ȱ
–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ
›˜›Š–œȱ
ǯȱ›’ŒȱŽ’œœȱ
™ŽŒ’Š•’œȱ’—ȱ’—Š—Œ’Š•ȱŒ˜—˜–’Œœȱ
Š›Œ‘ȱŗŗǰȱŘŖŖŞȱ
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŝȬśŝŖŖȱ
   ǯŒ›œǯ˜Ÿȱ
řřŘŚřȱ
ȱŽ™˜›ȱ˜›ȱ˜—›Žœœ
Pr
epared for Members and Committees of Congress

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
ž––Š›¢ȱ
The Small Business Administration (SBA) was created to aid small businesses because they are
viewed as important sources of job creation and economic growth, but are typically
disadvantaged in competing against large firms. Many minority-owned small businesses are even
more disadvantaged, and they can apply to join programs that provide limited competition
contracts and technical assistance to help them to grow and gain experience to compete
successfully against larger businesses.
The SBA has many programs that affect every state and congressional district. The disaster loan
programs are the subject of frequent congressional and media attention because of complaints
about slow processing of loan applications. The SBA does not view these programs as immediate
assistance, but the public frequently is looking for a rapid response.
Most Members of Congress receive many constituent inquiries about SBA loans, the loan
guarantee programs, and special contracting programs. Except for disaster loans, the SBA does
not directly make loans to businesses. Instead it provides guarantees for private business loans
that lenders would not otherwise be willing to make under desirable terms such as maturity and
interest rate. The SBA also provides funding to selected financial intermediaries that invest in and
otherwise support small businesses.
The SBA reviews loan and guarantee applications to assure that there is a reasonable probability
that a loan will be repaid. In the event of default on a loan, the SBA uses all available avenues to
obtain repayment, including seizing income tax refunds.
This report summarizes the major SBA programs. It will be updated if new programs are added or
existing programs phased out.

˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
˜—Ž—œȱ
Introduction ..................................................................................................................................... 1
SBA Disaster Loans......................................................................................................................... 2
Overview ................................................................................................................................... 2
Types of Disaster Loans ............................................................................................................ 3
Disaster Loans to Individuals.............................................................................................. 3
Disaster Loans to Businesses and Nonprofits ..................................................................... 3
SBA Small Business Financial Programs........................................................................................ 5
Overview ................................................................................................................................... 5
What Is a Business? ............................................................................................................ 5
Loan Guarantees........................................................................................................................ 6
Overview............................................................................................................................. 6
Programs ............................................................................................................................. 7
SBA Lender Programs..............................................................................................................11
Certified Lenders Program.................................................................................................11
Preferred Lenders Program ................................................................................................11
SBA Express ..................................................................................................................... 12
Patriot Express .................................................................................................................. 12
SBA Special Contracting Programs............................................................................................... 12
8(a) .................................................................................................................................... 12
Small Disadvantaged Businesses (SDBs) ......................................................................... 12
Historically Underutilized Business Zones (HUBZones) ................................................. 13
Service-Disabled Veterans ................................................................................................ 13
Office of Small and Disadvantaged Business Utilization (OSDBU) ................................ 13
Capital Access Programs ............................................................................................................... 13
Overview........................................................................................................................... 13
Surety Bonds..................................................................................................................... 13
Small Business Innovation Research Awards (SBIR)....................................................... 14
Small Business Technology Transfer (STTR) Awards...................................................... 14
Small Business Investment Companies (SBICs) .............................................................. 14
New Market Venture Capital............................................................................................. 14
Entrepreneurial Development........................................................................................................ 14
Service Corps of Retired Executives (SCORE)................................................................ 15
Small Business Development Centers (SBDCs)............................................................... 15
Women’s Business Centers (WBCs)................................................................................. 15
Native American Outreach................................................................................................ 15
Advocacy and Other ...................................................................................................................... 15
Advocacy .......................................................................................................................... 15
National Women’s Business Council (NWBC) ................................................................ 15
Veterans Business Development ....................................................................................... 15
Recent Changes ............................................................................................................................. 16
Discontinued Programs ........................................................................................................... 16
Extended Programs ................................................................................................................. 16
Community Express and Export Express.......................................................................... 16
Revisions................................................................................................................................. 16
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
Size Standards................................................................................................................... 16

’ž›Žœȱ
Figure 1. Major SBA Program Areas, FY2007 ............................................................................... 2

Š‹•Žœȱ
Table 1. Maximum Interest Rates on SBA 7(a) Guaranteed Fixed-Rate Loans .............................. 8
Table 2. 504 Loan Maximum Debenture and Loan Amounts ......................................................... 9
Table 3. SBA Loan Guarantee Summary........................................................................................11

˜—ŠŒœȱ
Author Contact Information .......................................................................................................... 17

˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
—›˜žŒ’˜—ȱ
The Small Business Administration (SBA) not only represents the interests of small businesses,
but it also provides disaster recovery loans for hurricanes, floods, and even terrorist attacks to
individuals and businesses. After Hurricanes Katrina and Rita in 2005, many criticized the SBA’s
disaster loan program for not processing loan applications rapidly1 and for allowing large
businesses to win government contracts meant for small businesses.2 This report provides an
overview of the SBA’s programs. The SBA’s programs have detailed rules on program
requirements and administration that are not covered in this report. Detailed information is
available on the SBA’s website, 15 U.S.C. 631 et seq., and in Title 13 of the Code of Federal
Regulations.3
The Small Business Act states that continued free competition is “the essence of the American
economic system.”4 It declares that it is the policy of Congress to insure that a fair proportion of
government contracts are awarded to small businesses and to support small businesses with
financing, export support, and other means. Moreover, the act charges the SBA with representing
small business interests with other government agencies.
The SBA also has programs for disadvantaged groups to overcome disadvantages that members
of racial and ethnic minorities face in business. These programs give participants training and
reduced competition for government contracts. After graduating from the programs, the SBA
expects that the firms should be able to compete more successfully for government and private
sector work.
SBA’s origins can be traced to the Great Depression of the 1930s and World War II when
concerns about unemployment and war production were paramount. The SBA replaced the
Reconstruction Finance Corporation (RFC), which was created by the federal government in
1932 to provide funding for businesses of all sizes during the Depression and later financed war
production. The RFC shrank during the early 1950s after the end of World War II and was
disbanded amidst charges of political favoritism in granting loans. In 1953, Congress passed the
Small Business Act (P.L. 83-163) that created the SBA. The SBA has undergone many changes
since 1953. One key change is that it no longer makes direct loans to businesses or individuals
except for disaster loans.
As a general principle and following its statutory mandate, the SBA is willing to take more risks
than other lenders will, but there is a limit to the amount of risk it is willing to accept. To reduce
risk, it seeks collateral and examines the borrower’s ability to repay a loan. For example, loans
and loan guarantees of more than $10,000 usually require collateral. For some loans and loan
guarantees, personal guarantees are required if the collateral is considered insufficient by the
lender or the SBA. In short, these are loans that must be repaid, not grants that are not repaid.
Appropriations cover salaries, expenses, and losses (after debt recovery) in the SBA’s lending and
guarantee programs. One trend during the administration of President George W. Bush has been

1 “Slow Business Administration,” The Washington Post, December 9, 2005, p. A-30.
2 Griff Witte and Renae Merle, “Defining Small,” The Washington Post, October 20, 2005, p. D-1.
3 See http://www.sba.gov.
4 P.L. 85-536, as amended.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗȱ





























































–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
increasing the fees for loan guarantees to reduce the amount appropriated. This reduces the cost
of the program to the federal government by shifting costs to program participants. In FY2007,
the SBA budget was $571.8 million.5
The SBA has six types of programs: disaster loans, business loan guarantees, government
contracting and business development limited to businesses owned by socially and economically
disadvantaged groups, capital access programs, entrepreneurial development, inspector general,
and a residual category including management, research and advocacy. Figure 1 shows SBA’s
FY2007 budget of $948.4 million broken down into these areas.
Figure 1. Major SBA Program Areas, FY2007
($ Millions)
Executive Direction,
Advocacy and Other,
$49.8
Disaster Assistance,
$323.9
Capital Access
Programs, $141.7
Business Loan
Guarantees, $127.4
Inspector General,
Government
$31.6
Entrepreneurial
Contracting and
Development, $132.7
Business
Development, $79.2

Source: U.S. Small Business Administration, Congressional Submission Fiscal Year 2009, pp. 26-27.
ȱ’œŠœŽ›ȱ˜Š—œȱ
ŸŽ›Ÿ’Ž ȱ
SBA disaster loans are some of the agency’s best-known programs and the only ones that are not
limited to small businesses.6 The disaster loan programs are the subject of frequent congressional

5 U.S. Small Business Administration, Congressional Budget Submission Fiscal Year 2009, p. 17.
6 13. C.F.R. 123.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Řȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
and media attention because of complaints about slow processing of loan applications. The SBA
does not view these programs as immediate assistance, but the public frequently is looking for a
rapid response.
Disaster loans are available to both individuals and small businesses in declared disaster areas.
These are the only instances where the SBA makes loans to the ultimate borrower instead of
guaranteeing loans that others make or supporting nonprofit lenders with loans. There are no
prepayment penalties on any disaster loans.7
¢™Žœȱ˜ȱ’œŠœŽ›ȱ˜Š—œȱ
’œŠœŽ›ȱ˜Š—œȱ˜ȱ —’Ÿ’žŠ•œȱ
Individuals can obtain loans for both personal property such as cars and furniture, and to repair
homes destroyed. Loans are limited to uninsured losses.
Ž›œ˜—Š•ȱ›˜™Ž›¢ȱ’œŠœŽ›ȱ˜Š—œȱ
Personal property loans are limited to $40,000 and must be used to repair or replace damaged
items. The loan can cover possessions such as cars, clothes, and furniture. Both homeowners and
renters may apply. Unusually high-value possessions such as furs, boats, airplanes, antiques, and
recreational vehicles are not covered.
Applicants who can obtain credit elsewhere are charged a rate based on the cost of money to the
U.S. government, but not more than 8% annually. Those who cannot obtain credit elsewhere are
charged half that rate, but not more than 4% annually. The maximum maturity for these loans is
30 years, but the SBA determines repayment terms on a case-by-case basis according to the
person’s ability to repay.
ŽŠ•ȱ›˜™Ž›¢ȱ’œŠœŽ›ȱ˜Š—œȱ
Real property disaster loans are not available to renters, have a limit of $200,000, and must be
used to repair or restore primary homes. The loan cannot be used to improve the home beyond its
original condition unless local building codes require structural changes.8
’œŠœŽ›ȱ˜Š—œȱ˜ȱžœ’—ŽœœŽœȱŠ—ȱ˜—™›˜’œȱ
There are four types of loans available to businesses and nonprofits located in counties covered
by a presidential disaster declaration. In certain circumstances, the SBA will also make these
loans available when a governor, the Secretary of Agriculture, or the Secretary of Commerce
makes a disaster declaration. Physical disaster loans are available to almost any nonprofit or
business. The other business disaster loans are limited to small businesses.

7 13 C.F.R. 123.105 and 123.203.
8 13 U.S.C. 123. See http://www.sba.gov/disaster_recov/loaninfo/property.html.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
řȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
‘¢œ’ŒŠ•ȱ’œŠœŽ›ȱ˜Š—ȱ
Any business or nonprofit regardless of size can apply for a physical disaster business loan of up
to $1.5 million for repairs and replacements to real property, machinery, equipment, fixtures,
inventory, and leasehold improvements that are not covered by insurance. The SBA may waive
the $1.5 million ceiling if a business is a “major source of employment.”9 Loans are for up to 30
years, and the interest rates are determined under the same rules as for personal property disaster
loans.
Nonprofits that are rejected or approved for less than the requested amount by the SBA for a
physical disaster loan are in some circumstances eligible for grants from the Federal Emergency
Management Agency (FEMA). One reason that a nonprofit might be approved for less than the
full amount by the SBA is a request for more than $1.5 million. The SBA could approve the $1.5
million and reject the excess. The borrower could then approach FEMA for the amount denied.
Œ˜—˜–’Œȱ —“ž›¢ȱ’œŠœŽ›ȱ˜Š—œȱ
Economic Injury Disaster Loans (EIDL) are limited to small businesses. If the Secretary of
Agriculture designates an agriculture production disaster, small farms and small cooperatives are
eligible. EIDLs are available in the counties included in a presidential disaster declaration and
contiguous counties. The loans are designed to provide small businesses with operating funds
until the business recovers. The maximum loan is $1.5 million and the terms are the same as
personal and physical disaster business loans.
’•’Š›¢ȱŽœŽ›Ÿ’œȱŒ˜—˜–’Œȱ —“ž›¢ȱ’œŠœŽ›ȱ˜Š—œȱ
This program makes loans to small businesses to cover ordinary and necessary operating
expenses that could not be met because an essential employee who is in the military reserves was
called up to active duty in a period of military conflict resulting from a declaration by the
President, Congress, or the Secretary of Defense.
These loans are at a subsidized rate and are not available if the business has resources to cover
these expenses. The statutory limit is $1.5 million, but the SBA will not approve more than the
actual, covered operating expenses. The SBA will consider waiving the $1.5 million limit for
small businesses that are “a major source of employment.” The maximum interest rate is 4%.
ȱ˜Š—œȱ
In response to Hurricanes Katrina and Rita, the SBA created the Gulf Opportunity Pilot Loan
Program (GO Loans) for small business in or relocating to the counties and parishes declared
major disaster areas. The maximum loan of $150,000 is backed by an 85% SBA guarantee. The
goal is to process the loan application in one day. The maximum interest rate on loans of $50,000
or less is prime plus 6.5%. On larger loans the maximum interest rate is prime plus 4.5%. Only
SBA Express lenders (described below) can make these loans.

9 13 C.F.R. 123.202.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Śȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
ȱ–Š••ȱžœ’—Žœœȱ’—Š—Œ’Š•ȱ›˜›Š–œȱ
ŸŽ›Ÿ’Ž ȱ
The SBA has four types of programs to directly support small businesses that are not affected by
disasters. The first are loan guarantees in which the SBA guarantees loans to small businesses that
the private sector would otherwise be unwilling to make because of the risk.
The second are contracting programs for small businesses that can involve sole source, limited
competition, and cost advantages in government contract competitions. Sometimes the use of
small business subcontractors is an evaluation factor for the prime contractor. When a
government agency is planning a procurement, it chooses between one of these vehicles, and full
and open competition in which there are no special advantages for small businesses.
The third are “capital access” programs that indirectly provide equity funding for small
businesses and improve access to capital markets through SBA guarantees.
The fourth are entrepreneurial development programs to provide training to small business
owners mostly using volunteers and nonprofits.
To qualify for any of the SBA programs, an organization must be both a business and small.
‘Šȱ œȱŠȱžœ’—Žœœǵȱ
To participate in either type of program, a business must meet the SBA’s definition of “small
business.” This is a business that
• is organized for profit,
• has a place of business in the United States,
• makes a contribution to the U.S. economy by paying taxes or using American
labor, products, and materials, and
• does not exceed the size standard for its industry.10
What is Small?
The definition of “small”—called the size standard—depends on what a business produces. Also
depending on what is produced, the SBA determines the size standard either in terms of dollars of
revenue or number of employees (but not both).11 For example, most manufacturers must have no
more than 500 employees to meet the size standard. Most general and heavy construction firms
(except dredging) must have an average annual revenue of $31 million or less. The formal
determination involves selecting the North American industrial classification system (NAICS)
codes that represent the business.12 Many NAICS codes are very similar, and there is as much art

10 See http://www.sba.gov/size/summary-whatis.html.
11 13 C.F.R. 121 establishes how the size standards are developed. Sizes are listed at 13 C.F.R. 121.201.
12 In 1997 NAICS replaced the Standard Industrial Classification (SIC) codes. Some documents still refer to “SIC”
(continued...)
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
śȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
as objectivity in selecting which codes to use in the SBA programs. Some programs use a single
size standard, such as 500 employees, regardless of industry.
When bidding on contracts that are limited to small businesses or that give preferences to them,
businesses must certify that they meet the size standard when they submit their proposals.
Depending on the type of contract, they may be required to certify their size at other times. A
large company can purchase a small business that has won a small-business-set-aside contract and
continue to perform work under the contract. Depending on the contract vehicle, a small business
subsidiary could win new small business work for the large parent.
˜Š—ȱ žŠ›Š—ŽŽœȱ
ŸŽ›Ÿ’Ž ȱ
The SBA provides loan guarantees for small businesses that cannot obtain commercial loans. The
SBA requires personal guarantees from owners and shares the risk of default with the lender by
making the guarantee less than 100%. The borrower still 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 offset. Most types of business are eligible
for loan guarantees, but a few are not. These excluded business lines include real estate
investment firms, financial speculation and intermediaries, pyramid sales, illegal activities, and
gambling. Nonprofit and charitable organizations are also ineligible.
›Ž™Š¢–Ž—ȱ
The SBA charges a prepayment penalty on loans applied for on or after December 22, 2000. This
is a “subsidy recoupment fee” and applies only to loans of 15 or more years when the borrower
makes the repayment in the first three years after the first loan disbursement, and when the
repayment is more than 25% of the loan amount. The fee is 5% of the prepayment in the first
year, 3% in the second, and 1% in the third year.13
ŽŽœȱ
To offset the cost of these programs to the taxpayer, the SBA charges fees based on the size of the
loan. There is a one time guarantee fee that currently ranges from 2% on the first $150,000 or less
to 3.75% on the portion greater than $1,000,000. The lender is charged an annual service fee of
0.494% on the outstanding portion of the loan guarantee.
Šž›’¢ȱ
SBA guaranteed loans generally have longer terms to maturity than other business loans. The
maximum loan is 25 years for real estate. For fixed capital equipment, the maximum term is the

(...continued)
instead of “NAICS.”
13 13 C.F.R. 120.223.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Ŝȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
lesser of 25 years or the life of equipment financed. For working capital it is seven years. There
are some exceptions. For example, if a borrower is likely to be unable to repay a working capital
loan in seven years, the SBA can allow a longer term, such as 10 years, if that makes the loan
viable.
œŽȱ˜ȱ›˜ŒŽŽœȱ
The SBA will guarantee loans for most business purposes. Exceptions to this are refinancing
existing debt where the lender is in a position to absorb a loss, and the SBA would be responsible
for the loss because of the refinancing; financing a partial change in ownership; paying funds
owed to the owner; paying delinquent taxes that should have been escrowed; and non-business
purposes. The SBA will make loans to farms, but it recommends contacting the Farm Service
Agency first.
‘Ž›ȱ˜ž›ŒŽœȱ
The SBA does not guarantee loans to businesses that can obtain loans without it. If the entire
amount is not available without an SBA guarantee, the SBA will guarantee the difference.
›˜›Š–œȱ
The SBA has many loan guarantee programs.
ŝǻŠǼȱ
The main SBA guarantee program is the 7(a) loan guarantee, which is named after the section of
the Small Business Act that authorizes it. These are loans made by SBA partners (mostly banks,
but also some other financial institutions) and partially guaranteed by the SBA. Despite the offer
from the SBA to guarantee a loan, a lender does not have to make it. The SBA has created
variations on the 7(a) program for special purposes. It has also created expedited processing with
selected lending partners called certified lenders and preferred lenders.
The maximum amount of a loan depends on the SBA’s guarantee. The SBA is limited to
guaranteeing $1.5 million, but no more than 85% on loans up to $150,000 and 75% on loans more
than $150,000. This makes the maximum loan amount $2 million.
Interest rates on 7(a) loans are negotiated between the borrower and the lender, but are subject to
SBA maximums. Table 1 summarizes these caps.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŝȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
Table 1. Maximum Interest Rates on SBA 7(a) Guaranteed Fixed-Rate Loans
Amount
Maturity
Maximum Interest Rate
$50,000 or more
Less Than 7 Years
Prime + 2.25%
$50,000 or more
7 Years or More
Prime + 2.75%
$25,000 to $50,000
Less Than 7 Years
Prime + 3.25%
$25,000 to $50,000
7 Years or More
Prime + 3.75%
$25,000 or less
Less Than 7 Years
Prime + 4.25%
$25,000 or less
7 Years or More
Prime + 4.75%
Source: Table compiled by CRS from data from the Small Business Administration.
Variable-rate loans can be pegged to either the prime rate or the SBA optional peg rate, which is a
weighted average of rates that the federal government pays for loans with maturities similar to the
guaranteed loan. The SBA optional peg rate is calculated and published quarterly in The Federal
Register
. For January to March 2008 the peg rate was 4.75%.14 The spread over the prime rate or
SBA optional peg rate is negotiable between the borrower and the lender. The adjustment period
can be no more than monthly and cannot change over the life of the loan.
In recent years the Administration has proposed making the 7(a) program self-funding by raising
the fees charged users for the SBA’s loan guarantees. In FY2005, the program became entirely
funded by user fees, although the conference committee report agreed to revisit the decision in the
event of an economic downturn.15
Š›’Š’˜—œȱ˜—ȱ‘ŽȱŝǻŠǼȱ›˜›Š–ȱ
There are two variations on the 7(a) program: prequalification and Certified Development
Company (CDC)/504 loans. The prequalification program targets low-income borrowers,
disabled business owners, new and emerging businesses, veterans, exporters, and rural and
specialized industries. The maximum loan amount is $250,000. Other terms follow standard 7(a)
parameters. SBA encourages applicants to use intermediaries to prepare a viable loan application
package. The intermediaries insure that the business plan and supporting documents are
complete; they also make sure that the applicant has credit merit. Once the application is
completed, the intermediary sends it to the SBA for expedited processing. If the SBA approves
the application, the intermediary will help the business to find a lender offering the most
competitive rates.
Small Business Development Centers (SBDCs) do not charge for this service, but for-profit
intermediaries do.
The 504 loan program uses CDCs, which are nonprofit organizations that support local economic
development. Each CDC has its own geographic territory. The program provides long-term,

14 U.S. Small Business Administration, “Interest Rates; Quarterly Determinations,” 73 Federal Register 1905, January
10, 2008.
15 U.S. Congress, House of Representatives, Making Appropriations for Foreign Operations, Export Financing, and
Related Programs for The Fiscal Year Ending September 30, 2004, and for Other Purposes
, conference report to
accompany H.R. 4818, 108th Cong., 2nd sess., Report 108-792, p. 843.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Şȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
fixed-rate loans for major fixed assets such as land, structures, machinery, and equipment.
Program loans cannot be used for working capital, inventory, repaying debt, or refinancing. A
commercial lender provides up to 50% of the financing package, which is secured by a senior
lien. The CDC’s loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a
guaranteed debenture.16 The small business must contribute at least 10% as equity.
The maximum amount of the SBA’s debenture depends on its purpose. This is summarized in
Table 2 below.
Table 2. 504 Loan Maximum Debenture and Loan Amounts Maximum
Goal
Maximum
Debenture
Loan
Amount
Job Creation or Community Development
$1.5 million
$3.38 million
A business must create or retain one job for each $50,000 of the debenture
except for small manufacturers.
Small Manufacturers Job Creation
$4 million
$9 million
The primary output of the company must be in NAICS codes 31, 32, or 33. All
production facilities must be in the United States. In addition, the loan must
result in the creation or retention of at least one job per $100,000 guaranteed or
improve the local economy or meet one of the public policy goals below.
Public Policy Goal Supported by Loan
$2 million
$4.5 million
• Business district revitalization
• Expansion of exports
• Expansion of minority business development
• Rural development
• Increasing productivity and competitiveness
• Restructuring because of federally mandated standards or policies
• Changes necessitated by federal budget cutbacks
• Expansion of small business concerns owned and controlled by veterans,
especially service-disabled veterans
• Expansion of small business concerns owned and controlled by women

Source: Table compiled by CRS from data from the Small Business Administration.
Notes: The maximum loan amount is the total financial package including the commercial loan and the CDC
loan. It does not include the owner’s minimum 10% equity contribution. It assumes that the CDC loan is 40% of
the total package.

16 A debenture is a bond that it not secured by a lien on specific collateral.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
şȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
™ŽŒ’Š•ȱž›™˜œŽȱ˜Š—ȱ žŠ›Š—ŽŽœȱ
In addition to the 7(a)-based loan guarantee programs, the SBA has special purpose loan
guarantee programs for exports, adjusting to the North American Free Trade Agreement
(NAFTA), Employee Stock Ownership Program trusts, pollution controls, and working capital.
Export Working Capital Loans. Export Working Capital Loans are a joint program between the
SBA and the Export-Import Bank. The SBA will guarantee up to the lesser of $1.5 million or 90%
of the loan.
Export Express. The SBA’s Export Express program guarantees loans for exporters to finance
business development activities such as participating in foreign trade shows, translating
brochures, and improving facilities. The SBA will guarantee 85% of loans up to $150,000 and
75% of loans from $150,000 to $250,000 (the maximum loan amount under the program).
International Trade Loans. International Trade Loans are available to small businesses that are
exporting goods and services, those that are planning to become exporters, and those adversely
affected by imports. Loan and guarantee maximums are the same as the regular 7(a) loan
guarantee program, but the maximum guaranteed amount can be increased to $1.75 million
instead of the normal $1.5 million under special circumstances.
Community Adjustment and Investment Program (CAIP). The Community Adjustment and
Investment Program (CAIP) uses federal funds to pay the fees on 7(a) and 504 loans to businesses
located in communities that have been adversely affected by the North American Free Trade
Agreement (NAFTA).
Employee Trusts. The SBA will guarantee loans to Employee Stock Ownership Plans (ESOPs)
that are used either to lend money to the employer or to purchase control from the owner. ESOPs
must meet regulations established by the IRS, Department of the Treasury, and Department of
Labor. These are 7(a) loans.
Pollution Control. The SBA has a special 7(a) program for small businesses to purchase pollution
control equipment.
CAPLines. CAPLines are five special 7(a) programs designed to meet the requirements of small
businesses for short-term or cyclical working capital. The maximum term is five years.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŖȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
Table 3. SBA Loan Guarantee Summary
Maximum
Program Purpose Maximum
Loan
SBA
Guarantee
7(a)
This is the SBA’s primary business loan
$2.0 million
85% of loans of
program. Small businesses apply for an SBA
$150,000 or less,
loan guarantee after being denied a loan by a
75% of loans more
commercial lender that will then make the
than $150,000
loan. Can be for up to 10 years for working
capital and 25 years for real assets.
GO Loans
SBA-guaranteed loans to businesses in
$150,000 85%
counties and parishes covered by Hurricanes
Katrina and Rita disaster declarations. These
loans are made only by SBA Express lenders.
Prequalification
Prequalification intermediaries help small
$250,000
Same as 7(a)
businesses assemble 7(a) loan guarantee
program
requests.
Certified
Loans are for real estate, machinery, or
$1.5 million debenture, The debenture,
Development
equipment. The usual loan package includes a depending on job
which can be up
Company
loan from a private lender for up to 50% of
creation criteria or
to 40% of the loan
(CDC)/504 Loan
the project cost secured by a senior lien, a
community economic
package, is 100%
Program
loan for up to 40% of the project cost secured develop-ment. Up to
guaranteed.
with a junior lien from the CDC (backed by a $4.0 million if it meets
100% SBA-guaranteed debenture) and at least other criteria.
10% equity from the small business.
Source: Table compiled by CRS from data from the Small Business Administration.
ȱŽ—Ž›ȱ›˜›Š–œȱ
The SBA has programs for experienced 7(a) lenders that provide faster processing to borrowers.
This speed is achieved because the SBA lets the lender do more of the work with less SBA
review. They allow the SBA to guarantee more loans with fewer employees.
Ž›’’ŽȱŽ—Ž›œȱ›˜›Š–ȱ
In the certified lenders program (CLP), the SBA’s goal is to reach a decision on the guarantee
within three business days. A certified lender can review an application for an SBA-guaranteed
loan and process much, but not all, of the paperwork. The SBA does a credit and eligibility
review instead of a complete verification of the data to achieve this faster turnaround.
›ŽŽ››ŽȱŽ—Ž›œȱ›˜›Š–ȱ
In the preferred lenders program (PLP), the SBA delegates loan approval, closing, and most
servicing and liquidation authority and responsibility to these selected lenders. The SBA
continues to check loan eligibility. Since the SBA does not review individual loan applications,
borrowers can receive funding in a matter of days.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŗȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
ȱ¡™›Žœœȱ
The SBA Express program offers borrowers an answer within 36 hours. Lenders are authorized
by the SBA to make eligibility decisions. The maximum loan amount is $350,000, but the SBA
will guarantee only 50% compared to 85% on loans of less than $150,000, or 75% on larger loans
in other 7(a) programs. The maximum interest rate that a lender can charge is 6.5% over the
prime rate for loans of $50,000 or less and 4.5% over prime for other loans. Only SBA Express
lenders can make GO Loans, which were discussed previously.
SBA lenders wishing to join the SBA Express program must meet portfolio performance
requirements and be preferred lenders. Other lenders in certain areas desiring to join the program
must originate a reasonable number of commercial loans of $50,000 or less.
Š›’˜ȱ¡™›Žœœȱ
The Patriot Express guarantees loans of up to $500,000 for most business purposes. Eligible
business owners are veterans, reservists, National Guard members, their spouses, and certain
widows. The program offers lower rates than the SBA Express program and faster approval times.
ȱ™ŽŒ’Š•ȱ˜—›ŠŒ’—ȱ›˜›Š–œȱ
There are three major SBA special contracting programs that allow small businesses owned by
disadvantaged individuals or located in impoverished areas to compete for government contracts
only with similar firms. This gives these disadvantaged businesses a chance to win government
contracts without having to compete against larger and more experienced companies.
ŞǻŠǼȱ
The 8(a) program (named for the section of the Small Business Act from which it derives its
authority) is for businesses owned by citizens who are socially and economically disadvantaged.17
A firm that is certified as an 8(a) is eligible for sole source and limited competition government
contracts. Their 10% cost advantage price evaluation preference lapsed near the end of 2004. The
SBA provides technical assistance and training to 8(a) firms. Firms graduate from the program
after nine years.18 As of March 4, 2008, there were 8,632 firms in the 8(a) program.19
–Š••ȱ’œŠŸŠ—ŠŽȱžœ’—ŽœœŽœȱǻœǼȱ
SDBs are similar to 8(a) firms, but the benefits are limited to federal procurements. Firms can be
in this program for three years. Firms that are certified as 8(a) are SDBs for the duration of their
8(a) status. As of March 11, 2008, there were 12,413 SDBs.20

17 Section 8(a) of the Small Business Act, P.L. 85-536, as amended, can be found at 15 U.S.C 637(a). Regulations are
in 13 C.F.R. 124.
18 See http://www.sba.gov/8abd/indexfaqs.html.
19 Small Business Administration, special tabulation.
20 Source: http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm run March 11, 2008.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŘȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
’œ˜›’ŒŠ••¢ȱ—Ž›ž’•’£Žȱžœ’—Žœœȱ˜—Žœȱǻ ˜—ŽœǼȱ
This program provides assistance to small businesses located in Historically Underutilized
Business Zones (HUBZones) through limited competition contract competitions, sole source
awards, or price evaluation preferences in full and open competitions.21 The determination of
whether or not an area is a HUBZone is based on criteria specified in 13 C.F.R. 126.103. To be
certified as a HUBZone small business, at least 35% of the small business’s employees must
reside in the HUBZone.
Ž›Ÿ’ŒŽȬ’œŠ‹•ŽȱŽŽ›Š—œȱ
Contracting officers of government agencies are authorized to limit procurement competitions or
sole source contracts to small businesses owned by service-disabled veterans.22
’ŒŽȱ˜ȱ–Š••ȱŠ—ȱ’œŠŸŠ—ŠŽȱžœ’—Žœœȱ’•’£Š’˜—ȱǻǼȱ
Every government agency with procurement authority has an Office of Small and Disadvantaged
Business Utilization (OSDBU) to advocate within the agency for firms that are small, SDB, 8(a),
woman-owned, HUBZone, or service-disabled veteran owned. Agencies set goals for contracting
with these firms as prime and subcontractors, and the OSDBUs participate in the process. In
addition, the OSDBUs help their agencies reach these goals. This is done with contracts that
either limit competition to these groups, give a cost advantage to these groups, or set a
subcontracting goal for these groups.
Š™’Š•ȱŒŒŽœœȱ›˜›Š–œȱ
ŸŽ›Ÿ’Ž ȱ
The SBA has other programs to improve the access of small businesses to specific parts of capital
markets. The most important of these are to guarantee performance (surety) bonds, provide
special high technology contracting opportunities (small-business innovative research and small-
business technology transfer programs), support equity investments (small-business investment
companies), and provide technical assistance (small-business development centers).
ž›Ž¢ȱ˜—œȱ
A surety bond is a bond that a contractor purchases to guarantee that it will complete a contract. If
the contractor fails to complete the contracted work, the surety bond is used to pay for
completion. The SBA guarantees four types of surety bonds. First, it guarantees bid bonds to
ensure that if a bidder wins a procurement competition the bidder will sign the contract. Second,
it guarantees payment bonds that the contractor will pay suppliers and subcontractors. Third, it
guarantees performance bonds that the contractor will complete the work as contracted. Fourth, it
guarantees ancillary bonds that are required to guarantee the performance of the contract.

21 See https://eweb1.sba.gov/hubzone/internet/.
22 P.L. 108-183.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗřȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
–Š••ȱžœ’—Žœœȱ ——˜ŸŠ’˜—ȱŽœŽŠ›Œ‘ȱ Š›œȱǻ Ǽȱ
SBIR awards are competitive grants to small businesses (500 or fewer employees) to research and
develop new ideas for selected government agencies. Government agencies with the largest
research budgets fund the SBIR program. The SBA coordinates and oversees the SBIR program
but does not provide funding for the awards. Phase I grants allow a company to determine if an
idea has scientific and technical merit and is feasible. Phase II evaluates the idea’s commercial
potential. Phase III is private sector development of the idea. Phase I awards are for a maximum
of $100,000 over six months, and phase II awards are for a maximum of $750,000 over more than
two years. Intellectual property rights are protected for four years after the completion of phase I,
phase II, or phase III. For more details on SBIR awards, see CRS Report 96-402, Small Business
Innovation Research Program
, by Wendy H. Schacht.
–Š••ȱžœ’—ŽœœȱŽŒ‘—˜•˜¢ȱ›Š—œŽ›ȱǻǼȱ Š›œȱ
The STTR program is similar to the SBIR program, but it requires the small business to work
with a nonprofit research institute. The SBA coordinates and oversees the STTR program but
does not provide funding for the awards. Phase I awards are a maximum of $100,000 for one
year. Phase II awards are for a maximum of $500,000 over two years. While there is no STTR
funding for phase III, the awarding agency may issue a sole source contract to a team that has
successfully reached this stage.
–Š••ȱžœ’—Žœœȱ —ŸŽœ–Ž—ȱ˜–™Š—’Žœȱǻ œǼȱ
Small Business Investment Companies (SBICs) are privately owned companies that are licensed
by the SBA to provide debt and equity capital to small businesses. They can obtain loans from the
SBA to supplement their own capital. For the SBIC program, a small business is a business with
net worth of $18 million or less and an average after-tax income for the two preceding years of $6
million or less. There are alternative size standards in some industries. The SBIC sells a debenture
to the SBA, which guarantees repayment and creates a pool of these debentures for resale on the
secondary market. SBICs can borrow three times their private capital to a maximum of $113
million.
Ž ȱŠ›”ŽȱŽ—ž›ŽȱŠ™’Š•ȱ
New Market Venture Capital is a program that encourages equity investments in small businesses
in low-income areas that meet specific statistical criteria established by regulation. A tax credit is
available on a competitive basis.
—›Ž™›Ž—Žž›’Š•ȱŽŸŽ•˜™–Ž—ȱ
Entrepreneurial development provides technical and managerial training to small businesses.
Some of this is free and other training is at low cost.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŚȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
Ž›Ÿ’ŒŽȱ˜›™œȱ˜ȱŽ’›Žȱ¡ŽŒž’ŸŽœȱǻǼȱ
The Service Corps of Retired Executives (SCORE) uses over 11,000 volunteers to bring practical
experience to start-up small business and to those thinking about starting a new small business.
–Š••ȱžœ’—ŽœœȱŽŸŽ•˜™–Ž—ȱŽ—Ž›œȱǻœǼȱ
SBDCs provide free or low-cost assistance to small businesses using programs customized to
local conditions. SBDCs support small business in marketing and business strategy, finance,
technology transfer, government contracting, management, manufacturing, engineering, sales,
accounting, exporting, and other topics. SBDCs are funded by grants from the SBA and matching
funds. There are more than 1,100 SBDCs with at least one in every state and territory.
˜–Ž—Ȃœȱžœ’—ŽœœȱŽ—Ž›œȱǻœǼȱ
WBCs are similar to SBDCs, except they concentrate on assisting women entrepreneurs. There
are WBCs in most states and territories.
Š’ŸŽȱ–Ž›’ŒŠ—ȱž›ŽŠŒ‘ȱ
The SBA’s Office of Native American Affairs works to encourage native Americans (native
American Indians, native Alaskans, and native Hawaiians) to start and expand small businesses.
Ÿ˜ŒŠŒ¢ȱŠ—ȱ‘Ž›ȱ
Ÿ˜ŒŠŒ¢ȱ
The Office of Advocacy represents small businesses, small organizations, and small governments
within the federal government. Among its activities are sponsoring and encouraging research into
the role of small businesses in the national economy and encouraging federal agencies to
specifically consider the impact of regulations on small businesses.
Š’˜—Š•ȱ˜–Ž—Ȃœȱžœ’—Žœœȱ˜ž—Œ’•ȱǻǼȱ
The NWBC is an independent office within the SBA charged with undertaking programs to
support women-owned businesses.
ŽŽ›Š—œȱžœ’—ŽœœȱŽŸŽ•˜™–Ž—ȱ
The Office of Veterans Business Development encourages veterans who are interested in starting
a small business or who own one.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗśȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
ŽŒŽ—ȱ‘Š—Žœȱ
’œŒ˜—’—žŽȱ›˜›Š–œȱ
Over the years, the SBA has terminated many programs. Some of these cancellations were done
administratively, others at the direction of Congress. In many cases key features of the programs
were incorporated in other programs. In recent years the small loans program, FA$TRAK loan
program (now called SBA Express, which continues), LowDoc loan program, handicapped
assistance loan program, and disabled assistance loan program. The SBA has ended its support of
the veterans franchise program (VETFRAN), but the Department of Veterans Affairs continues its
support.
Many features of the FA$TRAK and LowDoc programs were brought into the SBAExpress
program, which is part of the 7(a) loan guarantee program. Those opposed to these changes
believed that FA$TRAK and LowDoc offered borrowers and lenders advantages in the areas of
collateral, fees, and lender participation requirements that SBA Express does not.
Proponents of eliminating the handicapped, disabled, and VETFTRAN programs believed that
these business owners did not face challenges that differed significantly from other small business
owners.
¡Ž—Žȱ›˜›Š–œȱ
˜––ž—’¢ȱ¡™›ŽœœȱŠ—ȱ¡™˜›ȱ¡™›Žœœȱ
These programs were to expire on November 30, 2005, but the SBA extended them until March
30, 2008. Community Express is modeled on the SBA Express program, but targeted at
underserved areas and offering 75%-85% guarantees compared with SBA Express’s 50%. Export
Express is also modeled on SBA Express and offers higher guarantee percentages.
ŽŸ’œ’˜—œȱ
’£ŽȱŠ—Š›œȱ
The SBA increased the size standard defining “small” business when measured by monetary
standards such as revenue, income, and assets by 8.7% effective January 4, 2006. This is the first
increase in the standard since February 2002.23 The SBIC size standard is set by law and is not
changed.


23 U.S. Small Business Administration, “Small Business Size Standards Inflation Adjustment to Size Standards;
Business Loan Program; Disaster Assistance Loan Program,” 70 Federal Register 72577, December 5, 2005.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŜȱ

–Š••ȱžœ’—Žœœȱ–’—’œ›Š’˜—DZȱȱ›’–Ž›ȱ˜—ȱ›˜›Š–œȱ
ȱ
ž‘˜›ȱ˜—ŠŒȱ —˜›–Š’˜—ȱ

N. Eric Weiss

Specialist in Financial Economics
eweiss@crs.loc.gov, 7-6209




˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗŝȱ