/CDC program for qualified debt; under the SBA’s 504/CDC program for qualified debt;
 temporarily increased for one year the SBAExpress Program’s loan limit from  temporarily increased for one year the SBAExpress Program’s loan limit from
$350,000 to $1 $350,000 to $1 ~~million~~mil ion (expired on September 26, 2011); (expired on September 26, 2011);
 increased the Microloan Program’s loan limit for borrowers from $35,000 to  increased the Microloan Program’s loan limit for borrowers from $35,000 to
$50,000; and increased the loan limits for Microloan intermediaries after their $50,000; and increased the loan limits for Microloan intermediaries after their
first year in the program from $3.5 first year in the program from $3.5 ~~million~~mil ion to $5 to $5 ~~million~~mil ion; ;
 authorized the U.S. Treasury to make up to $30  authorized the U.S. Treasury to make up to $30 ~~billion~~bil ion of capital investments for of capital investments for
a a ~~Small~~ Smal Business Lending Fund ($4 Business Lending Fund ($4 ~~billion~~bil ion was issued); was issued);8586
 authorized to be appropriated $1.5  authorized to be appropriated $1.5 ~~billion~~ bil ion for the State for the State ~~Small~~ Smal Business Credit Business Credit
Initiative Program; Initiative Program;8687
 authorized a three-year Intermediary Lending Pilot Program to  authorized a three-year Intermediary Lending Pilot Program to ~~allow~~al ow the SBA the SBA to to
make direct loans to not more than 20 eligible make direct loans to not more than 20 eligible nonprofit lending intermediaries nonprofit lending intermediaries
each year totaling not more than $20 each year totaling not more than $20 ~~million~~mil ion. The intermediaries, in turn, would . The intermediaries, in turn, would
be be ~~allowed~~al owed to make loans to new or growing to make loans to new or growing ~~small~~ smal businesses, not to exceed businesses, not to exceed
$200,000 per business; $200,000 per business;

~~84 SBA,~~ 85 SBA, “Jobs Act Supported More “Jobs Act Supported More ~~Than~~T han $12 Billion in SBA $12 Billion in SBA ~~Lending~~ Lending to Small Businessesto Small Businesses in Just in Just ~~Three~~T hree Months,” Months,”
January 3, 2011, at https://www.sba.gov/content/jobs-act-supported-more-12-billion-sba-lending-small-businesses-just-January 3, 2011, at https://www.sba.gov/content/jobs-act-supported-more-12-billion-sba-lending-small-businesses-just-
three-months. three-months.
8586 For additional information and analysis, see CRS For additional information and analysis, see CRS Report R42045, Report R42045, The Small Business Lending Fund, by Robert Jay , by Robert Jay
Dilger. Dilger.
8687 For additional information and analysis, see CRS For additional information and analysis, see CRS Report R42581, Report R42581, State Small Business Credit Initiative:
~~Implementation~~Im plem entation and Funding Issues, by Robert Jay Dilger. , by Robert Jay Dilger.
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 established an alternative size standard for the 7(a) and 504/CDC loan programs  established an alternative size standard for the 7(a) and 504/CDC loan programs
to enable more to enable more ~~small~~ smal businesses to qualify for assistance;businesses to qualify for assistance;8788 and and
 provided  provided ~~small~~ smal businesses with about $12 businesses with about $12 ~~billion~~bil ion in tax relief. in tax relief.8889
There were also efforts during the 111th and 112th Congresses to require the SBA to reinstate There were also efforts during the 111th and 112th Congresses to require the SBA to reinstate
direct lending to direct lending to ~~small~~ smal businesses. businesses.
During the 111th Congress During the 111th Congress
 H.R. 3854, the  H.R. 3854, the ~~Small~~ Smal Business Financing and Investment Act of 2009, was Business Financing and Investment Act of 2009, was
passed by the House on October 29, 2009, by a vote of 389-32. It would have passed by the House on October 29, 2009, by a vote of 389-32. It would have
authorized a temporary SBA direct lending program.authorized a temporary SBA direct lending program.89
90 During the 112th Congress During the 112th Congress
 H.R. 3007, the Give Credit to Main Street Act of 2011, introduced on September  H.R. 3007, the Give Credit to Main Street Act of 2011, introduced on September
21, 2011, and referred to the House Committee on 21, 2011, and referred to the House Committee on ~~Small~~ Smal Business, would have Business, would have
authorized the SBA to provide direct loans to authorized the SBA to provide direct loans to ~~small~~ smal businesses that have been in businesses that have been in
operation as a operation as a ~~small~~ smal business for at least two years prior to its application for a business for at least two years prior to its application for a
direct loan. The maximum loan amount would have been the lesser of 10% of the direct loan. The maximum loan amount would have been the lesser of 10% of the
firm’s annual revenues or $500,000. firm’s annual revenues or $500,000.
 H.R. 5835, the Veterans Access to Capital Act of 2012, introduced on May 18,  H.R. 5835, the Veterans Access to Capital Act of 2012, introduced on May 18,
2012, and referred to the House Committee on 2012, and referred to the House Committee on ~~Small~~ Smal Business, would have Business, would have
authorized the SBA to provide up to 20% of the annual amount availableauthorized the SBA to provide up to 20% of the annual amount available for for
guaranteed loans under the 7(a) and 504/CDC loan guaranty programs, guaranteed loans under the 7(a) and 504/CDC loan guaranty programs,
respectively, in direct loans to veteran-owned and -controlled respectively, in direct loans to veteran-owned and -controlled ~~small~~ smal businesses. businesses.
Current Issues, Debates, and Lessons Learned
During the 111th Congress (2009-2010), there was a consensus in Congress that the federal During the 111th Congress (2009-2010), there was a consensus in Congress that the federal
government had to take decisive action to address the capital needs of government had to take decisive action to address the capital needs of ~~small~~ smal businesses, primarily businesses, primarily
as a means to promote job retention and creation. Similar sentiments are being expressed today as as a means to promote job retention and creation. Similar sentiments are being expressed today as
Congress considers proposals to assist Congress considers proposals to assist ~~small~~ smal businesses adversely affected by the COVID-19 businesses adversely affected by the COVID-19
pandemic. pandemic.
Many Members of Congress argued during the 111th Congress that the SBA should be provided Many Members of Congress argued during the 111th Congress that the SBA should be provided
additional resources to assist additional resources to assist ~~small~~ smal businesses in acquiring capital necessary to start, continue, or businesses in acquiring capital necessary to start, continue, or

87 88 P.L. 111-240, the Small Business P.L. 111-240, the Small Business ~~Jobs~~ Jobs Act of 2010, established the following interim alternative size standard for Act of 2010, established the following interim alternative size standard for
both the 7(a) and 504/CDC programs: the businessboth the 7(a) and 504/CDC programs: the business ~~qualifies~~ qualifies as small if it does not have a tangible net worth in excess as small if it does not have a tangible net worth in excess
of $15 million and doesof $15 million and does not have an average net income after federal taxes (excludingnot have an average net income after federal taxes (excluding any carryany carry -over losses) in excess -over losses) in excess
of $5 million for two fullof $5 million for two full fiscal years before the date of application. fiscal years before the date of application.
8889 P.L. 111-240 raised the exclusion of gains P.L. 111-240 raised the exclusion of gains on the sale or exchange of qualifiedon the sale or exchange of qualified small businesssmall business stock from the federal stock from the federal
income tax to 100%, with the full exclusion applying only to stock acquired the day after the date of enactment through income tax to 100%, with the full exclusion applying only to stock acquired the day after the date of enactment through
the end of 2010; increased the deduction for qualifiedthe end of 2010; increased the deduction for qualified start ~~start~~-up expenditures from $5,000 to $10,000 in 2010, and raised -up expenditures from $5,000 to $10,000 in 2010, and raised
the phaseout threshold from $50,000 to $60,000 for 2010; placed limitations on the penalty for failure to disclose the phaseout threshold from $50,000 to $60,000 for 2010; placed limitations on the penalty for failure to disclose
reportable transactions based on resultingreportable transactions based on resulting tax benefits; allowedtax benefits; allowed general businessgeneral business credits of eligiblecredits of eligible small businessessmall businesses for for
2010 to be carried back five years; exempted general business2010 to be carried back five years; exempted general business credits of eligiblecredits of eligible small businessessmall businesses in 2010 from the in 2010 from the
alternative minimum tax; allowed a temporary reduction in the recognition period for builtalternative minimum tax; allowed a temporary reduction in the recognition period for built -in gains tax; increased -in gains tax; increased
expensing limitations for 2010 and 2011 and allowedexpensing limitations for 2010 and 2011 and allowed certain real property to be treated as Sectioncertain real property to be treated as Section 179 property; 179 property;
allowedallowed additional firstadditional first -year depreciation for 50% of the basis of certain qualified-year depreciation for 50% of the basis of certain qualified property; and removed cellular property; and removed cellular
telephones and similar telecommunications equipment from listed property so their cost can be deductedtelephones and similar telecommunications equipment from listed property so their cost can be deducted or depreciated or depreciated
like like ~~other~~ot her business business property. property.
8990 H.R. 3854, the Small Business H.R. 3854, the Small Business Financing and Investment Act of 2009 (111th Congress), §111. Capital Backstop Financing and Investment Act of 2009 (111th Congress), §111. Capital Backstop
Program. Program.
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expand operations with the expectation that in so doing small businesses expand operations with the expectation that in so doing small businesses ~~will~~ wil create jobs. Others create jobs. Others
worried about the long-term adverse economic effects of spending programs that increase the worried about the long-term adverse economic effects of spending programs that increase the
federal deficit. They advocated business tax reduction, reform of financial credit market federal deficit. They advocated business tax reduction, reform of financial credit market
regulation, and federal fiscal restraint as the best means to help regulation, and federal fiscal restraint as the best means to help ~~small~~ smal businesses further economic businesses further economic
growth and job creation. growth and job creation.
Given the coronavirus’s widespread adverse economic impact, including productivity losses, Given the coronavirus’s widespread adverse economic impact, including productivity losses,
supply chain disruptions, labor dislocation, and financial pressure on businesses and households, supply chain disruptions, labor dislocation, and financial pressure on businesses and households,
there has been relatively littlethere has been relatively little concern expressed about federal fiscal restraint during the current concern expressed about federal fiscal restraint during the current
pandemic. The debate has been primarily over which specific policies would have the greatest pandemic. The debate has been primarily over which specific policies would have the greatest
impact and which types of impact and which types of ~~small~~ smal businesses and businesses and ~~small~~ smal business owners should be helped the most.business owners should be helped the most.
As mentioned, many of the enhancements to the SBA’s capital access programs that were made As mentioned, many of the enhancements to the SBA’s capital access programs that were made
during the 111th Congress, such as increasing loan limits, providing fee subsidies, increasing loan during the 111th Congress, such as increasing loan limits, providing fee subsidies, increasing loan
guaranty percentages, and expanding eligibilityguaranty percentages, and expanding eligibility criteria are being considered again. These criteria are being considered again. These
changes had a demonstrated impact on changes had a demonstrated impact on ~~small~~ smal business lending during and immediatelybusiness lending during and immediately following following
the Great Recession. SBA lending increased. For example, the SBA’s OIG found that SBA 7(a) the Great Recession. SBA lending increased. For example, the SBA’s OIG found that SBA 7(a)
loan approvals increased 39% and 504/CDC loan approval increased 73% from March to July loan approvals increased 39% and 504/CDC loan approval increased 73% from March to July
2009, largely due to ARRA’s fee reductions and increased loan guarantee percentages. Lending 2009, largely due to ARRA’s fee reductions and increased loan guarantee percentages. Lending
volume remained below pre-recession levels, but was much higher than before the fee reductions volume remained below pre-recession levels, but was much higher than before the fee reductions
and increase in the loan guarantee percentage were implemented. and increase in the loan guarantee percentage were implemented.
The OIG also noted that the increased loan volume “may be impacting Agency staffing The OIG also noted that the increased loan volume “may be impacting Agency staffing
requirements and program risk...requirements and program risk.... Without adequate training and supervision, the increased Without adequate training and supervision, the increased
demands on loan center staff could impact the quality of Agency loan reviews.”demands on loan center staff could impact the quality of Agency loan reviews.”9091
Also, in 2012, the SBA issued a press release lauding P.L. 111-240’s impact on SBA loan volume: Also, in 2012, the SBA issued a press release lauding P.L. 111-240’s impact on SBA loan volume:
With With ~~loan volume steadily increasing for the past six quarters, the U.S. Small Business~~
loan volume steadily increasing for the past six quarters, the U.S. Small Business Administration’s loan programs posted the second largest dollar volume ever in FY 2012, Administration’s loan programs posted the second largest dollar volume ever in FY 2012,
supporting $30.25 billion in loans to small businesses. That amount was surpassed only by supporting $30.25 billion in loans to small businesses. That amount was surpassed only by
FY 2011, which was heavily boosted by the loan incentives under the Small Business Jobs FY 2011, which was heavily boosted by the loan incentives under the Small Business Jobs
Act of 2010.Act of 2010.9192
The data demonstrate that ARRA and the The data demonstrate that ARRA and the ~~Small~~ Smal Business Jobs Act of 2010 helped Business Jobs Act of 2010 helped ~~small~~
smal businesses access capital. However, because the SBA primarily gathers data on program output businesses access capital. However, because the SBA primarily gathers data on program output
(e.g., loan volume, number of (e.g., loan volume, number of ~~small~~ smal businesses served, default rates) as opposed to program businesses served, default rates) as opposed to program
outcomes (e.g., outcomes (e.g., ~~small~~ smal business solvency, job creation, wealth generation) it is difficult to knowbusiness solvency, job creation, wealth generation) it is difficult to know
how effective these programs were in assisting how effective these programs were in assisting ~~small~~ smal businesses or if other approaches might businesses or if other approaches might
have produced better (or different) results. have produced better (or different) results.
Among the lessons learned from earlier Among the lessons learned from earlier ~~small~~ smal business stimulus packages is that additional business stimulus packages is that additional
funding for the SBA OIG to conduct oversight of the SBA’s implementation of stimulus changes funding for the SBA OIG to conduct oversight of the SBA’s implementation of stimulus changes
could help Congress in its oversight responsibilities. Additionalcould help Congress in its oversight responsibilities. Additional funding for the SBAfunding for the SBA OIG to OIG to
conduct investigations of conduct investigations of ~~potentially~~potential y fraudulent behaviors by borrowers and lenders could also fraudulent behaviors by borrowers and lenders could also
prove useful in deterring fraud, waste, and abuse.prove useful in deterring fraud, waste, and abuse.9293 In addition, requiring the SBA to In addition, requiring the SBA to ~~periodically~~

~~90 SBA,~~ periodical y 91 SBA, Office of Inspector General (OIG), Office of Inspector General (OIG), Review of the Recovery Act’s Impact on SBA Lending, ROM 10-02, , ROM 10-02,
November 25, 2009, p. 4, at https://www.sba.gov/document/reportNovember 25, 2009, p. 4, at https://www.sba.gov/document/report -rom-10-02-rom-10-02-review-recovery-acts-impact--rom-10-02-rom-10-02-review-recovery-acts-impact-
sba-lending. sba-lending.
9192 SBA, SBA, ~~“SBA~~ “ SBA Loan Dollars in FYLoan Dollars in FY 2012 Reach Second2012 Reach Second Largest Largest ~~Total~~T otal Ever; $30.25 Billion Second Only to FY 2011 Ever; $30.25 Billion Second Only to FY 2011 ,” ,”
October 9, 2012, at https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-loan-dollars-fy-October 9, 2012, at https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-loan-dollars-fy-
2012-reach-second-largest-total-ever-3025-billion-second-only-fy-2011. 2012-reach-second-largest-total-ever-3025-billion-second-only-fy-2011.
9293 P.L. 116-136, the CARES Act, provided the SBA’s P.L. 116-136, the CARES Act, provided the SBA’s ~~OIG~~ OIG $25 million in additional funding$25 million in additional funding for its oversightfor its oversight activities. activities.
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report to Congress and on its website both output and outcome performance data could help report to Congress and on its website both output and outcome performance data could help
Congress in its oversight responsibilities and assure the public that the taxpayer’s dollars are Congress in its oversight responsibilities and assure the public that the taxpayer’s dollars are
being spent both efficiently and effectively. being spent both efficiently and effectively.
SBA Entrepreneurial Development ~~Programs93~~Programs94
Overview
The SBA has provided technical and managerial assistance to The SBA has provided technical and managerial assistance to ~~small~~ smal businesses since it began businesses since it began
operations in 1953. operations in 1953. ~~Initially~~Initial y, the SBA provided its own , the SBA provided its own ~~small~~ smal business management and technical business management and technical
assistance training programs. Over time, the SBA has relied increasingly on third parties to assistance training programs. Over time, the SBA has relied increasingly on third parties to
provide that training. provide that training.
Congressional interest in the SBA’s management and technical assistance training programs has Congressional interest in the SBA’s management and technical assistance training programs has
increased in recent years, primarily because these programs are viewed as a means to assist increased in recent years, primarily because these programs are viewed as a means to assist ~~small~~
smal businesses create and retain jobs. businesses create and retain jobs. ~~The FY2020 budget appropriated $239 million, funding~~These programs received $239 mil ion in FY2020 and FY2021 under the Continuing Appropriations Act (funding through December 11, 2020). These funds supported about about
14,000 resource partners, including 63 lead 14,000 resource partners, including 63 lead ~~small~~ smal business development centers (SBDCs) and business development centers (SBDCs) and
nearly 900 SBDC local outreach locations, nearly 900 SBDC local outreach locations, ~~125~~over 200 women’s business centers women’s business centers (WBCs), and (WBCs), and ~~350~~
more than 250 chapters of the mentoring program, SCORE.chapters of the mentoring program, SCORE.94
95 The SBA reports that nearly a The SBA reports that nearly a ~~million~~ mil ion aspiring entrepreneurs and aspiring entrepreneurs and ~~small~~ smal business owners receive business owners receive
mentoring and training from an SBA-supported resource partner each year. Most of this training mentoring and training from an SBA-supported resource partner each year. Most of this training
is free, and some is offered at low cost.is free, and some is offered at low cost.9596
The Department of Commerce also provides management and technical assistance training for The Department of Commerce also provides management and technical assistance training for
~~small~~ smal businesses. For example, its Minority Business Development Agency provides training to businesses. For example, its Minority Business Development Agency provides training to
minority business owners to assist them in obtaining contracts and financial awards. minority business owners to assist them in obtaining contracts and financial awards.
Small Business Development Centers
SBDCs provide free or low-cost assistance to SBDCs provide free or low-cost assistance to ~~small~~ smal businesses using programs customized to businesses using programs customized to
local conditions. SBDCs support local conditions. SBDCs support ~~small~~ smal businesses in marketing and business strategy, finance, businesses in marketing and business strategy, finance,
technology transfer, government contracting, management, manufacturing, engineering, sales, technology transfer, government contracting, management, manufacturing, engineering, sales,
accounting, exporting, and other topics. SBDCs are funded by SBA grants and matching funds accounting, exporting, and other topics. SBDCs are funded by SBA grants and matching funds
equal to the grant amount. equal to the grant amount.

On April 3, 2020, the SBA’sOn April 3, 2020, the SBA’s ~~OIG issued~~ OIG issued its first CARESits first CARES Act ~~Act~~-related report, “-related report, “ White Paper: Risk Awareness and White Paper: Risk Awareness and
Lessons Learned from Prior Audits of Economic StimulusLessons Learned from Prior Audits of Economic Stimulus Loans.” For a list of the SBALoans.” For a list of the SBA OIG’sOIG’s oversight reports on oversight reports on
SBA’sSBA’s credit and capital programs, includingcredit and capital programs, including COVID-19-related relief programs, see https://www.sba.gov/document?COVID-19-related relief programs, see https://www.sba.gov/document?
sortBy=Effective%20Date&search=&documentType=Report&program=Credit/Capital&documentActivity=Audit/sortBy=Effective%20Date&search=&documentType=Report&program=Credit/Capital&documentActivity=Audit/
evaluation&office=7392&page=1. evaluation&office=7392&page=1.
9394 For additional information and analysis, see CRS For additional information and analysis, see CRS Report R41352, Report R41352, Small Business Management and Technical
Assistance Training ~~Programs~~Program s, by Robert Jay Dilger. , by Robert Jay Dilger.
9495 Other SBA Other SBA entrepreneurial development programs include the following: the Microloan entrepreneurial development programs include the following: the Microloan ~~Technical~~T echnical Assistance Assistance
Program;Program; the Program for Investment in Microentrepreneurs (PRIME), Veterans Programs (including Veterans the Program for Investment in Microentrepreneurs (PRIME), Veterans Programs (including Veterans
BusinessBusiness Outreach Centers, Boots to Business,Outreach Centers, Boots to Business, Veteran Women Igniting the Spirit of Entrepreneurship [VWISE], Veteran Women Igniting the Spirit of Entrepreneurship [VWISE],
Entrepreneurship Bootcamp for Veterans with Disabilities,Entrepreneurship Bootcamp for Veterans with Disabilities, and Boots to Business:and Boots to Business: ~~Reboot~~ Re boot), the Native American ), the Native American
Outreach Program, the Entrepreneurial Development Initiative (Regional Innovation Clusters), the Entrepreneurship Outreach Program, the Entrepreneurial Development Initiative (Regional Innovation Clusters), the Entrepreneurship
Education Initiative, Education Initiative, ~~the~~t he Growth Accelerators Initiative, and the 7(j) Growth Accelerators Initiative, and the 7(j) ~~Technical~~T echnical Assistance Program. Assistance Program.
9596 SBA, SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 18. , p. 18.
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SBDC funding is SBDC funding is ~~allocated~~al ocated on a pro rata basis among the states (including the District of on a pro rata basis among the states (including the District of
Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and American Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and American
Samoa) by a statutory formula “based on the percentage of the population of each State, as Samoa) by a statutory formula “based on the percentage of the population of each State, as
compared to the population of the United States.”compared to the population of the United States.”9697 If, as is currently the case, SBDC funding If, as is currently the case, SBDC funding
exceeds $90 exceeds $90 ~~million~~mil ion, the minimum funding level is “the sum of $500,000, plus a percentage of , the minimum funding level is “the sum of $500,000, plus a percentage of
$500,000 equal to the percentage amount by which the amount made available exceeds $90 $500,000 equal to the percentage amount by which the amount made available exceeds $90
~~million.”97~~ mil ion.”98
There are 63 lead SBDC service centers, one located in each state (four in Texas and six in 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 U.S. Virgin Islands, Guam, and American California), the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American
Samoa. These centers manage more than 900 SBDC outreach locations. In FY2020Samoa. These centers manage more than 900 SBDC outreach locations. In FY2020 and FY2021, under the Continuing Appropriations Act (funding through December 11, 2020), the SBA was , the SBA was
provided $135 provided $135 ~~million for SBDC grants through the regular appropriations process and an~~
~~additional $192 million~~ mil ion for SBDC grants. The SBA also was provided an additional $192 mil ion in supplemental funding for SBDC grants in in supplemental funding for SBDC grants in FY2020 under the CARES Act.the CARES Act.9899
In FY2019, SBDCs provided technical assistance training and counseling services to 254,821 In FY2019, SBDCs provided technical assistance training and counseling services to 254,821
unique SBDC clients, and 17,810 new businesses were started largely as a result of SBDC unique SBDC clients, and 17,810 new businesses were started largely as a result of SBDC
training and counseling.training and counseling.99100
Microloan Technical Assistance
Congress authorized the SBA’s Microloan lending program in 1991 (P.L. 102-140, the Congress authorized the SBA’s Microloan lending program in 1991 (P.L. 102-140, the
Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations
Act, 1992) to address the perceived disadvantages faced by women, lowAct, 1992) to address the perceived disadvantages faced by women, low -income, veteran, and -income, veteran, and
minority entrepreneurs and business owners gaining access to capital to start or expand their minority entrepreneurs and business owners gaining access to capital to start or expand their
business. The program became operational in 1992. business. The program became operational in 1992. ~~Initially~~Initial y, the SBA’s Microloan program was , the SBA’s Microloan program was
authorized as a five-year demonstration project. It was made permanent, subject to authorized as a five-year demonstration project. It was made permanent, subject to
reauthorization, by P.L. 105-135, the reauthorization, by P.L. 105-135, the ~~Small~~ Smal Business Reauthorization Act of 1997. Business Reauthorization Act of 1997.
The SBA’s Microloan Technical Assistance Program is affiliated with the SBA’s Microloan The SBA’s Microloan Technical Assistance Program is affiliated with the SBA’s Microloan
lendinglending program but receives a separate appropriation. This program provides grants to program but receives a separate appropriation. This program provides grants to
Microloan intermediaries for management and technical training assistance to Microloan program Microloan intermediaries for management and technical training assistance to Microloan program
borrowers and prospective borrowers.borrowers and prospective borrowers.~~100~~101 There are currently 144 active Microloan intermediaries There are currently 144 active Microloan intermediaries
serving 49 states, the District of Columbia, and Puerto Rico.serving 49 states, the District of Columbia, and Puerto Rico.~~101~~102
Under the Microloan program, intermediaries are eligible Under the Microloan program, intermediaries are eligible to receive a Microloan technical to receive a Microloan technical
assistance grant “of not more than 25% of the total outstanding balance of loans made to it.”assistance grant “of not more than 25% of the total outstanding balance of loans made to it.”~~102~~103
Grant funds may be used only to provide marketing, management, and technical assistance to Grant funds may be used only to provide marketing, management, and technical assistance to
Microloan borrowers, and no more than 50% of the funds may be used to provide such assistance Microloan borrowers, and no more than 50% of the funds may be used to provide such assistance
~~to prospective Microloan borrowers and no more than 50% of the funds may be awarded to third~~

~~96 15 U.S.C. §648(a)(4)(C).~~
~~97 15 U.S.C.~~ 97 15 U.S.C. §648(a)(4)(C). 98 15 U.S.C. §648(a)(4)(C) and P.L. 106-554, the Consolidated Appropriations Act, 2001. §648(a)(4)(C) and P.L. 106-554, the Consolidated Appropriations Act, 2001.
~~98 The~~99 T he CARES CARES Act also provides $25 million for SBAAct also provides $25 million for SBA resource partners, including SBDCs,resource partners, including SBDCs, to establish a centralized to establish a centralized
hubhub for COVID-19 information, which includes an online platform that consolidates resources and information across for COVID-19 information, which includes an online platform that consolidates resources and information across
multiple federal agenciesmultiple federal agencies and training program to education resource partner counselors.and training program to education resource partner counselors.
99 100 SBA, SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 85. , p. 85.
~~100~~101 For further analysis of the SBA’s For further analysis of the SBA’s Microloan program, see CRSMicroloan program, see CRS Report R41057, Report R41057, Small Business Administration
Microloan Program , by Robert Jay Dilger. , by Robert Jay Dilger.
~~101~~102 SBA, SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 36. For a list of , p. 36. For a list of
Microloan intermediaries by state, see SBA,Microloan intermediaries by state, see SBA, “ “List of Lenders,” at https://www.sba.gov/partners/lenders/microloan-List of Lenders,” at https://www.sba.gov/partners/lenders/microloan-
program/list-lenders. program/list-lenders.
~~102~~103 15 U.S.C. 15 U.S.C. §636(m)(4)(A). §636(m)(4)(A).
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to prospective Microloan borrowers and no more than 50% of the funds may be awarded to third parties to provide that technical assistance. Grant funds also may be used to attend required parties to provide that technical assistance. Grant funds also may be used to attend required
training.training.~~103~~104
In most instances, intermediaries must contribute, solely from nonfederal sources, an amount In most instances, intermediaries must contribute, solely from nonfederal sources, an amount
equal to 25% of the grant amount.equal to 25% of the grant amount.~~104~~105 In addition to cash or other direct funding, the contribution In addition to cash or other direct funding, the contribution
may include indirect costs or in-kind contributions paid for under nonfederal programs.may include indirect costs or in-kind contributions paid for under nonfederal programs.~~105~~
106 The SBA does not require Microloan borrowers to participate in the Microloan Technical The SBA does not require Microloan borrowers to participate in the Microloan Technical
Assistance Program. However, intermediaries Assistance Program. However, intermediaries ~~typically~~typical y require Microloan borrowers to require Microloan borrowers to
participate in the training program as a condition of the receipt of a microloan. Combining loan participate in the training program as a condition of the receipt of a microloan. Combining loan
and intensive management and technical assistance training is one of the Microloan program’s and intensive management and technical assistance training is one of the Microloan program’s
distinguishing features.distinguishing features.~~106~~107
The SBA was provided $34.5 The SBA was provided $34.5 ~~million~~mil ion for Microloan Technical Assistance grants in FY2020 for Microloan Technical Assistance grants in FY2020 and FY2021 under the Continuing Appropriations Act (funding through December 11, 2020). .
Women’s Business Centers
The WBC Renewable Grant Program was The WBC Renewable Grant Program was ~~initially~~initial y established by P.L. 100-533, the Women’s established by P.L. 100-533, the Women’s
Business Ownership Act of 1988, as the Women’s Business Demonstration Pilot Program, Business Ownership Act of 1988, as the Women’s Business Demonstration Pilot Program,
targeting the needs of targeting the needs of ~~socially and economically~~social y and economical y disadvantaged women. The act directed the SBA disadvantaged women. The act directed the SBA
to provide financial assistance to private, nonprofit organizations to conduct demonstration to provide financial assistance to private, nonprofit organizations to conduct demonstration
projects giving financial, management, and marketing assistance to projects giving financial, management, and marketing assistance to ~~small~~ smal businesses, including businesses, including
start-up businesses, owned and controlled by women. The WBC program was expanded and start-up businesses, owned and controlled by women. The WBC program was expanded and
provided permanent legislativeprovided permanent legislative status by P.L. 109-108, the Science, State, Justice, Commerce, and status by P.L. 109-108, the Science, State, Justice, Commerce, and
Related Agencies Appropriations Act, 2006. Related Agencies Appropriations Act, 2006.
Since the program’s inception, the SBA has awarded WBCs a grant of up to $150,000 per year. Since the program’s inception, the SBA has awarded WBCs a grant of up to $150,000 per year.
WBC initialWBC initial grants are currently awarded for up to five years, consisting of a base period of 12 grants are currently awarded for up to five years, consisting of a base period of 12
months from the date of the award and four 12-month option periods.months from the date of the award and four 12-month option periods.~~107~~108 The SBA determines if The SBA determines if
the option periods are exercised and makes that determination subject to the continuation of the option periods are exercised and makes that determination subject to the continuation of
program authority, the availabilityprogram authority, the availability of funds, and the recipient organization’s compliance with of funds, and the recipient organization’s compliance with
federal law, SBA regulations, and the terms and conditions specified in a cooperative agreement. federal law, SBA regulations, and the terms and conditions specified in a cooperative agreement.

~~103~~ 104 13 C.F.R. §120.712. 13 C.F.R. §120.712.
~~104~~105 13 C.F.R. §120.712. 13 C.F.R. §120.712.
~~105~~106 13 C.F.R. §120.712. Intermediaries may not borrow their contribution. 13 C.F.R. §120.712. Intermediaries may not borrow their contribution.
~~106~~107 Intermediaries that make at least 25% of their loans to small businesses Intermediaries that make at least 25% of their loans to small businesses located in or owned by residents of an located in or owned by residents of an
~~Economically~~Econom ically Distressed Area (defined as having 40% or more of its residents with an annual income that is at or (defined as having 40% or more of its residents with an annual income that is at or
belowbelow the poverty level), or have a portfolio of loans made under the program that averages not more than $10,000 the poverty level), or have a portfolio of loans made under the program that averages not more than $10,000
duringduring the period of the intermediary’s participation in the program are eligible to receive an additional training grant the period of the intermediary’s participation in the program are eligible to receive an additional training grant
equalequal to 5% of the total outstanding balance of loans made to the intermediary. Intermediaries are not required to make to 5% of the total outstanding balance of loans made to the intermediary. Intermediaries are not required to make
a matching contribution as a condition of receiving these additional grant funds.a matching contribution as a condition of receiving these additional grant funds. ~~See~~ See 13 C.F.R. §120.712; and 15 U.S.C. 13 C.F.R. §120.712; and 15 U.S.C.
§636(m)(4)(C)(i). §636(m)(4)(C)(i).
~~107~~108 P.L. 105-135, the Small Business P.L. 105-135, the Small Business Reauthorization Act of 1997, authorized the SBA to award grants to WBCs for up Reauthorization Act of 1997, authorized the SBA to award grants to WBCs for up
to five years—one baseto five years—one base year and four option years. P.L. 106-165, the Women’s Business Centers Sustainabilityyear and four option years. P.L. 106-165, the Women’s Business Centers Sustainability Act of Act of
1999, provided WBCs1999, provided WBCs that had completed the initial five-year grant an opportunity to apply for an additional five-year that had completed the initial five-year grant an opportunity to apply for an additional five-year
sustainability grant. sustainability grant. ~~Thus~~T hus, the act allowed, the act allowed ~~successful~~ successful WBCs to receive SBAWBCs to receive SBA ~~funding~~ funding for a total of 10 years. Because the for a total of 10 years. Because the
program has permitted permanent three-year funding intervals since 2007, the sustainability grants wouldprogram has permitted permanent three-year funding intervals since 2007, the sustainability grants would be be phased out phased out
by FY2012, leaving the initial five-year grants with the continuous three-year option. See SBA,by FY2012, leaving the initial five-year grants with the continuous three-year option. See SBA, FY2012 Congressional
Budget Justification and FY2010 Annual ~~Performance~~Perform ance Report, p. 49, at https://www.sba.gov/sites/default/files/, p. 49, at https://www.sba.gov/sites/default/files/
aboutsbaarticle/FINAL%20FY%202012%20CBJ%20FY%202010%20APR_0.pdfaboutsbaarticle/FINAL%20FY%202012%20CBJ%20FY%202010%20APR_0.pdf . .
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WBCs that successfully complete the initial five-year grant period may apply for an unlimited WBCs that successfully complete the initial five-year grant period may apply for an unlimited
number of three-year funding intervals.number of three-year funding intervals.~~108~~109
During their initial During their initial five-year grant period, WBCs are required to provide a nonfederal match of five-year grant period, WBCs are required to provide a nonfederal match of
one nonfederal dollar for each two federal dollars in years one and two (1:2), and one nonfederal one nonfederal dollar for each two federal dollars in years one and two (1:2), and one nonfederal
dollar for each federal dollar in years three, four, and five (1:1). After the initialdollar for each federal dollar in years three, four, and five (1:1). After the initial five-year grant five-year grant
period, the matching requirement in subsequent three-year funding intervals is not more than 50% period, the matching requirement in subsequent three-year funding intervals is not more than 50%
of federal funding (1:1).of federal funding (1:1).~~109~~110 The nonfederal match may consist of cash, in-kind, and program The nonfederal match may consist of cash, in-kind, and program
income.income.~~110~~111
Today, there are 125 WBCs located throughout most of the United States and the territories. Today, there are 125 WBCs located throughout most of the United States and the territories.~~111~~112 In In
FY2019, WBCs provided technical assistance training and counseling services to 64,527 unique FY2019, WBCs provided technical assistance training and counseling services to 64,527 unique
WBC clients, and 2,087 new businesses were started largely as a result of WBC training and WBC clients, and 2,087 new businesses were started largely as a result of WBC training and
counseling.counseling.~~112~~
~~In FY2020, the~~113 The SBA was provided $22.5 SBA was provided $22.5 ~~million~~mil ion for WBC grants in for WBC grants in ~~the regular appropriations~~
~~process and an additional $48 million~~ FY2020 and FY2021 under the Continuing Appropriations Act (funding through December 11, 2020). The SBA also was provided an additional $48 mil ion in supplemental funding for WBC grants in in supplemental funding for WBC grants in ~~the~~ FY2020 under the CARES CARES
Act.Act.~~113~~114
SCORE (formerly the Service Corps of Retired Executives)
SCORE was established on October 5, 1964, by then-SBA Administrator Eugene P. Foley as a 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 national, volunteer organization, uniting more than 50 independent nonprofit organizations into a
single, national nonprofit organization. single, national nonprofit organization.
The SBA The SBA currently provides grants to SCORE to provide in-person mentoring, online training, currently provides grants to SCORE to provide in-person mentoring, online training,
and “nearly 9,000 local training workshops and “nearly 9,000 local training workshops ~~annually” to small~~ annual y” to smal businesses.businesses.~~114~~115 SCORE’s more than 250 chapters ~~SCORE’s 350~~
~~chapters and more than 800 branch offices~~ are located throughout the United States and partner are located throughout the United States and partner
with more than 10,000 with more than 10,000 volunteer counselors, who are working or retired business owners, volunteer counselors, who are working or retired business owners,
executives and corporate leaders, to provide management and training assistance to executives and corporate leaders, to provide management and training assistance to ~~small~~
smal businesses “at no charge or at businesses “at no charge or at very low cost.”very low cost.”~~115~~

~~108~~116 109 P.L. 110-28, the U.S. P.L. 110-28, the U.S. ~~Troop~~T roop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations
Act, 2007, allowed WBCsAct, 2007, allowed WBCs that successfullythat successfully completed the initial five-year grant to apply for an unlimited number of completed the initial five-year grant to apply for an unlimited number of
three-year funding renewals. three-year funding renewals.
~~109~~110 P.L. 110-28 reduced the federal share to not more than 50% for all grant years (1:1) following the initial five P.L. 110-28 reduced the federal share to not more than 50% for all grant years (1:1) following the initial five -year -year
grant. grant.
~~110~~111 P.L. 105-135 specified that not more than one-half of the nonfederal sector matching assistance may be in the form P.L. 105-135 specified that not more than one-half of the nonfederal sector matching assistance may be in the form
of in-kind contributions that are budget line items only, includingof in-kind contributions that are budget line items only, including office equipment andoffice equipment and office space. office space.
~~111~~112 SBA, SBA, “Women’s Business“Women’s Business Centers Directory,” at https://www.sba.gov/tools/local-assistance/wbc. Centers Directory,” at https://www.sba.gov/tools/local-assistance/wbc.
~~112~~113 SBA, SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 87. , p. 87.
~~113 The~~114 T he CARES CARES Act also provides $25 million for SBAAct also provides $25 million for SBA resource partners, including WBCs,resource partners, including WBCs, to establish a centralized to establish a centralized
hubhub for COVID-19 information, which includes an online platform that consolidates resources and information across for COVID-19 information, which includes an online platform that consolidates resources and information across
multiple federal agenciesmultiple federal agencies and training and training ~~program to education~~programs to educat e resource partner counselors. resource partner counselors.
~~114~~115 SBA, SBA, FY2013 Congressional Budget Justification and FY2011 Annual Performance Report, p. 45, at , p. 45, at
https://www.sba.gov/sites/default/files/files/1-https://www.sba.gov/sites/default/files/files/1-
508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR(1).pdf. 508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR(1).pdf.
~~115~~116 SCORE SCORE (Service Corps of Retired Executives), “About SCORE,”(Service Corps of Retired Executives), “About SCORE,” Washington, DC,Washington, DC, at https://www.score.org/about-at https://www.score.org/about-
score. score.
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In FY2019, SCORE provided technical assistance training and counseling services to 195,242 In FY2019, SCORE provided technical assistance training and counseling services to 195,242
unique SCORE clients, and 480 new businesses were started largely as a result of SCORE unique SCORE clients, and 480 new businesses were started largely as a result of SCORE
training and counseling.training and counseling.~~116~~
~~In FY2020~~117 In FY2020 and FY2021, under the Continuing Appropriations Act (funding through December 11, 2020), the SBA was provided $11.7 , the SBA was provided $11.7 ~~million~~mil ion for SCORE grants. for SCORE grants.
Current Issues, Debates, and Lessons Learned
Congress provided additional funding for SBA entrepreneurial development programs during and Congress provided additional funding for SBA entrepreneurial development programs during and
immediately following the Great Recession. For example, ARRA provided an additionalimmediately following the Great Recession. For example, ARRA provided an additional ~~$24~~
~~million~~ $24 mil ion for Microloan Technical Assistance grants. The for Microloan Technical Assistance grants. The ~~Small~~ Smal Business Jobs Act of 2010 provided Business Jobs Act of 2010 provided
SBDCs an additionalSBDCs an additional ~~$50 million~~ $50 mil ion and temporarily waived SBDC, Microloan Technical and temporarily waived SBDC, Microloan Technical
Assistance, and WBC matching requirements.Assistance, and WBC matching requirements.
Similar proposals have been made to address the COVID-19 pandemic. For example, S. 3518, the Similar proposals have been made to address the COVID-19 pandemic. For example, S. 3518, the
COVID-19 RELIEF for COVID-19 RELIEF for ~~Small~~ Smal Businesses Act of 2020, as introduced, would provide an Businesses Act of 2020, as introduced, would provide an
additional $150 additional $150 ~~million~~ mil ion for SBA’s entrepreneurial development programs, including $40 for SBA’s entrepreneurial development programs, including $40 ~~million~~mil ion
for SBDCs, $18.75 for WBCs, $1 for SBDCs, $18.75 for WBCs, $1 ~~million~~mil ion to SCORE, and $50 to SCORE, and $50 ~~million~~ mil ion for Microloan Technical for Microloan Technical
Assistance grants. The Assistance grants. The ~~bill~~ bil also would waive SBDC, Microloan Technical Assistance, and WBC also would waive SBDC, Microloan Technical Assistance, and WBC
grant matching requirements. The CARES Act grant matching requirements. The CARES Act ~~appropriates $265 million~~ appropriated $265 mil ion for entrepreneurial for entrepreneurial
development programs ($192 development programs ($192 ~~million~~mil ion for SBDCs, $48 for SBDCs, $48 ~~million~~mil ion for WBCs, and $25 for WBCs, and $25 ~~million for~~
mil ion for SBA resource partners to provide online information and training). The act also SBA resource partners to provide online information and training). The act also ~~waives~~waived SBDC SBDC
and WBC matching requirements. and WBC matching requirements.
Congress could require the SBA’s resource partners to report to the SBA both output and Congress could require the SBA’s resource partners to report to the SBA both output and
outcome performance data for these grants and to require the SBA to report that information to outcome performance data for these grants and to require the SBA to report that information to
Congress and make that information availableCongress and make that information available to the public on the SBAto the public on the SBA website. website.
SBA Contracting ~~Programs117~~Programs118
Overview
Federal agencies are required to facilitate the maximum participation of Federal agencies are required to facilitate the maximum participation of ~~small~~ smal businesses as prime businesses as prime
contractors, subcontractors, and suppliers. For example, federal agencies are contractors, subcontractors, and suppliers. For example, federal agencies are ~~generally~~general y required to required to
reserve contracts that have an anticipated value greater than the micro-purchase threshold reserve contracts that have an anticipated value greater than the micro-purchase threshold
(currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000)
exclusively for exclusively for ~~small~~ smal businesses unless the contracting officer is unable to obtain offers from two businesses unless the contracting officer is unable to obtain offers from two
or more or more ~~small~~ smal businesses that are competitive with market prices and the quality and delivery of businesses that are competitive with market prices and the quality and delivery of
the goods or services being purchased.119 117 SBA, ~~the goods or services being purchased.118~~
~~Several SBA programs assist small businesses in obtaining and performing federal contracts and~~
~~subcontracts. These include various prime contracting programs, subcontracting programs, and~~

~~116 SBA,~~ FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 89. , p. 89.
~~117~~118 For additional information and analysis concerning SBA For additional information and analysis concerning SBA contracting programs, see CRScontracting programs, see CRS Report R45576, Report R45576, An
Overview ~~of Small~~ of Sm all Business Contracting, by Robert Jay Dilger. , by Robert Jay Dilger.
~~118~~119 15 U.S.C. 15 U.S.C. §644(j)(1). Certain regulations implementing this provision of the Small Business§644(j)(1). Certain regulations implementing this provision of the Small Business Act effectively narrows Act effectively narrows
its scope. For example, certain small businessits scope. For example, certain small business contracts awardedcontracts awarded or performed overseas are not necessarily requiredor performed overseas are not necessarily required to to
be set asidebe set aside for small businesses,for small businesses, and the small businessand the small business provisions contained in Part 19 of the Federal Acquisition provisions contained in Part 19 of the Federal Acquisition
Regulation (FAR) generally do not apply to blanket purchase agreements and orders placedRegulation (FAR) generally do not apply to blanket purchase agreements and orders placed against Federalagainst Federal Supply Supply
ScheduleSchedule contracts. contracts.
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Several SBA programs assist smal 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 and oversight of the federal other assistance (e.g., contracting technical training assistance and oversight of the federal ~~small~~
smal business goaling program and the Surety Bond Guarantee program).business goaling program and the Surety Bond Guarantee program).~~119~~120
8(a) ~~Program120~~Program121
The SBA’s 8(a) Minority The SBA’s 8(a) Minority ~~Small~~ Smal Business and Capital Ownership Development Program provides Business and Capital Ownership Development Program provides
business development assistance to businesses owned and controlled by persons who are business development assistance to businesses owned and controlled by persons who are ~~socially~~
~~and economically~~social y and economical y disadvantaged, have good character, and demonstrate a potential for success. disadvantaged, have good character, and demonstrate a potential for success.~~121~~
122 Although the 8(a) Program was Although the 8(a) Program was ~~originally~~original y established in the 1980s for the benefit of established in the 1980s for the benefit of
disadvantaged individuals,disadvantaged individuals, Congress expanded the program to include Congress expanded the program to include ~~small~~ smal businesses owned by businesses owned by
four disadvantaged groups. four disadvantaged groups. ~~Small~~ Smal businesses owned by Alaska Native Corporations (ANCs), businesses owned by Alaska Native Corporations (ANCs),
Community Development Corporations (CDCs), Indian tribes, and Native Community Development Corporations (CDCs), Indian tribes, and Native ~~Hawaiian~~Hawai an
Organizations (NHOs) are also eligibleOrganizations (NHOs) are also eligible to participate in the 8(a) Program under somewhat to participate in the 8(a) Program under somewhat
different requirements. different requirements.
Federal agencies are authorized to award contracts for goods or services, or to perform Federal agencies are authorized to award contracts for goods or services, or to perform
construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate
the function of executing contracts to the procuring agencies and often does so. Once the SBA has the function of executing contracts to the procuring agencies and often does so. Once the SBA has
accepted a contract for the 8(a) Program, the contract is awarded through either a restricted accepted a contract for the 8(a) Program, the contract is awarded through either a restricted
competition limitedcompetition limited to just 8(a) participants (a set aside) or on a sole source basis, with the to just 8(a) participants (a set aside) or on a sole source basis, with the
contract amount contract amount ~~generally~~general y determining the acquisition method used. determining the acquisition method used.
For For ~~individually owned small~~ individual y owned smal businesses, when the contract’s anticipated total value, including businesses, when the contract’s anticipated total value, including
any options, is less than $4 any options, is less than $4 ~~million ($7 million~~ mil ion ($7 mil ion for manufacturing contracts), the contract is for manufacturing contracts), the contract is
~~normally~~normal y awarded without competition (as a sole source award). In contrast, when the contract’s awarded without competition (as a sole source award). In contrast, when the contract’s
anticipated value exceeds these thresholds, the contract anticipated value exceeds these thresholds, the contract ~~generally~~general y must be awarded via a set aside must be awarded via a set aside
with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two
eligibleeligible and responsible 8(a) firms and responsible 8(a) firms ~~will~~ wil submit offers and the award can be made at fair market submit offers and the award can be made at fair market
price.price.~~122~~
123 Similar to other participants, firms owned by ANCs, CDCs, NHOs, and Indian tribes are eligible Similar to other participants, firms owned by ANCs, CDCs, NHOs, and Indian tribes are eligible
for 8(a) set asides and may receive sole source awards valued at less than $4 for 8(a) set asides and may receive sole source awards valued at less than $4 ~~million ($7 million~~
mil ion ($7 mil ion for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also receive for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also receive
sole source awards in excess of $4 sole source awards in excess of $4 ~~million ($7 million~~ mil ion ($7 mil ion for manufacturing contracts) even when for manufacturing contracts) even when
contracting officers reasonably expect that at least two eligible and responsible 8(a) firms contracting officers reasonably expect that at least two eligible and responsible 8(a) firms ~~will~~
~~submit offers and the award can be made at fair market price.123 NHO-owned firms may receive~~
~~sole source awards from the Department of Defense under the same conditions.124~~

~~119~~wil 120 For additional information and analysis concerning the SBA’s For additional information and analysis concerning the SBA’s Surety BondSurety Bond Program, see CRSProgram, see CRS Report R42037, Report R42037, SBA
Surety Bond Guarantee Program , by Robert Jay Dilger. , by Robert Jay Dilger.
~~120~~121 For additional information and analysis concerning the 8(a) Program, see CRS For additional information and analysis concerning the 8(a) Program, see CRS Report R44844, Report R44844, SBA’s “8(a)
Program”: Overview, History, and Current Issues, by Robert Jay Dilger. , by Robert Jay Dilger.
~~121~~122 Section 8(a) of the Small Section 8(a) of the Small ~~Business~~ Business Act, P.L. 85-536, as amended, can be found at 15 U.S.C.Act, P.L. 85-536, as amended, can be found at 15 U.S.C. §637(a). Regulations §637(a). Regulations
are in 13 C.F.R.are in 13 C.F.R. §124. §124.
~~122~~123 15 U.S.C. 15 U.S.C. §637(a)(1)(D)(ii); and SBA,§637(a)(1)(D)(ii); and SBA, “Conforming Statutory Amendments and “Conforming Statutory Amendments and ~~Technical~~T echnical Corrections to Small Corrections to Small
BusinessBusiness Government Contracting Regulations,” 83Government Contracting Regulations,” 83 Federal Register 12849, March 26, 2018. 12849, March 26, 2018.
~~123 P.L. 100-656, §602(a), 102 Stat. 3887-88 (November 15, 1988) (codified at 15 U.S.C. §637 note); and 48 C.F.R.~~
~~§19.805-1(b)(2).~~
~~124 DOD’s authority to make sole source awards to NHO-owned firms of contracts valued at more than $4 million ($7~~
~~million for manufacturing contracts) even if contracting officers reasonably expect that offers will be received from at~~
~~least two responsible small businesses existed on a temporary basis in 2004-2006 and became permanent in 2006. See~~
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Congressional Research Service 31 COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options submit offers and the award can be made at fair market price.124 NHO-owned firms may receive sole source awards from the Department of Defense under the same conditions.125
The 8(a) program is designed to help federal agencies achieve their statutory goal of awarding at The 8(a) program is designed to help federal agencies achieve their statutory goal of awarding at
least 5% of their federal contracting dollars to least 5% of their federal contracting dollars to ~~small~~ smal disadvantaged businesses. disadvantaged businesses.
In FY2019, the federal government awarded $30.3 In FY2019, the federal government awarded $30.3 ~~billion~~bil ion to 8(a) firms. to 8(a) firms.
Historically Underutilized Business Zone ~~Program125~~Program126
The SBA oversees the The SBA oversees the ~~Historically~~Historical y Underutilized Underutilized Business Zones (HUBZones)Business Zones (HUBZones) Program. The Program. The
program assists program assists ~~small~~ smal businesses located in HUBZone-designated areas through set asides, sole businesses located in HUBZone-designated areas through set asides, sole
source awards (so long as the award can be made at a fair and reasonable price, and the source awards (so long as the award can be made at a fair and reasonable price, and the
anticipated total value of the contract, including any options, is below $4 anticipated total value of the contract, including any options, is below $4 ~~million~~mil ion, or $7 , or $7 ~~million~~mil ion
for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open
competitions.competitions.~~126~~127 The HUBZone program targets assistance to The HUBZone program targets assistance to ~~small~~ smal businesses located in areas businesses located in areas
with low income, high poverty, or high unemployment.with low income, high poverty, or high unemployment.~~127~~128 To be certified as a HUBZone To be certified as a HUBZone ~~small~~
smal business, at least 35% of the business, at least 35% of the ~~small~~ smal business’s employees must business’s employees must ~~generally~~general y reside in a HUBZone. reside in a HUBZone.
The HUBZone The HUBZone contracting program is designed to help federal agencies achieve their statutory contracting program is designed to help federal agencies achieve their statutory
goal of awarding at least 3% of their federal contracting dollars to HUBZonegoal of awarding at least 3% of their federal contracting dollars to HUBZone ~~small~~ smal businesses. businesses.
In FY2019, the federal government awarded $10.8 In FY2019, the federal government awarded $10.8 ~~billion~~bil ion to HUBZone-certified to HUBZone-certified ~~small~~
smal businesses. businesses.
Service-Disabled Veteran-Owned Small Business Program
The SBA oversees the Service-Disabled Veteran-Owned The SBA oversees the Service-Disabled Veteran-Owned ~~Small~~ Smal Business (SDVOSB) Program. Business (SDVOSB) Program.
The program The program ~~allows~~al ows agencies to set aside contracts for SDVOSBs. Federal agencies may award agencies to set aside contracts for SDVOSBs. Federal agencies may award
sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable
price, and the anticipated total value of the contract, including any options, is below $4 price, and the anticipated total value of the contract, including any options, is below $4 ~~million~~mil ion
($6.5 ($6.5 ~~million~~mil ion for manufacturing contracts). for manufacturing contracts).~~128~~129 For purposes of this program, veterans with service- For purposes of this program, veterans with service-
related disabilitiesrelated disabilities are defined as they are under the statutes governing veterans affairs.are defined as they are under the statutes governing veterans affairs.~~129~~
~~The SDVOSB contracting program is designed to help federal agencies achieve their statutory~~
~~goal of awarding at least 3% of their federal contracting dollars to SDVOSBs.~~
~~In FY2019, the federal government awarded $23.5 billion to SDVOSBs.~~

130 124 P.L. 100-656, §602(a), 102 Stat. 3887-88 (November 15, 1988) (codified at 15 U.S.C. §637 note); and 48 C.F.R. §19.805-1(b)(2). 125 DOD’s authority to make sole source awards to NHO-owned firms of contracts valued at more than $4 million ($7 million for manufacturing contracts) even if contracting officers reasonably expect that offers will be received from at least two responsible small businesses existed on a temporary basis in 2004 -2006 and became permanent in 2006. See P.L. 109-148, Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the GulfP.L. 109-148, Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of of
Mexico, and Pandemic Influenza Act of 2006, §8020, 119 Mexico, and Pandemic Influenza Act of 2006, §8020, 119 ~~Stat~~St at. 2702-03 (December 30, 2005); 48 C.F.R. §219.805-. 2702-03 (December 30, 2005); 48 C.F.R. §219.805-
1(b)(2)(A)-(B). 1(b)(2)(A)-(B).
~~125~~126 For additional information and analysis, see CRS For additional information and analysis, see CRS Report R41268, Report R41268, Small Business Administration HUBZone
Program , by Robert Jay Dilger. , by Robert Jay Dilger.
~~126~~127 15 U.S.C. 15 U.S.C. §657a(b)(2-3); and SBA,§657a(b)(2-3); and SBA, “Conforming Statutory Amendments and “Conforming Statutory Amendments and ~~Technical~~T echnical Corrections to Small Corrections to Small
BusinessBusiness Government Contracting Regulations,” 83Government Contracting Regulations,” 83 Federal Register 12849, March 26, 2018. 12849, March 26, 2018.
~~127~~128 For specific criteria, see 15 U.S.C. For specific criteria, see 15 U.S.C. §632(p)(4); and 13 C.F.R. §126.103. §632(p)(4); and 13 C.F.R. §126.103.
~~128~~129 15 U.S.C. 15 U.S.C. §657f(a-b); and SBA,§657f(a-b); and SBA, “Conforming Statutory Amendments and “Conforming Statutory Amendments and ~~Technical~~T echnical Corrections to Small Business Corrections to Small Business
Government Contracting Regulations,” 83Government Contracting Regulations,” 83 Federal Register 12849, March 26, 2018. 12849, March 26, 2018.
~~129~~130 38 U.S.C. 38 U.S.C. §8127(f). Veteran-owned small businesses§8127(f). Veteran-owned small businesses and service-disabledand service-disabled veteran-owned small businessesveteran-owned small businesses are are
eligibleeligible for separate preferences in procurements conducted by the Department of Veterans Affairs under the authority for separate preferences in procurements conducted by the Department of Veterans Affairs under the authority
of P.L. 109-461, the Veterans Benefits, Health Care, and Information Technology Act of 2006, as amended by P.L. of P.L. 109-461, the Veterans Benefits, Health Care, and Information Technology Act of 2006, as amended by P.L.
~~110-389, the Veterans’ Benefits Improvements Act of 2008.~~
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The SDVOSB contracting program is designed to help federal agencies achieve their statutory goal of awarding at least 3% of their federal contracting dollars to SDVOSBs. In FY2019, the federal government awarded $23.5 bil ion to SDVOSBs.
Women-Owned Small Business Program
The SBA oversees the Women-Owned The SBA oversees the Women-Owned ~~Small~~ Smal Businesses (WOSB) Program. Under this program, Businesses (WOSB) Program. Under this program,
federal contracting officers may set aside federal contracts (or orders) for WOSBs and federal contracting officers may set aside federal contracts (or orders) for WOSBs and
~~Economically~~Economical y Disadvantaged Women-Owned Disadvantaged Women-Owned ~~Small~~ Smal Businesses (EDWOSBs) in industries in Businesses (EDWOSBs) in industries in
which the SBA determines WOSBs are which the SBA determines WOSBs are ~~substantially~~substantial y underrepresented in federal procurement. underrepresented in federal procurement.
Federal contracting officers can also set aside federal contracts for EDWOSBs exclusively in Federal contracting officers can also set aside federal contracts for EDWOSBs exclusively in
industries in which the SBA determines WOSBs are underrepresented in federal procurement. industries in which the SBA determines WOSBs are underrepresented in federal procurement.
The WOSB Program is designed to help federal agencies achieve their statutory goal of awarding The WOSB Program is designed to help federal agencies achieve their statutory goal of awarding
at least 5% of their federal contracting dollars to WOSBs. at least 5% of their federal contracting dollars to WOSBs.
Federal agencies may award sole source contracts to WOSBs so long as the award can be made at Federal agencies may award sole source contracts to WOSBs so long as the award can be made at
a fair and reasonable price, and the anticipated total value of the contract, including any options, a fair and reasonable price, and the anticipated total value of the contract, including any options,
is below $4 is below $4 ~~million ($6.5 million~~mil ion ($6.5 mil ion for manufacturing contracts). for manufacturing contracts).~~130~~
131 In FY2019, the federal government awarded $25.0 In FY2019, the federal government awarded $25.0 ~~billion~~bil ion to WOSBs. to WOSBs.
SBA Surety Bond ~~Program131~~Program132
The SBA’s Surety Bond Guarantee Program has been operational since April 1971.The SBA’s Surety Bond Guarantee Program has been operational since April 1971.~~132~~133 It is It is
designed to increase designed to increase ~~small~~ smal business’ access to federal, state, and local government contracting, as business’ access to federal, state, and local government contracting, as
~~well~~ wel as private sector contracting, by guaranteeing bid, performance, payment, and specified as private sector contracting, by guaranteeing bid, performance, payment, and specified
~~ancillary~~ ancil ary bonds “on contracts … for bonds “on contracts … for ~~small~~ smal and emerging contractors who cannot obtain bonding and emerging contractors who cannot obtain bonding
through regular commercial channels.”through regular commercial channels.”~~133~~134 The program guarantees individual contracts of up to The program guarantees individual contracts of up to
$6.5 $6.5 ~~million~~mil ion, and up to $10 , and up to $10 ~~million~~ mil ion for federal contracts if a federal contracting officer certifies for federal contracts if a federal contracting officer certifies
that such a guarantee is necessary. The $6.5 that such a guarantee is necessary. The $6.5 ~~million~~mil ion limit limit ~~is periodically~~ is periodical y adjusted for inflation.adjusted for inflation.~~134~~
135 The SBA’s guarantee currently ranges from 80% to 90% of the surety’s loss if a default occurs. The SBA’s guarantee currently ranges from 80% to 90% of the surety’s loss if a default occurs.
~~In FY2019, the SBA guaranteed 9,905 bid and final surety bonds (a payment bond, performance~~
~~bond, or both a payment and performance bond) with a total contract value of nearly $6.5~~
~~billion.135~~
~~A surety bond is a three-party instrument between a surety (who agrees to be responsible for the~~
~~debt or obligation of another), a contractor, and a project owner. The agreement binds the~~

~~130 15 U.S.C. §637(m); and SBA,~~ 110-389, the Veterans’ Benefits Improvements Act of 2008. 131 15 U.S.C. §637(m); and SBA, “Conforming Statutory Amendments and “Conforming Statutory Amendments and ~~Technical Corrections~~T echnical Correct ions to Small Business to Small Business
Government Contracting Regulations,” 83Government Contracting Regulations,” 83 Federal Register 12849, March 26, 2018. 12849, March 26, 2018.
~~131~~132 For additional information and analysis concerning the SBA’s For additional information and analysis concerning the SBA’s Surety BondSurety Bond Program, see CRSProgram, see CRS Report R42037, Report R42037, SBA
Surety Bond Guarantee Program , by Robert Jay Dilger. , by Robert Jay Dilger.
~~132~~133 P.L. 91-609, the Housing and Urban Development Act of 1970; and U.S. Congress, P.L. 91-609, the Housing and Urban Development Act of 1970; and U.S. Congress, Senate Committee on Banking, Senate Committee on Banking,
Housing,Housing, and Urban Affairs, and Urban Affairs, ~~Small~~Sm all Business Legislation - 1974, hearing on S. 3137 and S., hearing on S. 3137 and S. 3138, 93rd Cong., 2nd sess., 3138, 93rd Cong., 2nd sess.,
March 13, 1974 (Washington, DC: GPO, 1974), p. 19. March 13, 1974 (Washington, DC: GPO, 1974), p. 19.
~~133~~134 SBA, SBA, “ “FY2016 Congressional BudgetFY2016 Congressional Budget Justification and FY2014 Annual Performance Report,” p. 44, at Justification and FY2014 Annual Performance Report,” p. 44, at
https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF. An ancillary bond, https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF. An ancillary bond,
which ensureswhich ensures that requirements integral to the contract, but not directly performance related, are performed, is eligible that requirements integral to the contract, but not directly performance related, are performed, is eligible
if it is incidental and essential to a contract for which SBAif it is incidental and essential to a contract for which SBA has guaranteed a final bond.has guaranteed a final bond. A reclamation bond is eligible A reclamation bond is eligible
if it is issuedif it is issued to reclaim an abandoned mine site and for a project undertaken for a specific period of time. to reclaim an abandoned mine site and for a project undertaken for a specific period of time.
~~134~~135 P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, increased the program’s guarantee limit P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, increased the program’s guarantee limit
from $2.0 million to $6.5 million, and up to $10 million for a federal contract if from $2.0 million to $6.5 million, and up to $10 million for a federal contract if ~~certified. The~~cert ified. T he act also includes a act also includes a
provision to increase the $6.5 million limit periodically for inflation “by striking ‘does not exceed’ and all that follows provision to increase the $6.5 million limit periodically for inflation “by striking ‘does not exceed’ and all that follows
through the period at the end, and inserting ‘does not exceed $6,500,000,’ as adjusted for inflation in accordance with through the period at the end, and inserting ‘does not exceed $6,500,000,’ as adjusted for inflation in accordance with
Section 1908 of title 41, United States Code.” Section 1908 of title 41, United States Code.” ~~That~~T hat section of the section of the U.S. Code provides for an inflation adjustment on provides for an inflation adjustment on
October 1 of each year evenly divisibleOctober 1 of each year evenly divisible ~~by five.~~
~~135 SBA, Office of Congressional and Legislative Affairs, correspondence with the author, January 14, 2020.~~
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by five. Congressional Research Service 33 COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options In FY2019, the SBA guaranteed 9,905 bid and final surety bonds (a payment bond, performance bond, or both a payment and performance bond) with a total contract value of nearly $6.5 bil ion.136 A surety bond is a three-party instrument between a surety (who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract’s terms and conditions. If the contractor is unable to contractor to comply with the contract’s terms and conditions. If the contractor is unable to
successfully perform the contract, the surety assumes the contractor’s responsibilities and ensures successfully perform the contract, the surety assumes the contractor’s responsibilities and ensures
that the project is completed. Surety bonds encourage project owners to contract with that the project is completed. Surety bonds encourage project owners to contract with ~~small~~
smal businesses that may not have the credit history or prior experience of larger businesses and may businesses that may not have the credit history or prior experience of larger businesses and may
be at greater risk of failing to comply with the contract’s terms and conditions. be at greater risk of failing to comply with the contract’s terms and conditions.
Surety bonds are important to Surety bonds are important to ~~small~~ smal businesses interested in competing for federal contracts businesses interested in competing for federal contracts
because the federal government requires prime contractors—prior to the award of a federal because the federal government requires prime contractors—prior to the award of a federal
contract exceeding $150,000 for the construction, alteration, or repair of any building or public contract exceeding $150,000 for the construction, alteration, or repair of any building or public
work of the United States—to furnish a performance bond issued by a surety satisfactory to the work of the United States—to furnish a performance bond issued by a surety satisfactory to the
contracting officer in an amount that the officer considers adequate to protect the government. contracting officer in an amount that the officer considers adequate to protect the government.
Current Issues, Debates, and Lessons Learned
Congress included enhancements for Congress included enhancements for ~~small~~ smal business contracting in both ARRAbusiness contracting in both ARRA (increased funding (increased funding
and higher maximum bond amounts for the SBA Surety Bond program) and the and higher maximum bond amounts for the SBA Surety Bond program) and the ~~Small~~ Smal Business Business
Jobs Act of 2010 (new restrictions on the consolidation or bundling of contracts that make it more Jobs Act of 2010 (new restrictions on the consolidation or bundling of contracts that make it more
difficult for difficult for ~~small~~ smal businesses to be awarded the contract). The CARES Act authorizes federal businesses to be awarded the contract). The CARES Act authorizes federal
agencies to modify a contract’s terms and conditions to reimburse contractors—at the minimum agencies to modify a contract’s terms and conditions to reimburse contractors—at the minimum
~~billing~~ bil ing rate not to exceed an average of 40 hours per week—for any paid leave (including sick rate not to exceed an average of 40 hours per week—for any paid leave (including sick
leave) the contractor provides to keep its employees or subcontractors in a ready state through leave) the contractor provides to keep its employees or subcontractors in a ready state through
September 30, 2020. EligibleSeptember 30, 2020. Eligible contractors are those whose employees or subcontractors cannot contractors are those whose employees or subcontractors cannot
perform work on a perform work on a ~~federally~~federal y approved site due to facility closures or other restrictions because of approved site due to facility closures or other restrictions because of
COVID-19 and cannot telework because their job duties cannot be performed remotely. COVID-19 and cannot telework because their job duties cannot be performed remotely.
Concluding Observations
In response to the Great Recession, Congress took a number of actions to enhance In response to the Great Recession, Congress took a number of actions to enhance ~~small~~
smal businesses’ access to capital, management and training programs, and contracting opportunities. businesses’ access to capital, management and training programs, and contracting opportunities.
The goal then, as it is now, was to provide The goal then, as it is now, was to provide ~~small~~ smal businesses with the resources necessary to businesses with the resources necessary to
survive the economic downturn and retain or create jobs. Some of the CARES Act’s provisions survive the economic downturn and retain or create jobs. Some of the CARES Act’s provisions
(e.g., fee waivers, increased loan limits, and increased guarantee percentages) were used in (e.g., fee waivers, increased loan limits, and increased guarantee percentages) were used in
legislationlegislation passed during the 111th Congress to address the severe economic slowdown during and passed during the 111th Congress to address the severe economic slowdown during and
immediately following the Great Recession (2007-2009). The main difference between that immediately following the Great Recession (2007-2009). The main difference between that
~~legislation~~ legislation and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness, and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness,
and greatly expanded eligibility,and greatly expanded eligibility, including, for the first time, specified types of nonprofit including, for the first time, specified types of nonprofit
organizations. organizations.
The CARES Act’s inclusion of loan deferral and forgiveness is, at least partly, due to the unique The CARES Act’s inclusion of loan deferral and forgiveness is, at least partly, due to the unique
economic dislocations and reduction in consumer spending resulting from individuals and economic dislocations and reduction in consumer spending resulting from individuals and
households engaging in physical distancing to avoid COVID-19 infection. households engaging in physical distancing to avoid COVID-19 infection.
As mentioned, because COVID-19’s adverse economic impact is so widespread, including As mentioned, because COVID-19’s adverse economic impact is so widespread, including
productivity losses, supply chain disruptions, labor dislocation, and financial pressure on productivity losses, supply chain disruptions, labor dislocation, and financial pressure on
136 SBA, Office of Congressional and Legislative Affairs, correspondence with the author, January 14, 2020. Congressional Research Service 34 COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options businesses and households, there has been relatively littlebusinesses and households, there has been relatively little concern expressed about federal fiscal concern expressed about federal fiscal
restraint during the current pandemic. The debate has been primarily over which specific policies restraint during the current pandemic. The debate has been primarily over which specific policies
would have the greatest impact and which types of would have the greatest impact and which types of ~~small~~ smal businesses and businesses and ~~small~~ smal business owners business owners
should be helped the most. should be helped the most.
Among the lessons learned from the 111th Congress is the potential benefits that can be derived Among the lessons learned from the 111th Congress is the potential benefits that can be derived
from providing additional funding for the SBA’s Office of Inspector General and the Government from providing additional funding for the SBA’s Office of Inspector General and the Government
Accountability Office. GAO and the SBA’s OIG can provide Congress information that could Accountability Office. GAO and the SBA’s OIG can provide Congress information that could
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prove useful as Congress engages in congressional oversight of the SBA’s administration of the prove useful as Congress engages in congressional oversight of the SBA’s administration of the
CARES Act, provide an early warning if unforeseen administrative problems should arise, and, CARES Act, provide an early warning if unforeseen administrative problems should arise, and,
through investigations and audits, serve as a deterrent to fraud. through investigations and audits, serve as a deterrent to fraud.
Requiring the SBA to report regularly on its implementation of the CARES Act could also Requiring the SBA to report regularly on its implementation of the CARES Act could also
promote transparency and assist Congress in performing its oversight responsibilities. In addition, promote transparency and assist Congress in performing its oversight responsibilities. In addition,
requiring output and outcome performance measures and requiring the SBA to report this requiring output and outcome performance measures and requiring the SBA to report this
information directly to both Congress and the public by posting that information on the SBA’s information directly to both Congress and the public by posting that information on the SBA’s
website could enhance both congressional oversight and public confidence in the SBA’s efforts to website could enhance both congressional oversight and public confidence in the SBA’s efforts to
assist assist ~~small~~ smal businesses. businesses.
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Appendix. Major Provisions of the CARES Act, the
Paycheck Protection Program and Health Care
Enhancement Act, the Paycheck Protection Program
Flexibility Act, the Heroes Act, the Continuing
Small Business Recovery and Paycheck Protection
Program Act, and the (updated) Heroes Act
The Coronavirus Aid, Relief, and Economic Security Act (CARES
Act; P.L. 116-136)
 established a Paycheck Protection Program (PPP) to provide “covered loans”  established a Paycheck Protection Program (PPP) to provide “covered loans”
with a 100% SBA loan guarantee, a maximum term of 10 years, and an interest with a 100% SBA loan guarantee, a maximum term of 10 years, and an interest
rate not to exceed 4% to assist rate not to exceed 4% to assist ~~small~~ smal businesses and other organizations adversely businesses and other organizations adversely
affected by the Coronavirus Disease 2019 (COVID-19). The SBA announced that affected by the Coronavirus Disease 2019 (COVID-19). The SBA announced that
PPP loans PPP loans ~~will~~ wil have a two-year term at a 1.0% interest rate;have a two-year term at a 1.0% interest rate;
 defines a covered loan as a loan made to an eligible  defines a covered loan as a loan made to an eligible recipient from February 15, recipient from February 15,
2020, through June 30, 2020; 2020, through June 30, 2020;
 waives the up-front loan guarantee fee and annual servicing fee, the no credit  waives the up-front loan guarantee fee and annual servicing fee, the no credit
elsewhere requirement, and the requirements for collateral and a personal elsewhere requirement, and the requirements for collateral and a personal
guarantee for a covered loan; guarantee for a covered loan;
 expands eligibility  expands eligibility for a covered loan to include 7(a) eligiblefor a covered loan to include 7(a) eligible businesses and any businesses and any
business, 501(c)(3) nonprofit organization, 501(c)(19) veteran’s organization, or business, 501(c)(3) nonprofit organization, 501(c)(19) veteran’s organization, or
tribal business not currently eligible that has not more than 500 employees or, if tribal business not currently eligible that has not more than 500 employees or, if
applicable, the SBA’s size standard in number of employees for the industry in applicable, the SBA’s size standard in number of employees for the industry in
which they operate. Sole proprietors, independent contractors, and eligible self-which they operate. Sole proprietors, independent contractors, and eligible self-
employed individuals are also eligibleemployed individuals are also eligible to receive a covered loan;to receive a covered loan;~~136~~
~~ allows~~137  al ows borrowers to refinance Economic Injury Disaster Loans (EIDLs) made on borrowers to refinance Economic Injury Disaster Loans (EIDLs) made on
or after January 31, 2020, as part of a covered loan; or after January 31, 2020, as part of a covered loan;
 increases the maximum loan amount for a covered loan to the lesser of (1) 2.5  increases the maximum loan amount for a covered loan to the lesser of (1) 2.5
times the average total monthly payments by the applicant for payroll costs times the average total monthly payments by the applicant for payroll costs
incurred during the one-year period before the date on which the loan is made incurred during the one-year period before the date on which the loan is made
plus the outstanding balance of any EIDL made on or after January 31, 2020, that plus the outstanding balance of any EIDL made on or after January 31, 2020, that
is refinanced as part of a covered loan, or (2) $10 is refinanced as part of a covered loan, or (2) $10 ~~million~~mil ion; ;
 specifies that covered loans are nonrecourse (meaning that the SBA cannot  specifies that covered loans are nonrecourse (meaning that the SBA cannot
pursue collections actions against the recipient(s) in the case of nonpayment) pursue collections actions against the recipient(s) in the case of nonpayment)

~~136~~ 137 For purposes of determining not more than 500 employees, the term employee includes individuals For purposes of determining not more than 500 employees, the term employee includes individuals employed on a employed on a
full-time, partfull-time, part -time, or other basis. Also, special eligibility-time, or other basis. Also, special eligibility considerations are provided for certain considerations are provided for certain ~~businesses~~ busin esses and and
organizations. For example, businessesorganizations. For example, businesses operating in NAICSoperating in NAICS Sector 72 (Sector 72 ( Accommodation and Food ServicesAccommodation and Food Services industry) industry)
that employ not more than 500 employees per physical location are also eligiblethat employ not more than 500 employees per physical location are also eligible for a covered loan. Affiliation rules are for a covered loan. Affiliation rules are
also waivedalso waived for: (1) NAICSfor: (1) NAICS Sector 72 businesses,Sector 72 businesses, (2) franchises, and (3) SBIC-owned(2) franchises, and (3) SBIC-owned businesses.businesses. In other words, these In other words, these
businessesbusinesses ~~would~~ would not be deniednot be denied a covered loan solely becausea covered loan solely because they employ more than 500 employees across multiple they employ more than 500 employees across multiple
businessesbusinesses ~~under~~ under common ownership. common ownership.
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except to the extent that the covered loan proceeds are used for nonauthorized except to the extent that the covered loan proceeds are used for nonauthorized
purposes; purposes;
  ~~allows~~al ows covered loans to be used for payroll costs, costs related to the continuation covered loans to be used for payroll costs, costs related to the continuation
of group health care benefits during periods of paid sick, medical, or family of group health care benefits during periods of paid sick, medical, or family
leave, and insurance premiums, employee salaries, commissions, or similar leave, and insurance premiums, employee salaries, commissions, or similar
compensations, mortgage payments, rent, utilities, and interest on any other debt compensations, mortgage payments, rent, utilities, and interest on any other debt
obligations that were incurred before the covered period; obligations that were incurred before the covered period;
 expands lender delegated loan approval authority for making covered loans to  expands lender delegated loan approval authority for making covered loans to ~~all~~
al 7(a) lenders to expedite PPP loan processing; 7(a) lenders to expedite PPP loan processing;
 requires lenders, when evaluating borrower eligibility  requires lenders, when evaluating borrower eligibility for a covered loan, to for a covered loan, to
consider whether the borrower was in operation on February 15, 2020, had consider whether the borrower was in operation on February 15, 2020, had
employees for whom the borrower paid salaries and payroll taxes, and paid employees for whom the borrower paid salaries and payroll taxes, and paid
independent contractors; independent contractors;
 requires borrowers to, among other acknowledgements,  requires borrowers to, among other acknowledgements,
 make a good faith certification that the covered loan is needed because of the  make a good faith certification that the covered loan is needed because of the
uncertainty of current economic conditions and to support ongoing uncertainty of current economic conditions and to support ongoing
operations, and operations, and
 acknowledge that the funds  acknowledge that the funds ~~will~~ wil be used to retain workers, maintain payroll, be used to retain workers, maintain payroll,
or make mortgage payments, lease payments, and utility payments; or make mortgage payments, lease payments, and utility payments;
 requires lenders to provide “impacted borrowers” adversely affected by COVID-  requires lenders to provide “impacted borrowers” adversely affected by COVID-
19 “complete payment deferment relief” 19 “complete payment deferment relief”~~137~~138 on a covered PPP loan for not less on a covered PPP loan for not less
than six months and not more than one year if the borrower was in operation on than six months and not more than one year if the borrower was in operation on
February 15, 2020, and has an application for a covered loan approved or February 15, 2020, and has an application for a covered loan approved or
pending approval on or after the date of enactment. The SBA announced that pending approval on or after the date of enactment. The SBA announced that
covered loan payments covered loan payments ~~will~~ wil be deferred for six months. However, interest be deferred for six months. However, interest ~~will~~
wil continue to accrue on these loans during the six-month deferment;continue to accrue on these loans during the six-month deferment;~~138~~139
 presumes that each eligible recipient that applies for a PPP loan is an impacted  presumes that each eligible recipient that applies for a PPP loan is an impacted
borrower and authorizes the SBA Administrator to purchase covered loans sold borrower and authorizes the SBA Administrator to purchase covered loans sold
on the secondary market so that affected borrowers may receive a deferral for not on the secondary market so that affected borrowers may receive a deferral for not
more than one year. The SBA has announced that the deferment relief on covered more than one year. The SBA has announced that the deferment relief on covered
loans loans ~~will~~ wil be for six months; be for six months;
 provides for the forgiveness of covered loan amounts equal to the amount the  provides for the forgiveness of covered loan amounts equal to the amount the
borrower spent during an 8-week period after the loan’s origination date on borrower spent during an 8-week period after the loan’s origination date on
payroll costs, interest payment on any mortgage incurred prior to February 15, payroll costs, interest payment on any mortgage incurred prior to February 15,
2020, payment of rent on any lease in force prior to February 15, 2020, and 2020, payment of rent on any lease in force prior to February 15, 2020, and
payment on any utilitypayment on any utility for which service began before February 15, 2020. The for which service began before February 15, 2020. The
amount of loan forgiveness cannot exceed the covered loan’s principal amount. amount of loan forgiveness cannot exceed the covered loan’s principal amount.
The forgiveness is reduced The forgiveness is reduced ~~proportionally~~proportional y by formulas related to the borrower’s by formulas related to the borrower’s
retention of full-time equivalent employees compared to the borrower’s choice of retention of full-time equivalent employees compared to the borrower’s choice of
either (1) the period beginning on February 15, 2019, and ending on June 30, either (1) the period beginning on February 15, 2019, and ending on June 30,
2019, or (2) January 1, 2020, and February 29, 2020; and by the amount of any 2019, or (2) January 1, 2020, and February 29, 2020; and by the amount of any
reduction in pay of any employee beyond 25% of their salary or wages during the reduction in pay of any employee beyond 25% of their salary or wages during the

~~137~~ 138 According to the bill text, “complete deferment relief” includes payment of principal, interest, and fees. According to the bill text, “complete deferment relief” includes payment of principal, interest, and fees.
~~138~~ 139 SBA, SBA, “Business“Business Loan Program Loan Program ~~Temporary~~T emporary Changes; Paycheck Protection Program,” 85 Changes; Paycheck Protection Program,” 85 Federal Register 20813, 20813,
April 15, 2020. April 15, 2020.
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most recent full quarter before the covered period. most recent full quarter before the covered period.~~139~~140 Borrowers that re-hire Borrowers that re-hire
workers previously laid off workers previously laid off ~~will~~ wil not be penalized for having a reduced payroll at not be penalized for having a reduced payroll at
the beginning of the period. the beginning of the period. ~~Cancelled~~Cancel ed debt resulting from loan forgiveness debt resulting from loan forgiveness
would not be included in the borrower’s taxable federal income; would not be included in the borrower’s taxable federal income;
 The SBA has announced that due to likely high subscription, at least 75% of the  The SBA has announced that due to likely high subscription, at least 75% of the
forgiven loan amount must have been used for payroll; forgiven loan amount must have been used for payroll;~~140~~
141  requires the SBA to pay the principal, interest, and any associated fees that are  requires the SBA to pay the principal, interest, and any associated fees that are
owed on an existing 7(a), 504/CDC, or Microloan that is in a regular servicing owed on an existing 7(a), 504/CDC, or Microloan that is in a regular servicing
status for a six-month period starting on the next payment due. Loans that are status for a six-month period starting on the next payment due. Loans that are
already on deferment already on deferment ~~will~~ wil receive six months of payment by the SBA beginning receive six months of payment by the SBA beginning
with the first payment after the deferral period. Loans made up until six months with the first payment after the deferral period. Loans made up until six months
after enactment after enactment ~~will~~ wil also receive a full six months of SBA loan payments; also receive a full six months of SBA loan payments;
 requires federal banking agencies or the National Credit Union Administration  requires federal banking agencies or the National Credit Union Administration
Board applying capital requirements under their respective risk-based capital Board applying capital requirements under their respective risk-based capital
requirements to provide a covered loan with a 0%-risk weight; requirements to provide a covered loan with a 0%-risk weight;
 increases the SBA’s lending authorization under Section 7(a) of the  increases the SBA’s lending authorization under Section 7(a) of the ~~Small~~
Smal Business Act from $30 Business Act from $30 ~~billion~~bil ion to $349 to $349 ~~billion~~ bil ion during the covered period; during the covered period;
 increases the SBAExpress loan limit from $350,000 to $1  increases the SBAExpress loan limit from $350,000 to $1 ~~million~~mil ion (reverts to (reverts to
$350,000 on January 1, 2021); $350,000 on January 1, 2021);
 permanently eliminates the zero subsidy requirement to waive SBAExpress loan  permanently eliminates the zero subsidy requirement to waive SBAExpress loan
fees for veterans; fees for veterans;
 appropriates $349  appropriates $349 ~~billion~~ bil ion for loan guarantees and subsidies (remaining available for loan guarantees and subsidies (remaining available
through FY2021), $675 through FY2021), $675 ~~million~~mil ion for the SBA’s salaries and expenses account, $25 for the SBA’s salaries and expenses account, $25
~~million~~ mil ion for the SBA’s Office of Inspector General (OIG), $562 for the SBA’s Office of Inspector General (OIG), $562 ~~million~~mil ion for for
disaster loans, $265 disaster loans, $265 ~~million~~mil ion for entrepreneurial development programs ($192 for entrepreneurial development programs ($192
~~million~~ mil ion for SBDCs, $48 for SBDCs, $48 ~~million~~ mil ion for WBCs, and $25 for WBCs, and $25 ~~million~~ mil ion for SBAfor SBA resource resource
partners to provide online information and training), $17 partners to provide online information and training), $17 ~~billion~~ bil ion for subsidies for for subsidies for
certain loan payments, and $10 certain loan payments, and $10 ~~million~~mil ion for the Department of Commerce’s for the Department of Commerce’s
Minority Business Development Agency; Minority Business Development Agency;
  ~~allows~~al ows the period of use of FY2018 and FY2019 grant awards made under the the period of use of FY2018 and FY2019 grant awards made under the
State Trade Expansion Program (STEP) through FY2021; State Trade Expansion Program (STEP) through FY2021;
 reimburses (up to the grant amount received) STEP award recipients for financial  reimburses (up to the grant amount received) STEP award recipients for financial
losses relating to a foreign trade mission or a trade show exhibition that was losses relating to a foreign trade mission or a trade show exhibition that was
~~cancelled~~cancel ed solely due to a public health emergency declared due to COVID-19; solely due to a public health emergency declared due to COVID-19;
 waives SBDC and WBC matching requirements;  waives SBDC and WBC matching requirements;
 requires federal agencies to continue to pay  requires federal agencies to continue to pay ~~small~~ smal business contractors and revise business contractors and revise
delivery schedules, holding delivery schedules, holding ~~small~~ smal contractors harmless for being unable to contractors harmless for being unable to
perform a contract due to COVID-19 caused interruptions until September 2021; perform a contract due to COVID-19 caused interruptions until September 2021;
 requires federal agencies to promptly pay  requires federal agencies to promptly pay ~~small~~ smal business prime contractors and business prime contractors and
requires prime contractors to promptly pay requires prime contractors to promptly pay ~~small~~ smal business subcontractors within business subcontractors within
15 days, notwithstanding any other provision of law or regulation, for the 15 days, notwithstanding any other provision of law or regulation, for the

~~139~~ 140 For the purposes of the reduction formula, reductions in employees with wages For the purposes of the reduction formula, reductions in employees with wages or salary at an annualizedor salary at an annualized rate of pay rate of pay
more than $100,000 are not taken into account. Businesses may also receive forgiveness amounts for additional wages more than $100,000 are not taken into account. Businesses may also receive forgiveness amounts for additional wages
paid to tipped employees. paid to tipped employees.
~~140~~141 SBA, SBA, “Business“Business Loan Program Loan Program ~~Temporary~~T emporary Changes; Paycheck Protection Program,” 85 Changes; Paycheck Protection Program,” 85 Federal Register 20813- 20813-
20814, April 15, 2020. 20814, April 15, 2020.
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duration of the President invoking the Defense Production Act in response to duration of the President invoking the Defense Production Act in response to
COVID-19; and COVID-19; and
 provides SBA Emergency Injury Disaster Loan (EIDL) enhancements during the  provides SBA Emergency Injury Disaster Loan (EIDL) enhancements during the
covered period of January 31, 2020, through December 31, 2020, including covered period of January 31, 2020, through December 31, 2020, including
 expanding eligibility expanding eligibility beyond currently eligible beyond currently eligible ~~small~~ smal businesses, private businesses, private
nonprofit organizations, and nonprofit organizations, and ~~small~~ smal agricultural cooperatives, to include agricultural cooperatives, to include
startups, cooperatives, and eligible ESOPs (employee stock ownership plans) startups, cooperatives, and eligible ESOPs (employee stock ownership plans)
with not more than 500 employees, sole proprietors, and independent with not more than 500 employees, sole proprietors, and independent
contractors; contractors;
 authorizing the SBA Administrator, in response to economic injuries caused  authorizing the SBA Administrator, in response to economic injuries caused
by COVID-19, to by COVID-19, to
 waive the no credit available elsewhere requirement,  waive the no credit available elsewhere requirement,
 approve an applicant based solely on their credit score,  approve an applicant based solely on their credit score,
 not require applicants to submit a tax return or tax return transcript for  not require applicants to submit a tax return or tax return transcript for
approval, approval,
 waive any rules related to the personal guarantee on advances and loans  waive any rules related to the personal guarantee on advances and loans
of not more than $200,000, of not more than $200,000,
 waive the requirement that the applicant needs to be in business for the  waive the requirement that the applicant needs to be in business for the
one-year period before the disaster declaration, except that no waiver one-year period before the disaster declaration, except that no waiver
may be made for a business that was not in operation on January 31, may be made for a business that was not in operation on January 31,
2020;2020;
 authorizing the SBA Administrator, through December 31, 2020, to provide  authorizing the SBA Administrator, through December 31, 2020, to provide
up to $10,000 as an advance payment in the amount requested within three up to $10,000 as an advance payment in the amount requested within three
days after receiving an EIDL application from an eligibledays after receiving an EIDL application from an eligible entity. Applicants entity. Applicants
are not required to repay the advance payment, even if subsequently denied are not required to repay the advance payment, even if subsequently denied
an EIDL loan. The funds may be used for any eligible EIDL expense, an EIDL loan. The funds may be used for any eligible EIDL expense,
including, among other expenses, providing paid sick leave to employees including, among other expenses, providing paid sick leave to employees
unable to work due to COVID-19, maintaining payroll to retain employees, unable to work due to COVID-19, maintaining payroll to retain employees,
and meeting increased costs to obtain materials due to supply chain and meeting increased costs to obtain materials due to supply chain
disruptions. The SBA limiteddisruptions. The SBA limited EIDL-advance payments to $1,000 per EIDL-advance payments to $1,000 per
employee, up to a maximum of $10,000; and employee, up to a maximum of $10,000; and
 appropriating an additional $10  appropriating an additional $10 ~~billion~~ bil ion for EIDL assistance. for EIDL assistance.
The Paycheck Protection Program and Health Care Enhancement
Act (P.L. 116-139)
 increases the SBA’s lending authorization under Section 7(a) of the  increases the SBA’s lending authorization under Section 7(a) of the ~~Small~~
Smal Business Act from $349 Business Act from $349 ~~billion~~bil ion during the covered period to $659 during the covered period to $659 ~~billion~~bil ion; ;
 requires that no less than $30  requires that no less than $30 ~~billion~~ bil ion of this authorization amount be set aside for of this authorization amount be set aside for
loans issued by insured depository institutions and credit unions with loans issued by insured depository institutions and credit unions with
consolidated assets of $10 consolidated assets of $10 ~~billion~~bil ion to $50 to $50 ~~billion~~bil ion; ;
 requires that no less than $30  requires that no less than $30 ~~billion~~ bil ion of this authorization amount be set aside for of this authorization amount be set aside for
loans issued by community financial institutions (including community loans issued by community financial institutions (including community
development financial institutions (CDFIs), minority depository institutions, development financial institutions (CDFIs), minority depository institutions,
SBA-certifiedSBA-certified development companies, and SBA microloan intermediaries), and development companies, and SBA microloan intermediaries), and
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insured depository institutions and credit unions with consolidated assets less insured depository institutions and credit unions with consolidated assets less
than $10 than $10 ~~billion~~bil ion; ;
 increases the PPP appropriation amount from $349  increases the PPP appropriation amount from $349 ~~billion~~bil ion to $670.335 to $670.335 ~~billion~~bil ion; ;
 appropriates an additional $50  appropriates an additional $50 ~~billion~~ bil ion for EIDL loans; for EIDL loans;
 appropriates an additional $10  appropriates an additional $10 ~~billion~~ bil ion for Emergency EIDL grants; for Emergency EIDL grants;
 appropriates an additional $2.1  appropriates an additional $2.1 ~~billion~~ bil ion for the SBA’s salaries and expenses for the SBA’s salaries and expenses
account (to remain available until September 30, 2021); and account (to remain available until September 30, 2021); and
 provides agricultural enterprises eligibility  provides agricultural enterprises eligibility for Emergency EIDL grants and EIDL for Emergency EIDL grants and EIDL
loans during the covered period (January 31, 2020 through December 31, 2020). loans during the covered period (January 31, 2020 through December 31, 2020).
The Paycheck Protection Program Flexibility Act (P.L. 116-142)
 extends the PPP loan forgiveness covered period from 8 weeks after the loan’s  extends the PPP loan forgiveness covered period from 8 weeks after the loan’s
origination date to the earlier of 24 weeks after the loan’s origination date or origination date to the earlier of 24 weeks after the loan’s origination date or
December 31, 2020; December 31, 2020;
 provides borrowers that received a PPP loan prior to the enactment date (June 5,  provides borrowers that received a PPP loan prior to the enactment date (June 5,
2020) the option to use the CARES Act’s loan forgiveness covered period of 2020) the option to use the CARES Act’s loan forgiveness covered period of
eight weeks after the loan’s origination date; eight weeks after the loan’s origination date;
 replaces the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness  replaces the 75%/25% rule on the use of PPP loan proceeds for loan forgiveness
purposes with the requirement that at least 60% of the loan proceeds be used for purposes with the requirement that at least 60% of the loan proceeds be used for
payroll costs and up to 40% be used for covered mortgage interest, rent, and payroll costs and up to 40% be used for covered mortgage interest, rent, and
utility payments;utility payments;~~141~~142
 provides borrowers a “safe harbor” from the loan forgiveness rehiring  provides borrowers a “safe harbor” from the loan forgiveness rehiring
requirement if the borrower is unable to rehire an individual requirement if the borrower is unable to rehire an individual who was an who was an
employee of the recipient on or before February 15, 2020, or if the borrower can employee of the recipient on or before February 15, 2020, or if the borrower can
demonstrate an inability to hire similarlydemonstrate an inability to hire similarly qualified employees on or before qualified employees on or before
December 31, 2020; December 31, 2020;
 establishes a minimum PPP loan maturity of five years for loans made on or after  establishes a minimum PPP loan maturity of five years for loans made on or after
the date of enactment; the date of enactment;
 extends the PPP loan deferral period from six months (under SBA regulations) to  extends the PPP loan deferral period from six months (under SBA regulations) to
the date that the SBA remits the borrower’s loan forgiveness amount to the the date that the SBA remits the borrower’s loan forgiveness amount to the
lender or, if the borrower does not apply for loan forgiveness, 10 months after the lender or, if the borrower does not apply for loan forgiveness, 10 months after the
end of the borrower’s loan forgiveness covered period; and end of the borrower’s loan forgiveness covered period; and
 eliminates the exception in the CARES Act preventing taxpayers who receive  eliminates the exception in the CARES Act preventing taxpayers who receive
PPP loan forgiveness from delaying the payment of employer payroll taxes. PPP loan forgiveness from delaying the payment of employer payroll taxes.~~142~~
143 The Heroes Act (H.R. 6800)
H.R. 6800, would, among other provisionsH.R. 6800, would, among other provisions,
 expand the PPP loan covered period from June 30, 2020, to December 31, 2020;  expand the PPP loan covered period from June 30, 2020, to December 31, 2020;

~~141~~ 142 If a borrower uses If a borrower uses ~~less~~ less than 60% of the PPP loan amount for payroll costs during the forgiveness covered than 60% of the PPP loan amount for payroll costs during the forgiveness covered
period, the borrower willperiod, the borrower will continue to be eligiblecontinue to be eligible for partial loan forgiveness, subject to at least 60% of the loan for partial loan forgiveness, subject to at least 60% of the loan
forgiveness amountforgiveness amount having been usedhaving been used for payroll costs. for payroll costs.
~~142 See FAQs~~ 143 See FAQs 3 and 4 in IRS,3 and 4 in IRS, “Deferral of Employment Tax Deposits and Payments “Deferral of Employment Tax Deposits and Payments ~~Through~~T hrough December 31, 2020,” at December 31, 2020,” at
https://www.irs.gov/newsroom/deferral-of-employmenthttps://www.irs.gov/newsroom/deferral-of-employment -tax-deposits-and-payments-through-december-31-2020. -tax-deposits-and-payments-through-december-31-2020.
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 extend PPP eligibility  extend PPP eligibility ~~to all~~ to al 501(c) nonprofit organizations of 501(c) nonprofit organizations of ~~all~~ al sizes; sizes;
 establish a minimum PPP loan maturity of five years;  establish a minimum PPP loan maturity of five years;
 require, as of the date of enactment, that 25% of existing PPP funds be issued to  require, as of the date of enactment, that 25% of existing PPP funds be issued to
~~small~~ smal businesses with 10 or fewer employees; 25% of existing funds be issued to businesses with 10 or fewer employees; 25% of existing funds be issued to
nonprofit organizations, with at least half of this amount going to nonprofit nonprofit organizations, with at least half of this amount going to nonprofit
organizations with not more than 500 employees; and the lesser of 25% of organizations with not more than 500 employees; and the lesser of 25% of
existing PPP funds or $10 existing PPP funds or $10 ~~billion~~bil ion be issued to community financial institutions, be issued to community financial institutions,
such as Community Development Financial Institutions (CDFIs), SBA microloan such as Community Development Financial Institutions (CDFIs), SBA microloan
intermediaries, and SBA-certified development companies; intermediaries, and SBA-certified development companies;
 establish technical assistance grants for  establish technical assistance grants for ~~small~~ smal community financial institutions community financial institutions
with assets of less than $10 with assets of less than $10 ~~billion~~bil ion; ;
 bifurcate the SBA’s lending authority for the 7(a) and PPP programs;  bifurcate the SBA’s lending authority for the 7(a) and PPP programs;
 increase the SBA’s 7(a) loan authorization amount from $30  increase the SBA’s 7(a) loan authorization amount from $30 ~~billion to $75 billion~~bil ion to $75 bil ion
for FY2020; for FY2020;
 provide SCORE and veterans business outreach centers eligibility  provide SCORE and veterans business outreach centers eligibility for $10 for $10 ~~million~~mil ion
each from the CARES Act’s $265 each from the CARES Act’s $265 ~~million~~mil ion entrepreneurial development resource entrepreneurial development resource
partners grant program; partners grant program;
 amend the PPP loan forgiveness by extending the 8-week period to the earlier of  amend the PPP loan forgiveness by extending the 8-week period to the earlier of
24 weeks or December 31, 2020, mandate loan forgiveness data collection and 24 weeks or December 31, 2020, mandate loan forgiveness data collection and
reporting, and eliminate the 75%/25% rule on the use of loan proceeds; reporting, and eliminate the 75%/25% rule on the use of loan proceeds;
 provide borrowers a “safe harbor” from the loan forgiveness rehiring requirement  provide borrowers a “safe harbor” from the loan forgiveness rehiring requirement
if the borrower is unable to rehire an individual if the borrower is unable to rehire an individual who was an employee of the who was an employee of the
recipient on or before February 15, 2020, or if the borrower can demonstrate an recipient on or before February 15, 2020, or if the borrower can demonstrate an
inabilityinability to hire similarlyto hire similarly qualified employees on or before December 31, 2020; qualified employees on or before December 31, 2020;
  ~~allow~~al ow certain previously incarcerated individuals to be approved for PPP and certain previously incarcerated individuals to be approved for PPP and
SBA disaster loans; SBA disaster loans;
 temporarily increase, for FY2020, the 7(a) loan program guaranty from up to  temporarily increase, for FY2020, the 7(a) loan program guaranty from up to
75% for loans with an outstanding loan balance exceeding $150,000, and 85% 75% for loans with an outstanding loan balance exceeding $150,000, and 85%
for loans with an outstanding loan balance of $150,000 or less, to 90% of the for loans with an outstanding loan balance of $150,000 or less, to 90% of the
outstanding loan balance; outstanding loan balance;
 temporarily increase, through December 31, 2020, the SBAExpress loan guaranty  temporarily increase, through December 31, 2020, the SBAExpress loan guaranty
from not more than 50% of the outstanding loan balance to not more than 90% of from not more than 50% of the outstanding loan balance to not more than 90% of
the outstanding loan balance on loans up to $350,000, and not more than 75% of the outstanding loan balance on loans up to $350,000, and not more than 75% of
the outstanding loan balance on loans greater than $350,000; the outstanding loan balance on loans greater than $350,000;
 temporarily reduce, for FY2020, 7(a) and 504/CDC fees to the maximum extent  temporarily reduce, for FY2020, 7(a) and 504/CDC fees to the maximum extent
possible given available possible given available appropriations; temporarily increase, for FY2020, the appropriations; temporarily increase, for FY2020, the
maximum 7(a) loan amount from $5 maximum 7(a) loan amount from $5 ~~million~~mil ion to $10 to $10 ~~million~~ mil ion and the maximum and the maximum
504/CDC loan amount from $5.5 504/CDC loan amount from $5.5 ~~million~~mil ion to $10 to $10 ~~million;~~ mil ion; and permanently and permanently
increase the 504/CDC maximum loan amount for increase the 504/CDC maximum loan amount for ~~small~~ smal manufacturers from $5.5 manufacturers from $5.5
~~million to $10 million~~mil ion to $10 mil ion; ;
 eliminate  eliminate the exception in the CARES Act preventing taxpayers who receive PPP the exception in the CARES Act preventing taxpayers who receive PPP
loan forgiveness from delaying the payment of employer payroll taxes; loan forgiveness from delaying the payment of employer payroll taxes;
 authorize, for each of FY2021-FY2025, $80  authorize, for each of FY2021-FY2025, $80 ~~million~~mil ion for Microloan technical for Microloan technical
assistance grants and $110 assistance grants and $110 ~~million~~mil ion for Microloan; and authorize to be for Microloan; and authorize to be
appropriated during FY2020, to remain availableappropriated during FY2020, to remain available until expended, $50 until expended, $50 ~~million~~mil ion for for
Microloan technical assistance grants and $7 Microloan technical assistance grants and $7 ~~million~~mil ion for Microloans; for Microloans;
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 appropriate $500  appropriate $500 ~~million~~ mil ion for fee reductions and guaranty and maximum loan for fee reductions and guaranty and maximum loan
amount increases; and amount increases; and
 appropriate $10  appropriate $10 ~~billion~~ bil ion for Emergency EIDL grants. for Emergency EIDL grants.
The Continuing Small Business Recovery and Paycheck Protection
Program Act (S. 4321)
S. 4321 would, among other provisionsS. 4321 would, among other provisions,
 extend the PPP loan covered period from August 8, 2020, to December 31, 2020,  extend the PPP loan covered period from August 8, 2020, to December 31, 2020,
and reduce the maximum PPP loan amount from $10 and reduce the maximum PPP loan amount from $10 ~~million~~mil ion to $2 to $2 ~~million~~mil ion; ;
 expand PPP forgivable expenses to include covered operations expenditures (e.g.,  expand PPP forgivable expenses to include covered operations expenditures (e.g.,
software, cloud computing, and other human resources and accounting needs), software, cloud computing, and other human resources and accounting needs),
property damages due to public disturbances that occurred during 2020 (not property damages due to public disturbances that occurred during 2020 (not
covered by insurance or other compensation), covered supplier costs essential to covered by insurance or other compensation), covered supplier costs essential to
the recipient’s current operations, and covered worker protection expenditures to the recipient’s current operations, and covered worker protection expenditures to
comply with federal health and safety guidelines related to COVID-19;comply with federal health and safety guidelines related to COVID-19;
  ~~allow~~al ow borrowers to select a preferred 8-week period after the loan’s origination borrowers to select a preferred 8-week period after the loan’s origination
date through December 31, 2020, for determining loan forgiveness; date through December 31, 2020, for determining loan forgiveness;
 create simplified loan forgiveness application processes for loans under $150,000  create simplified loan forgiveness application processes for loans under $150,000
and for loans between $150,000 and $2 and for loans between $150,000 and $2 ~~million~~mil ion. The SBA. The SBA would retain the right would retain the right
to review and audit these loans for fraud. Reporting of demographic information to review and audit these loans for fraud. Reporting of demographic information
would be optional; would be optional;
 expand eligibility  expand eligibility to include certain 501(c)(6) organizations, including Chambers to include certain 501(c)(6) organizations, including Chambers
of Commerce and Destination Marketing Organizations, that have 300 or fewer of Commerce and Destination Marketing Organizations, that have 300 or fewer
employees, do not receive more than 10% of their receipts from lobbying, and employees, do not receive more than 10% of their receipts from lobbying, and
whose lobbying activities do not comprise more than 10% of their total activities. whose lobbying activities do not comprise more than 10% of their total activities.
Recipients cannot use any loan proceeds for lobbying activities; Recipients cannot use any loan proceeds for lobbying activities;
  ~~allow~~al ow second PPP “draw” loans through December 31, 2020, for PPP borrowers second PPP “draw” loans through December 31, 2020, for PPP borrowers
that meet the SBA’s revenue standard, if applicable, have not more than 300 that meet the SBA’s revenue standard, if applicable, have not more than 300
employees, and can demonstrate at least a 50% reduction in gross receipts in the employees, and can demonstrate at least a 50% reduction in gross receipts in the
first or second quarter of 2020 relative to the same 2019 quarter. Several types of first or second quarter of 2020 relative to the same 2019 quarter. Several types of
PPP eligiblePPP eligible entities, such as publicly traded companies, would be ineligibleentities, such as publicly traded companies, would be ineligible for a for a
second loan. The maximum loan size would equal 2.5 times average monthly second loan. The maximum loan size would equal 2.5 times average monthly
payroll costs, up to $2 payroll costs, up to $2 ~~million~~mil ion (not more than $10 (not more than $10 ~~million~~ mil ion in the aggregate). Full in the aggregate). Full
loan forgiveness would be based on a 60/40 cost loan forgiveness would be based on a 60/40 cost ~~allocation~~al ocation between payroll and between payroll and
eligibleeligible nonpayroll costs; nonpayroll costs;
 establish a specific loan calculation for farmers and ranchers who operate as a  establish a specific loan calculation for farmers and ranchers who operate as a
sole proprietor, independent contractor, or self-employed individual and sole proprietor, independent contractor, or self-employed individual and ~~allow~~al ow
Farm Credit System Institutions to make PPP loans; Farm Credit System Institutions to make PPP loans;
 increase the PPP authorization amount from $659  increase the PPP authorization amount from $659 ~~billion~~bil ion to $749 to $749 ~~billion,~~ bil ion, rescind rescind
$100 $100 ~~billion~~ bil ion from the SBA’s business loan program account, and appropriate an from the SBA’s business loan program account, and appropriate an
additional $190 additional $190 ~~billion~~ bil ion for the cost of PPP and PPP second draw loans. In for the cost of PPP and PPP second draw loans. In
funding, $25 funding, $25 ~~billion~~ bil ion would be set-aside for entities employing 10 or fewer would be set-aside for entities employing 10 or fewer
employees and $10 employees and $10 ~~billion~~ bil ion would be set-aside for community lenders; would be set-aside for community lenders;
 appropriate $57.7  appropriate $57.7 ~~billion~~ bil ion to support up to $100 to support up to $100 ~~billion~~bil ion in lending for a new 7(a) in lending for a new 7(a)
Recovery Sector Loan program for seasonal businesses and businesses located in Recovery Sector Loan program for seasonal businesses and businesses located in
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low-income census tracts that meet specified size standards (e.g., one of the low-income census tracts that meet specified size standards (e.g., one of the
requirements is that seasonal businesses have no more than 250 employees and requirements is that seasonal businesses have no more than 250 employees and
non-seasonable businesses have no more than 500 employees) and can non-seasonable businesses have no more than 500 employees) and can
demonstrate at least a 50% reduction in gross revenue in the first or second demonstrate at least a 50% reduction in gross revenue in the first or second
quarter of 2020 relative to the same 2019 quarter. Loans would be up to twice the quarter of 2020 relative to the same 2019 quarter. Loans would be up to twice the
borrower’s annual revenue, capped at $10 borrower’s annual revenue, capped at $10 ~~million~~mil ion, have a maturity of up to 20 , have a maturity of up to 20
years, and a subsidized interest rate charged to the borrower of 1%. The SBA years, and a subsidized interest rate charged to the borrower of 1%. The SBA
would provide lenders a 100% loan guarantee, the credit elsewhere requirement would provide lenders a 100% loan guarantee, the credit elsewhere requirement
and SBAand SBA fees would be waived, and principal and interest payments would be fees would be waived, and principal and interest payments would be
deferred for the first two years of the loan. The SBA would be authorized to grant deferred for the first two years of the loan. The SBA would be authorized to grant
an additionalan additional two years of deferment. Loan proceeds could be used for working two years of deferment. Loan proceeds could be used for working
capital, acquisition of fixed assets, and refinancing existing indebtedness. The capital, acquisition of fixed assets, and refinancing existing indebtedness. The
loans would be availableloans would be available through December 31, 2020. through December 31, 2020.
 appropriate $10  appropriate $10 ~~billion~~ bil ion for a new for a new ~~Small~~ Smal Business Growth and Domestic Business Growth and Domestic
Production Investment Facility under the SBA’s Production Investment Facility under the SBA’s ~~Small~~ Smal Business Investment Business Investment
Company (SBIC) program to provide funds to firms that invest in businesses Company (SBIC) program to provide funds to firms that invest in businesses
which meet the revenue loss requirements for PPP, are a manufacturing business, which meet the revenue loss requirements for PPP, are a manufacturing business,
or are located in a or are located in a ~~small~~ smal business low-income census tract, as defined in this act. business low-income census tract, as defined in this act.
At least 50% of the investments by the participating investment company must be At least 50% of the investments by the participating investment company must be
in eligiblein eligible ~~small~~ smal businesses. The program’s goals are to “improve the recovery of businesses. The program’s goals are to “improve the recovery of
~~eligible small~~ eligible smal business concerns from the COVID-19 pandemic, increase business concerns from the COVID-19 pandemic, increase
resiliency in the manufacturing supply chain of eligibleresiliency in the manufacturing supply chain of eligible ~~small~~ smal business concerns, business concerns,
and increase the economic development of and increase the economic development of ~~small~~ smal business low-income census business low-income census
tracts.” The SBA would purchase bonds that include equity features from a tracts.” The SBA would purchase bonds that include equity features from a
participating SBIC with a term of at least 15 years and an interest rate of up to participating SBIC with a term of at least 15 years and an interest rate of up to
2%. The SBA would be authorized to directly commit or commit to purchase 2%. The SBA would be authorized to directly commit or commit to purchase
bonds from an SBIC of an amount up to the lesser of twice the SBIC’s regulatory bonds from an SBIC of an amount up to the lesser of twice the SBIC’s regulatory
capital or $200 capital or $200 ~~million~~mil ion. The SBA. The SBA would receive a share of any profits and the would receive a share of any profits and the
SBA’s share would be deposited into a fund and made availableSBA’s share would be deposited into a fund and made available for additional for additional
commitments. commitments.
The (updated) Heroes Act (H.R. 925)
The (updated) Heroes Act (H.R. 925) would, among other provisions, The (updated) Heroes Act (H.R. 925) would, among other provisions,
  ~~allow~~al ow PPP borrowers that have less than 200 employees and can document PPP borrowers that have less than 200 employees and can document
quarterly revenue losses of at least 25% to receive a second PPP loan of up to $2 quarterly revenue losses of at least 25% to receive a second PPP loan of up to $2
~~million~~mil ion; ;
 expand the list of  expand the list of ~~allowable~~al owable uses of proceeds and loan forgiveness to include uses of proceeds and loan forgiveness to include
personal protective equipment, supplier costs, and costs related to property personal protective equipment, supplier costs, and costs related to property
damage from public disturbances; damage from public disturbances;
 exclude publicly traded entities from being eligible  exclude publicly traded entities from being eligible for PPP loans; for PPP loans;
 exclude businesses that are 51% or more foreign owned, controlled, and managed  exclude businesses that are 51% or more foreign owned, controlled, and managed
from receiving a PPP loan; from receiving a PPP loan;
 clarify that prior to enactment the current “no credit elsewhere test” remains in  clarify that prior to enactment the current “no credit elsewhere test” remains in
place for PPP loans, but that going forward the 7(a) credit elsewhere test would place for PPP loans, but that going forward the 7(a) credit elsewhere test would
apply for PPP loans greater than $350,000; and apply for PPP loans greater than $350,000; and
 prevent the SBA from imposing an EIDL loan cap below the program’s statutory  prevent the SBA from imposing an EIDL loan cap below the program’s statutory
limit of $2 limit of $2 ~~million and allow~~mil ion and al ow current EIDL borrowers to modify their loans to current EIDL borrowers to modify their loans to
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seek additional funds up to the $2 seek additional funds up to the $2 ~~million~~ mil ion maximum loan size. Due to high maximum loan size. Due to high
demand, the SBA currently caps COVID-19-related EIDL at $150,000. demand, the SBA currently caps COVID-19-related EIDL at $150,000.
In addition, the In addition, the ~~bill~~ bil would appropriate would appropriate
 $50  $50 ~~billion~~ bil ion for Emergency EIDL Advance Payment grants, including $40 for Emergency EIDL Advance Payment grants, including $40 ~~billion~~bil ion
for a new Lifeline Grant program targeting for a new Lifeline Grant program targeting ~~small~~ smal businesses with not more than businesses with not more than
50 employees and that have suffered specified economic loss (related to 50 employees and that have suffered specified economic loss (related to
reductions in gross receipts) of not less than 30%; reductions in gross receipts) of not less than 30%;
 $8  $8 ~~billion~~ bil ion to provide 12 months of payment, interest debt, and associated fee to provide 12 months of payment, interest debt, and associated fee
relief for SBA relief for SBA physical disaster loans in a regular servicing status and EIDL loans physical disaster loans in a regular servicing status and EIDL loans
approved prior to February 15, 2020, and in a regular servicing status; approved prior to February 15, 2020, and in a regular servicing status;
 $1  $1 ~~billion~~ bil ion for a new Micro-SBIC program to provide financing to micro-SBICs for a new Micro-SBIC program to provide financing to micro-SBICs
of up to 50% of private capital raised, not to exceed $25 of up to 50% of private capital raised, not to exceed $25 ~~million~~ mil ion or, in the case of or, in the case of
a micro-SBIC owned by persons who also own a SBIC licensed under section a micro-SBIC owned by persons who also own a SBIC licensed under section
301, up to 100% of private capital raised, not to exceed $50 301, up to 100% of private capital raised, not to exceed $50 ~~million~~mil ion; ;
 $1  $1 ~~billion~~ bil ion to increase 7(a) loan guarantees from 75% and 85%, depending on the to increase 7(a) loan guarantees from 75% and 85%, depending on the
amount borrowed, to 90% for amount borrowed, to 90% for ~~all~~ al 7(a) loans during FY2021, increase the 7(a) loans during FY2021, increase the
SBAExpress loan guarantee from 50% to 75% for SBAExpress loans of SBAExpress loan guarantee from 50% to 75% for SBAExpress loans of
$350,000 or less during FY2021, and reduce fees to the maximum extent possible $350,000 or less during FY2021, and reduce fees to the maximum extent possible
on 7(a) and 504/CDC loans during FY2021; on 7(a) and 504/CDC loans during FY2021;
 $57  $57 ~~million~~ mil ion for Microloan program enhancements, including $50 for Microloan program enhancements, including $50 ~~million~~mil ion for for
Microloan technical assistance grants and $7 Microloan technical assistance grants and $7 ~~million~~mil ion in loan credit subsidies to in loan credit subsidies to
support up to $72 support up to $72 ~~million~~mil ion in additional in additional Microloan lending; Microloan lending;
 $15  $15 ~~billion~~ bil ion for a one-year, state and local government for a one-year, state and local government ~~small~~ smal business local relief business local relief
grant program within the Department of the Treasury. The program would grant program within the Department of the Treasury. The program would
provide states, localities, and Indian Tribes grants to create a provide states, localities, and Indian Tribes grants to create a ~~small~~ smal business business
emergency fund. The fund would support loans and other assistance to nonprofit emergency fund. The fund would support loans and other assistance to nonprofit
organizations and businesses with 20 or fewer employees (50 or fewer employees organizations and businesses with 20 or fewer employees (50 or fewer employees
if located in a low-income community) that have experienced a loss of revenue if located in a low-income community) that have experienced a loss of revenue
due to COVID-19; anddue to COVID-19; and
 $10  $10 ~~billion~~ bil ion for a SBAfor a SBA grant program for independent live venue operators, grant program for independent live venue operators,
producers, promoters, or talent representatives to address the economic effects of producers, promoters, or talent representatives to address the economic effects of
COVID-19 on certain live venues. An initialCOVID-19 on certain live venues. An initial grant of up to $12 grant of up to $12 ~~million~~ mil ion dollars, dollars,
and a supplemental grant that is equal to 50% of the initialand a supplemental grant that is equal to 50% of the initial grant, would be grant, would be
availableavailable to cover specified expenses, such as payroll costs, rent, utilities, and to cover specified expenses, such as payroll costs, rent, utilities, and
personal protective equipment.personal protective equipment.
Author Information

Robert Jay Dilger Robert Jay Dilger
Sean Lowry Sean Lowry
Senior Specialist in American National Government Analyst in Public Finance Senior Specialist in American National Government Analyst in Public Finance

Bruce R. Lindsay Bruce R. Lindsay

Analyst in American National Government Analyst in American National Government

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Congressional Research Service Congressional Research Service
R46284 R46284 · VERSION 3638 · UPDATED
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