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Small Business:
Access to Capital and Job Creation
Robert Jay Dilger
Senior Specialist in American National Government
November 21, 2011
Congressional Research Service
7-5700
www.crs.gov
R40985
CRS Report for Congress
Pr
epared for Members and Committees of Congress
c11173008
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Small Business: Access to Capital and Job Creation
Summary
The SBA administers several programs to support small businesses, including loan guaranty
programs to enhance small business access to capital; contracting programs to increase small
business opportunities in federal contracting; direct loan programs for businesses, homeowners,
and renters to assist their recovery from natural disasters; and small business management and
technical assistance training programs to assist business formation and expansion. Congressional
interest in these programs has increased in recent years, primarily because assisting small
business is viewed as a means to enhance economic growth.
Some, including President Obama, have argued that current economic conditions make it
imperative that the SBA be provided additional resources to assist small businesses in acquiring
capital necessary to start, continue, or expand operations and create jobs. Others worry about the
long-term adverse economic effects of spending programs that increase the federal deficit. They
advocate business tax reduction, reform of financial credit market regulation, and federal fiscal
restraint as the best means to assist small business economic growth and job creation.
Several laws were enacted during the 111th Congress to enhance small business access to capital.
For example, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA),
provided the SBA an additional $730 million, including $375 million to temporarily subsidize
SBA fees and increase the 7(a) loan guaranty program’s maximum loan guaranty percentage to
90%. P.L. 111-240, the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury
to establish a $30 billion Small Business Lending Fund to encourage community banks to provide
small business loans ($4 billion was issued), a $1.5 billion State Small Business Credit Initiative
to provide funding to participating states with small business capital access programs, numerous
changes to the SBA’s loan guaranty and contracting programs, $510 million to continue the SBA’s
fee subsidies and the 7(a) program’s 90% maximum loan guaranty percentage through December
31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322, the Continuing
Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue
its fee subsidies and the 7(a) program’s 90% loan guaranty percentage through March 4, 2011, or
until available funding was exhausted, which occurred on January 3, 2011.
This report addresses a core issue facing Congress during the 112th Congress: What, if any,
additional action should the federal government take to enhance small business access to capital?
After briefly discussing the role of small business in job creation and retention, this report
provides an assessment of the supply and demand for small business loans, including the number
and amount of small business loans guaranteed by the SBA. It also examines selected laws
enacted during the 110th and 111th Congresses that were designed to enhance small business
access to capital by increasing the supply of small business loans and/or the demand for small
business loans, and recent actions concerning the SBA’s budget.
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Small Business: Access to Capital and Job Creation
Contents
Small Business Access to Capital .................................................................................................... 1
The Supply and Demand for Private Sector Small Business Loans ................................................ 3
The Supply and Demand for SBA Loans......................................................................................... 4
Recent Laws Designed to Enhance the Supply of Small Business Loans ....................................... 9
Recent Laws Designed to Enhance the Demand for Small Business Loans ................................. 12
Discussion...................................................................................................................................... 15
SBA Funding ................................................................................................................................. 17
Concluding Observations............................................................................................................... 20
Figures
Figure 1. Small Business Lending Environment, 2000-2011 .......................................................... 4
Tables
Table 1. Selected Small Business Administration Financial Statistics, FY2000-FY2011 ............... 5
Table 2. Small Business Administration Funding, FY2000-FY2011............................................. 18
Table A-1. Selected Provisions, the Small Business Jobs Act of 2010.......................................... 22
Appendixes
Appendix. Selected Provisions in the Small Business Jobs Act of 2010....................................... 22
Contacts
Author Contact Information........................................................................................................... 24
Acknowledgments ......................................................................................................................... 25
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Small Business: Access to Capital and Job Creation
Small Business Access to Capital
The Small Business Administration (SBA) administers several programs to support small
businesses, including loan guarantees to lenders to encourage them to provide loans to small
businesses “that might not otherwise obtain financing on reasonable terms and conditions.”1
Historically, one of the justifications presented for funding the SBA’s loan guarantee programs
has been that small businesses can be at a disadvantage, compared with other businesses, when
trying to obtain access to sufficient capital and credit.2 As an economist explained:
Growing firms need resources, but many small firms may have a hard time obtaining loans
because they are young and have little credit history. Lenders may also be reluctant to lend to
small firms with innovative products because it might be difficult to collect enough reliable
information to correctly estimate the risk for such products. If it’s true that the lending
process leaves worthy projects unfunded, some suggest that it would be good to fix this
“market failure” with government programs aimed at improving small businesses’ access to
credit.3
In recent years, advocates of providing federal assistance to small businesses have focused
increased attention on the role small businesses have in job creation and retention.4 They note that
small businesses have led job formation during previous economic recoveries.5 Economists
generally do not view job creation as a justification for providing federal assistance to small
businesses. They argue that in the long term such assistance will likely reallocate jobs within the
economy, not increase them. In their view, jobs arise primarily from the size of the labor force,
which depends largely on population, demographics, and factors that affect the choice of home
versus market production (e.g., the entry of women in the workforce). However, economic theory
does suggest that increased federal spending may result in additional jobs in the short term. For
example, the SBA reported in September 2010, that ARRA funding for small businesses created
or retained 785,955 jobs.6
1 U.S. Small Business Administration, Fiscal Year 2010 Congressional Budget Justification (Washington, DC: GPO,
2009), p. 30.
2 Proponents of providing federal funding for the SBA’s loan guarantee programs also argue that small business can
promote competitive markets. See P.L. 83-163, §2(a), as amended; and 15 U.S.C. §631a.
3 Veronique de Rugy, Why the Small Business Administration’s Loan Programs Should Be Abolished, American
Enterprise Institute for Public Policy Research, AEI Working Paper #126, April 13, 2006, http://www.aei.org/docLib/
20060414_wp126.pdf. Also, see U.S. Government Accountability Office, Small Business Administration: 7(a) Loan
Program Needs Additional Performance Measures, GAO-08-226T, November 1, 2007, pp. 3, 9-11,
http://www.gao.gov/new.items/d08226t.pdf.
4 For example, see The White House, “Remarks by the President on Job Creation and Economic Growth,” December 8,
2009, http://www.whitehouse.gov/the-press-office/remarks-president-job-creation-and-economic-growth. For further
analysis concerning the role of small business in job creation see CRS Report R41392, Small Business and the
Expiration of the 2001 Tax Rate Reductions: Economic Issues, by Jane G. Gravelle and CRS Report R41523, Small
Business Administration and Job Creation, by Robert Jay Dilger.
5 U.S. Small Business Administration, Office of Advocacy, Small Business Economic Indicators for 2003, Washington,
DC, August 2004, p. 3; and Brian Headd, “Small Businesses Most Likely to Lead Economic Recovery,” The Small
Business Advocate, vol. 28, no. 6 (July 2009), pp. 1, 2.
6 U.S. Small Business Administration, “FY2009/2010 Final—Recovery Program Performance Report, September
2010,” Washington, DC, September, 2010, http://archive.sba.gov/idc/groups/public/documents/sba_homepage/
perform_report_9_2010.pdf.
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As will be discussed, the tightening of private sector lending standards and the disruption of
credit markets in 2008 and 2009, led to increased concern in Congress that small businesses
might be prevented from accessing sufficient capital to start, continue, or expand their
operations—actions which were expected to lead to higher levels of employment. As the SBA
indicated in its FY2010 congressional budget justification report:
Over the last decade, small businesses across this country have been responsible for the
majority of new private sector jobs, leaving little doubt that they are a vital engine for the
nation’s economic growth. However, with the United States facing the most severe economic
crisis in more than 70 years, small businesses are confronted with a frozen lending market
and limited access to the capital they need to survive and grow at this critical time.7
Some, including President Obama, have argued that economic conditions make it imperative that
the SBA be provided additional resources to assist small businesses in acquiring capital necessary
to start, continue, or expand operations. For example, the SBA has argued that “improving access
to credit by small businesses is a crucial step in supporting economic recovery and job creation.”8
Others worry about the long-term adverse economic effects of spending programs that increase
the federal deficit. They advocate business tax reduction, reform of financial credit market
regulation, and federal fiscal restraint as the best means to assist small businesses, generate
economic growth and create jobs.
Several laws were enacted during the 110th and 111th Congresses to enhance small business
access to capital, including P.L. 111-240, the Small Business Jobs Act of 2010 (see the Appendix
for a list of its key provisions). Some of these laws were designed primarily to enhance the supply
of small business loans, others were designed primarily to enhance the demand for small business
loans, and some, including P.L. 111-5, the American Recovery and Reinvestment Act of 2009
(ARRA), and the Small Business Jobs Act of 2010, included provisions designed to enhance both
the supply and demand for small business loans.9
This report addresses a core issue facing Congress during the 112th Congress: What, if any,
additional action should the federal government take to enhance small business access to capital?
After briefly discussing the role of small business in job creation and retention, this report
provides an assessment of the supply and demand for small business loans, including the number
and amount of small business loans guaranteed by the SBA. It also examines selected laws
enacted during the 110th and 111th Congresses that were designed to enhance small business
access to capital by increasing the supply of small business loans and/or the demand for small
business loans, and recent actions concerning the SBA’s budget.
7 U.S. Small Business Administration, Fiscal Year 2010 Congressional Budget Justification (Washington, DC: GPO,
2009), p. 1.
8 U.S. Small Business Administration, “President Obama Announces New Efforts to Improve Access to Credit for
Small Businesses,” Washington, DC, 2009, http://www.whitehouse.gov/assets/documents/small_business_final.pdf.
9 For further analysis of ARRA’s small business provisions, see CRS Report R40241, Overview and Analysis of Small
Business Provisions in the American Recovery and Reinvestment Act of 2009, by Oscar R. Gonzales and N. Eric Weiss.
For further analysis of ARRA’s small business provisions and P.L. 111-240, see CRS Report R41385, Small Business
Legislation During the 111th Congress, by Robert Jay Dilger and Gary Guenther.
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The Supply and Demand for Private Sector
Small Business Loans
Each quarter, the Federal Reserve Board surveys senior loan officers concerning their bank’s
lending practices. The survey includes a question concerning their bank’s credit standards for
small business loans: “Over the past three months, how have your bank’s credit standards for
approving applications for C&I [commercial and industrial] loans or credit lines—other than
those to be used to finance mergers and acquisitions—for small firms (annual sales of less than
$50 million) changed?” The senior loan officers are asked to indicate if their bank’s credit
standards have “Tightened considerably,” “Tightened somewhat,” “Remained basically
unchanged,” “Eased somewhat,” or “Eased considerably.” Subtracting the percentage of
respondents reporting “Eased somewhat” and “Eased considerably” from the percentage of
respondents reporting “Tightened considerably” and “Tightened somewhat” provides an
indication of the market’s supply of small business loans.
As shown in Figure 1, senior loan officers reported that they tightened small business loan credit
standards during the early part of this decade, loosened those credit standards mid-decade, and
tightened them in 2008 and 2009. Since 2009, business credit markets have improved, and most
senior loan officers report that they are no longer tightening their small business lending
standards. However, the Federal Reserve Board notes that those lending standards “remain quite
stringent following the prolonged and widespread tightening that took place over the past few
years.”10
The survey also includes a question concerning the demand for small business loans: “Apart from
normal seasonal variation, how has demand for C&I loans changed over the past three months for
small firms (annual sales of less than $50 million)?” Senior loan officers are asked to indicate if
demand was “Substantially stronger,” “Moderately stronger,” “About the same,” “Moderately
weaker,” or “Substantially weaker.” Subtracting the percentage of respondents reporting
“Moderately weaker” and “Substantially weaker” from the percentage of respondents reporting
“Substantially stronger” and “Moderately stronger” provides an indication of the market’s
demand for small business loans.
As shown in Figure 1, senior loan officers reported that the demand for small business loans
declined during the early part of this decade, increased mid-decade, declined somewhat in 2007
and 2008, declined significantly in 2009, leveled off (at a relatively reduced level) during the first
half of 2010, declined somewhat during the third quarter of 2010, increased somewhat during the
fourth quarter of 2010 and the first half of 2011, and then declined during the latter half of 2011.
The combination of decreased supply and demand for small business loans over the past three
years led to a decline in the total amount of outstanding small business debt as well. Since
peaking at $780.9 billion in the second quarter of 2008, the total amount of outstanding small
business debt declined to $692.9 billion in the fourth quarter of 2010, and to $672.8 million in the
second quarter of 2011.11
10 Federal Reserve Board, “The April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices,”
Washington, DC, http://www.federalreserve.gov/boarddocs/SnLoanSurvey/201005/default.htm.
11 Federal Deposit Insurance Corporation, “Statistics on Depository Institutions,” Washington, DC,
(continued...)
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Figure 1. Small Business Lending Environment, 2000-2011
(senior loan officers’ survey responses)
80
60
Tightening Standards
40
Increasing Demand
20
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-20
Loosening Standards
-40
Decreasing Demand
-60
-80
Bank Lending Standards
Small Businesses Demand for Loans
Sources: Federal Reserve Board, “Senior Loan Officer Opinion Survey on Bank Lending Practices,” Washington,
DC, http://www.federalreserve.gov/boarddocs/SnLoanSurvey/; and Brian Headd, “Forum Seeks Solutions To
Thaw Frozen Small Business Credit,” The Smal Business Advocate, vol. 28, no. 10 (December 2009), p. 3,
http://www.sba.gov/sites/default/files/The%20Small%20Business%20Advocate%20-%20December%202009.pdf.
The Supply and Demand for SBA Loans
Table 1 shows selected financial statistics for the SBA from FY2000 to FY2011. It provides an
overview of the extent of the SBA’s various programs to enhance small business access to capital.
The first two columns report the amount and number of non-disaster small business loans
guaranteed by the SBA from FY2000 to FY2011. The figures reflect loans that were disbursed
and are less than the amount and number of loans approved by the SBA. Each year, 7% to 10% of
the loans approved by the SBA are subsequently canceled for a variety of reasons, typically by
the borrower.
The third column reports the number of bid bonds and final bonds guaranteed under the SBA’s
surety bond guarantee program from FY2000 to FY2011.12 A surety bond is a three-party
(...continued)
http://www2.fdic.gov/SDI/main.asp.
12 For further information and analysis of the SBA’s surety bond guarantee program, see CRS Report R42037, SBA
(continued...)
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instrument between a surety (someone 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 terms and conditions of a contract. If the contractor is unable to successfully perform the
contract, the surety assumes the contractor’s responsibilities and ensures that the project is
completed. It is designed to reduce the risk of contracting with small businesses that may not
have the credit history or prior experience of larger businesses. The SBA does not issue surety
bonds. Instead, it provides and manages surety bond guarantees for qualified small and emerging
businesses through its Surety Bond Guarantee (SBG) Program. The SBA reimburses a
participating surety (within specified limits) for the losses incurred as a result of a contractor’s
default on a bond.13
The fourth column reports funding for the SBA’s secondary market guarantee program, which is
discussed later in this report. The final column reports the SBA’s end-of-year outstanding
principal balance of loans for FY2000-FY2011 that have not been charged off as of the end of the
fiscal year. It provides a measure of the SBA’s scope of lending.
Table 1. Selected Small Business Administration Financial Statistics, FY2000-FY2011
($ in millions)
SBA Business Loan Guarantees
Secondary
Unpaid
Surety Bond
Market
Principal
Amount
Number
Guarantees
Guarantee
Loan
Fiscal Year
Disburseda
Disbursedb
Number
Funding
Balancec
2011 $19,681 60,400
(est.)
8,638
$4,299
$99,203
2010
15,060
54,800 (est.)
8,348
3,379
93,340
2009 12,728
45,548 6,135
2,381
90,441
2008 18,152
78,916 6,055
4,138
88,244
2007 20,525
108,152 5,809
3,678
84,523
2006 19,954
105,680 5,214
3,633
78,117
2005 19,661
102,893 5,678
10,000
71,495
2004 21,308
83,611 7,803
3,572
64,362
2003 15,358
71,973 8,974 -
59,181
2002 15,281
53,585 7,372 -
56,219
2001 14,019
50,278 6,320 -
53,116
2000 13,180 NA 7,034 -
52,227
Sources: U.S. Small Business Administration, FY 2002 Budget Request and Performance Plan (Washington, DC:
GPO, 2001), pp. 14, 28, 31, 34; U.S. Smal Business Administration, SBA Budget Request and Performance Plan: FY
2003 Congressional Submission (Washington, DC: GPO, 2002), pp. 17, 57, 58, 62; U.S. Smal Business
Administration, FY 2004 Budget Request and Performance Plan (Washington, DC: GPO, 2003), pp. 3, 4, 113; U.S.
Small Business Administration, FY 2005 Congressional Performance Budget Request (Washington, DC: GPO, 2004),
(...continued)
Surety Bond Guarantee Program, by Robert Jay Dilger.
13 U.S. Small Business Administration, “Surety Bonds,” Washington, DC, http://www.sba.gov/category/navigation-
structure/loans-grants/bonds/surety-bonds.
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pp. 9, 15, 20, 82; U.S. Smal Business Administration, Congressional Submission Fiscal Year 2006 (Washington, DC:
GPO, 2005), pp. 13, 19, 25; U.S. Smal Business Administration, FY 2007 Budget Request and Performance Plan
(Washington, DC: GPO, 2006), pp. 14, 20, 23, 51, 63; U.S. Smal Business Administration, Congressional
Submission Fiscal Year 2008 (Washington, DC: GPO, 2007), pp. 17, 23, 26; 49, 52, 53, 55; U.S. Smal Business
Administration, Fiscal Year 2009 Congressional Submission and Fiscal Year 2007 Annual Performance Report
(Washington, DC: GPO, 2008), pp. 17, 25, 28, 127, 128; U.S. Small Business Administration, Fiscal Year 2010
Congressional Budget Justification (Washington, DC: GPO, 2009), pp. 11, 17, 21, 34, 38, 43; U.S. Smal Business
Administration, Number of Approved Loans by Program, Washington, DC; U.S. Small Business Administration,
Unpaid Principal Balance By Program, Washington, DC; U.S. Small Business Administration, Agency Financial Report,
2009 Fiscal Year (Washington, DC: GPO, 2009), p. 68; U.S. Smal Business Administration, Fiscal Year 2011
Congressional Budget Justification and FY 2009 Annual Performance Report (Washington, DC: GPO, 2010) pp. 19, 36,
39, 41, 48, U.S. Smal Business Administration, Agency Financial Report, Fiscal Year 2010 (Washington, DC: GPO,
2010), pp. 7, 65; and U.S. Smal Business Administration, Agency Financial Report, Fiscal Year 2011 (Washington,
DC: GPO, 2011), pp. 9, 70.
a. The amount disbursed is the amount given to the borrower. In recent years, the SBA has guaranteed 84%
to 87% of the amount disbursed.
b. The SBA no longer publishes the number of loans disbursed. The number of general business loans
disbursed for FY2010 and FY2011 was estimated by assuming that 92% of the loans approved (59,572 in
FY2010 and 65,680 in FY2011) were disbursed.
c. Includes outstanding disaster loans ($7.5 billion in FY2011). The SBA provided $8.8 billion in disaster loans
in FY2006, $1.6 billion in FY2007, $861 million in FY2008, $725 million in FY2009, $387 million in FY2010,
and $312 million in FY2011. See U.S. Small Business Administration, Congressional Submission Fiscal Year 2008
(Washington, DC: GPO, 2007), p. 23; U.S. Smal Business Administration, Fiscal Year 2009 Congressional
Submission and Fiscal Year 2007 Annual Performance Report (Washington, DC: GPO, 2008), p. 25; U.S. Smal
Business Administration, Fiscal Year 2011 Congressional Budget Justification and FY 2009 Annual Performance
Report (Washington, DC: GPO, 2010) p. 48; U.S. Smal Business Administration, Agency Financial Report, Fiscal
Year 2010 (Washington, DC: GPO, 2010), pp. 7, 65; and U.S. Smal Business Administration, Agency Financial
Report, Fiscal Year 2011 (Washington, DC: GPO, 2011), pp. 9, 70.
As shown in Table 1, the amount and number of non-disaster small business loans guaranteed by
the SBA declined in FY2008 and FY2009; increased, but remained below pre-recession levels in
FY2010; and then increased in FY2011, with the SBA guaranteeing about 60,400 loans
amounting to just under $19.7 billion.14
The decline in the amount and number of small business loans guaranteed by the SBA during
2008 and 2009 was, at least in part, due to three interrelated factors. First, many lending
institutions experienced significant economic difficulties during the recession. In 2007, before the
recession, three lending institutions failed. In 2008, 26 failed. During 2009, 140 lending
institutions failed.15 Included in the list of failed lending institutions in 2009 was CIT Group, Inc.,
the nation’s largest lender to small businesses.16 Over the course of the year, 702 (of 8,012) banks,
with $403 billion in assets, were on the Federal Deposit Insurance Corporation’s (FDIC’s) watch
list for heightened risk of failure.17 Deterioration in the quality of loans and securities in the
portfolios of financial institutions, combined with rapidly rising loan defaults, also took a toll on
the industry’s earnings in 2008 and 2009. In 2007, FDIC-insured lending institutions had $101.6
14 U.S. Small Business Administration, Agency Financial Report, Fiscal Year 2011 (Washington, DC: GPO, 2011), p.
9.
15 Federal Deposit Insurance Corporation, “Failed Bank List,” Washington, DC, http://www.fdic.gov/bank/individual/
failed/banklist.html. In 2010, 157 lending institutions failed. In 2011, 87 had failed through November 7, 2011.
16 Patrice Hill, “Lender to small business bankrupt,” The Washington Post, November 2, 2009, pp. A1, A10. CIT
Group, Inc. failed on November 1, 2009.
17 Federal Deposit Insurance Corporation, “Quarterly Banking Profile: Fourth Quarter 2009, Table 1-A. Selected
Indicators, FDIC-Insured Institutions,” Washington, DC, http://www2.fdic.gov/qbp/2009dec/all1a.html.
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billion in net profits. In 2008, they lost $12.9 billion, including a $37.8 billion loss in the fourth
quarter, which more than erased $24.9 billion in profits during the previous three quarters. In
2009, FDIC-insured lending institutions had a net profit of $4.2 billion.18 In terms of individual
lending institutions, more than one in four (29.5%) reported a net loss for the year.19 When
lending institutions anticipate difficulty in making a profit, are losing money, or have diminished
expectations of future profits, they tend to become more risk averse and the supply of business
loans, including small business loans, tends to decline.
Second, the secondary market for small business loans, as with other secondary markets, began to
contract in October 2008, reached its nadir in January 2009, and then began a relatively
prolonged recovery.20 In a secondary market, loans are pooled together and packaged as securities
for sale to investors. This practice makes more capital available by allowing lending institutions
to remove existing loans from their balance sheets, freeing them to make new loans.21 When
secondary credit markets constrict, lenders tend to become both less willing and less able to
supply small business loans. For example, the secondary market volume for SBA 7(a) loans
averaged $328 million a month from January 2008 through September 2008, and then fell each
succeeding month, declining to under $100 million in January 2009.22 The SBA estimates that
about half of the lenders that make SBA guaranteed loans resell them to obtain additional capital
to make additional loans.
Third, many small businesses experienced severe economic difficulties during the recession. The
SBA estimated that about 60% of the jobs lost in 2008 through the second quarter of 2009 were
lost in small firms.23 Monthly business surveys conducted by Automatic Data Processing, Inc.
(ADP) suggest that about 81% of the 7.5 million jobs lost during the recession (from December
18 Federal Deposit Insurance Corporation, “Quarterly Banking Profile: Quarterly Net Income,” Washington, DC,
http://www2.fdic.gov/qbp/2009dec/chart1.htm. In 2010, FDIC-insured lending institutions had $85.4 billion in net
profits. See Federal Deposit Insurance Corporation, “Quarterly Banking Profile: Quarterly Net Income,” Washington,
DC, http://www2.fdic.gov/qbp/2010dec/chart1.htm.
19 Federal Deposit Insurance Corporation, “Quarterly Banking Profile: Fourth Quarter 2009, Table 1-A. Selected
Indicators, FDIC-Insured Institutions,” Washington, DC, http://www2.fdic.gov/qbp/2009dec/all1a.html. For further
analysis see CRS Report RL32542, The Condition of the Banking Industry, by Walter W. Eubanks.
20 The Federal Reserve Bank of New York, utilizing authority provided under §13(3) of the Federal Reserve Act,
created the Term Asset-Backed Securities Loan Facility (TALF) on March 3, 2009 to stabilize secondary credit
markets by lending up to $200 billion to eligible owners of certain AAA-rated asset backed securities (ABS) backed by
newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans.
The initial TALF subscription took place on March 19, 2009 and the last one took place in June 2010. There were 23
monthly ABS and Commercial Mortgage Backed Securities (CMBS) subscriptions. TALF supported about $58 billion
of ABS and $12 billion of CMBS. See Federal Reserve Bank of New York, “Term Asset-Backed Securities Loan
Facility: Terms and Conditions,” New York, NY, http://www.newyorkfed.org/markets/talf_terms.html; Federal
Reserve Bank of New York, “New York Fed releases revised TALF Master Loan and Security Agreement and
appendices,” press release, New York, NY, http://www.federalreserve.gov/newsevents/press/monetary/20090303a.htm;
and U.S. Department of the Treasury, “Secretary of the Treasury Timothy F. Geithner, Written Testimony
Congressional Oversight Panel,” Press Release, Washington, DC, June 22, 2010, http://cop.senate.gov/documents/
testimony-062210-geithner.pdf.
21 U.S. Small Business Administration, Office of Advocacy, An Exploration of a Secondary Market for Small Business
Loans, Washington, DC, April 2003, p. 1, http://archive.sba.gov/advo/research/rs227_tot.pdf.
22 U.S. Small Business Administration, “Six-Month Recovery Act Report Card,” Washington, DC, August 2009.
23 Brian Headd, U.S. Small Business Administration, Office of Advocacy, “An Analysis of Small Business and Jobs,”
Washington, DC, March 2010, p. 14, http://www.sba.gov/sites/default/files/files/
an%20analysis%20of%20small%20business%20and%20jobs(1).pdf.
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2007 through September 2009) were in firms with less than 500 employees.24 When business is
slow, or when expectations of business sales growth are diminished, business owners (and
entrepreneurs considering starting a new small business) tend to become more risk averse and the
demand for small business loans tends to decline.
In 2009, the number and amount of small business loans guaranteed by the SBA declined sharply
early in the year, followed by modest increases during the second and third quarters, and briefly
surpassed pre-recession levels in the fourth quarter as small business owners took advantage of
ARRA funded fee subsidies for the SBA’s 7(a) and 504/CDC loan guaranty programs and
increase in the 7(a) program’s maximum loan guaranty percentage to 90% which were expected
to end by the end of the year.25
The SBA argued that the increase in the number and amount of small business loans it guaranteed
during FY2010 was primarily due to fee subsidies and loan enhancements first put in place under
ARRA and later extended by law to cover most of the fiscal year.26 The SBA noted that its
average weekly loan volume for FY2010 ($333 million) was 29% higher than its average weekly
loan volume for FY2009 ($258 million).27 Another likely factor contributing to the higher loan
volume was a general improvement in the economy as the recession ended (officially in June
2009) and the economic recovery began, albeit slowly in many parts of the nation.
The demand for SBA loans increased significantly during the first quarter of FY2011 (October-
December 2010), as borrowers took advantage of SBA fee subsidies that were expected to expire
at the end of the calendar year. The SBA announced, on January 3, 2011, that it “approved nearly
22,000 small business loans for $10.47 billion, supporting a total of $12.16 billion in lending”
during the first quarter of FY2011, which “was the highest volume in a fiscal year’s first quarter
than at any time in the agency’s history.”28 After the fee subsidies ended, SBA lending declined
during the second quarter of FY2011, and then increased somewhat during the final two quarters
of FY2011. The SBA approved $3.8 billion in small business loans during the second quarter of
FY2011, $4.8 million during the third quarter of FY2011, and about $5.4 billion during the final
quarter of FY2011, for a total of more than $24.4 billion.29 As mentioned previously, the SBA
ended up guaranteeing about 60,400 loans of these approved loans in FY2011, amounting to just
24 Automatic Data Processing, Inc. (ADP), “National Employment Report, December 2007,” Roseland, NJ, p. 2,
http://www.adpemploymentreport.com/pdf/FINAL_Report_DEC_07.pdf; and ADP, “National Employment Report,
September 2009,” Roseland, NJ, p. 2, http://www.adpemploymentreport.com/PDF/FINAL_Report_September_09.pdf.
25 U.S. Small Business Administration, “Recovery Act Changes to SBA Loan Programs Sparked Major Mid-Year
Turn-Around in Volume,” Washington, DC, October 1, 2009; and Nancy Waitz, “U.S. stimulus funds run out for lower
SBA loan fees,” Reuters News, November 24, 2009, http://www.reuters.com/article/companyNewsAndPR/
idUSN2431964620091125.
26 U.S. Small Business Administration, “Recovery Loan Incentives Spurred Continued Rebound in SBA Lending in
FY2010,” Washington, DC, October 4, 2010, http://archive.sba.gov/idc/groups/public/documents/sba_homepage/
news_release_10-54.pdf.
27 Ibid.
28 U.S. Small Business Administration, “Jobs Act Supported More Than $12 Billion in SBA Lending to Small
Businesses in Just Three Months,” Washington, DC, January 3, 2011, http://www.sba.gov/content/jobs-act-supported-
more-12-billion-sba-lending-small-businesses-just-three-months.
29 U.S. Small Business Administration, “Weekly Lending Report,” Washington, DC, http://www.sba.gov/about-sba-
services/7571.
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under $19.7 billion.30 Typically, 7% to 10% of the loans approved by the SBA are subsequently
canceled for a variety of reasons, usually by the borrower.
Recent Laws Designed to Enhance the Supply of
Small Business Loans
As mentioned previously, several laws were enacted during the 110th and 111th Congresses to
enhance small business access to capital. The following laws were enacted largely in response to
the contraction of financial credit markets which started in 2008, and reached its nadir in early
2009.
P.L. 110-343, the Emergency Economic Stabilization Act of 2008, was designed to enhance the
supply of loans to businesses of all sizes. The act authorized the Troubled Asset Relief Program
(TARP) to “restore liquidity and stability to the financial system of the United States” by
purchasing or insuring up to $700 billion in troubled assets from banks and other financial
institutions.31 TARP’s purchase authority was later reduced from $700 billion to $475 billion by
P.L. 111-203, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Department
of the Treasury has disbursed $389 billion in TARP funds, including $337 million to purchase
SBA 7(a) loan guaranty program securities.32 The authority to make new TARP commitments
expired on October 3, 2010.
P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), included several
provisions to enhance the supply of loans to small businesses.33 ARRA
• authorized the SBA to establish a temporary secondary market guarantee
authority to provide a federal guarantee for pools of first lien 504/CDC program
loans that are to be sold to third-party investors. The SBA was granted
emergency rulemaking authority to issue regulations for the program within 15
days after enactment (by March 4, 2009). After experiencing unanticipated delays
30 U.S. Small Business Administration, Agency Financial Report, Fiscal Year 2011 (Washington, DC: GPO, 2011), p.
9.
31 For further analysis, see CRS Report R41427, Troubled Asset Relief Program (TARP): Implementation and Status,
by Baird Webel.
32 U.S. Department of the Treasury, Troubled Assets Relief Program Monthly 105(a) Report—November 2010,
Washington, DC, December 10, 2010, pp. 2-4, http://www.financialstability.gov/docs/
November%20105(a)%20FINAL.pdf. On March 16, 2009, President Obama announced that the Department of the
Treasury would use TARP funds to purchase up to $15 billion of SBA-guaranteed loans to “immediately unfreeze the
secondary market for SBA loans and increase the liquidity of community banks.” The plan was deferred after it met
resistance from lenders. Some lenders objected to TARP’s requirement that participating lenders comply with
executive compensation limits and issue warrants to the federal government. Smaller, community banks objected to the
program’s paperwork requirements, such as the provision of a small-business lending plan and quarterly reports. See
The White House, “Remarks by the President to Small Business Owners, Community Leaders, and Members of
Congress,” Washington, DC, March 16, 2009, http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-
to-small-business-owners/.
33 For further analysis, see CRS Report R40241, Overview and Analysis of Small Business Provisions in the American
Recovery and Reinvestment Act of 2009, by Oscar R. Gonzales and N. Eric Weiss; CRS Report R40728, Small Business
Tax Benefits and the American Recovery and Reinvestment Act of 2009, by Gary Guenther; and CRS Report R41385,
Small Business Legislation During the 111th Congress, by Robert Jay Dilger and Gary Guenther.
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in implementing the program due to “limited staff resources” and determining
how to meet ARRA reporting requirements, the SBA issued regulations for its
504/CDC First Mortgage Loan Pooling program on October 30, 2009, and it
became operational in June 2010.34 The program was scheduled to end on
February 16, 2011, or until $3 billion in new pools are created, whichever
occurred first. As will be discussed, the Small Business Jobs Act of 2010
extended the program.35
• authorized the SBA to use emergency rulemaking authority to issue regulations
within 30 days after enactment (by March 19, 2009), to make below market
interest rate direct loans to SBA-designated “Systemically Important Secondary
Market (SISM) Broker-Dealers.” These broker-dealers would use the loan funds
to purchase SBA-guaranteed loans from commercial lenders, assemble them into
pools, and sell them to investors in the secondary loan market. The SBA
experienced unanticipated delays in implementing the program primarily due to
the need to determine “the extent to which broker-dealers, and perhaps small
business lenders, would be required to share in the potential losses associated
with extending the guarantee in the 504 loan program.”36 The SBA issued
regulations to establish the Direct Loan Program for Systemically Important
Secondary Market Broker-Dealers on November 19, 2009.37
• provided $255 million for a temporary, two-year small business stabilization
program to guarantee loans of $35,000 or less to small businesses for qualified
debt consolidation, later named the America’s Recovery Capital (ARC) Loan
program (the program ceased issuing new loan guarantees on September 30,
2010); $15 million for the SBA’s surety bond program, and temporarily increased
the maximum bond amount from $2 million to $5 million, and up to $10 million
under certain conditions (the higher maximum bond amounts ended on
September 30, 2010); $6 million for the SBA’s Microloan program’s lending
program and $24 million for the Microloan program’s technical assistance
program; and increased the funds (“leverage”) available to SBA-licensed Small
Business Investment Companies (SBICs) to no more than 300% of the
company’s private capital or $150,000,000, whichever is less.
34 U.S. Small Business Administration, “SBA Creates Secondary Market Guarantee Program for 504 First Mortgage
Loan Pools,” Washington, DC, October 28, 2009; U.S. Government Accountability Office, Recovery Act: Project
Selection and Starts Are Influenced by Certain Federal Requirements and Other Factors, GAO-10-383, February 10,
2010, p. 23, http://www.gao.gov/new.items/d10383.pdf; and U.S. Small Business Administration, “New First Mortgage
Loan Poolers Will Jump-Start Secondary Market for SBA 504 Loans, Make Credit More Available,” Washington, DC,
June 24, 2010, http://www.sba.gov/about-sba-services/7367/5728.
35 U.S. Small Business Administration, “The American Recovery and Reinvestment Act of 2009: Secondary Market
First Lien Position 504 Loan Pool Guarantee,” 74 Federal Register 56087, October 30, 2009; and U.S. Small Business
Administration, “New First Mortgage Loan Poolers Will Jump-Start Secondary Market for SBA 504 Loans, Make
Credit More Available, Washington, DC, June 24, 2010, http://www.sba.gov/about-sba-services/7367/5728.
36 U.S. Government Accountability Office, Status of the Small Business Administration’s Implementation of
Administrative Provisions in the American Recovery and Reinvestment Act of 2009, GAO-10-298R, January 19, 2010,
p. 7, http://www.gao.gov/new.items/d10298r.pdf.
37 U.S. Small Business Administration, “American Recovery and Reinvestment Act: Loan Program for Systemically
Important SBA Secondary Market Broker-Dealers,” 74 Federal Register 59891, November 19, 2009.
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• authorized the SBA to guarantee 504/CDC loans used to refinance business
expansion projects as long as the existing indebtedness did not exceed 50% of the
project cost of the expansion and the borrower met specified requirements.
P.L. 111-240, the Small Business Jobs Act of 2010, was enacted after the financial credit markets
had stabilized. It includes several provisions designed to enhance the supply of loans to small
businesses. For example, the act
• authorizes the Secretary of the Treasury to establish a $30 billion Small Business
Lending Fund (SBLF) to encourage community banks to provide small business
loans ($4 billion was issued) and a $1.5 billion State Small Business Credit
Initiative (SSBCI) to provide funding to participating states with small business
capital access programs.38 The Department of the Treasury has provided 18 states
and Washington, DC, a total of $722.7 million in SSBCI funds.39
• extends the SBA’s secondary market guarantee authority from two years after the
date of ARRA’s enactment to two years after the date of the program’s first sale
of a pool of first lien position 504/CDC loans to a third-party investor (which
took place on September 24, 2010).40
• authorizes $22.5 million for a temporary, three-year Small Business Intermediary
Lending Pilot Program. It is designed to provide direct loans to intermediaries
which provide loans to small business startups, newly established small
businesses, and growing small businesses. On August 4, 2011, the SBA
announced the first 20 community lenders who have been selected to participate
in the program.41
• authorizes $15 million in additional funding for the SBA’s 7(a) loan guaranty
program.
• increases the loan guarantee limits for the SBA’s 7(a) program from $2 million to
$5 million, and for the 504/CDC program from $1.5 million to $5 million for
“regular” borrowers, from $2 million to $5 million if the loan proceeds are
38 For further analysis of the Small Business Lending Fund, see CRS Report R42045, The Small Business Lending
Fund, by Robert Jay Dilger.
39 U.S. Department of the Treasury, “Resource Center—State Small Business Credit Initiative (SSBCI),” Washington,
DC, http://www.treasury.gov/resource-center/sb-programs/Pages/ssbci.aspx; U.S. Department of the Treasury,
“Treasury Department Awards First Wave of State Small Business Credit Initiative Funds to Michigan, North
Carolina,” Washington, DC, January 14, 2011, http://www.treasury.gov/press-center/press-releases/Pages/tg1025.aspx;
U.S. Department of the Treasury, “Obama Administration Approves Funds for California to Spur $1.7 Billion in New
Small Business Lending, Help Create Jobs,” Washington, DC, February 17, 1011, http://www.treasury.gov/press-
center/press-releases/Pages/tg1069.aspx; U.S. Department of the Treasury, “Obama Administration Announces Funds
for Connecticut, Missouri, and Vermont to Spur at Least $534 Million in New Small Business Lending, Help Create
Jobs,” Washington, DC, March 22, 2011, http://www.treasury.gov/press-center/press-releases/Pages/tg1113.aspx; U.S.
Department of the Treasury, “U.S. Department of the Treasury Announces Funds to Spur $3.6 Billion in New Lending
to Small Businesses, Help Create Jobs,” Washington, DC, August 16, 2011, http://www.treasury.gov/press-center/
press-releases/Pages/tg1278.aspx; and U.S. Department of the Treasury, “A Boost for the Bluegrass State,”
Washington, DC, August 29, 2011, http://www.treasury.gov/connect/blog/Pages/A-Boost-for-the-Bluegrass-State.aspx.
40 U.S. Small Business Administration, Office of Congressional and Legislative Affairs, correspondence with the
author, Washington, DC, January 4, 2010.
41 U.S. Small Business Administration, “Small Businesses Have New Non-Profit Sources for SBA-financed Loans,”
Washington, DC, August 4, 2011, http://www.sba.gov/content/intermediary-lending-pilot-program-0.
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directed toward one or more specified public policy goals, and from $4 million to
$5.5 million for manufacturers.
• increases the SBA’s Microloan program’s loan limit for borrowers from $35,000
to $50,000 and for microlender intermediaries after their first year in the program
from $3.5 million to $5 million.42
• temporarily increases for one year the SBA 7(a) Express Program’s loan limit
from $350,000 to $1 million (the temporary increase expired on September 26,
2011).
• requires the SBA to establish an on-line lending platform listing all SBA lenders
and information concerning their loan rates.
• authorizes the SBA to temporarily guarantee for two years, under specified
circumstances, 504/CDC loans that refinance existing business debt even if the
project does not involve the expansion of the business.
For additional details concerning provisions in the Small Business Jobs Act of 2010, see Table A-
1 in the Appendix.
Recent Laws Designed to Enhance the Demand for
Small Business Loans
ARRA provided the SBA $375 million to subsidize fees for the SBA’s 7(a) and 504/CDC loan
guaranty programs and to increase the 7(a) program’s maximum loan guaranty percentage from
up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all
regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies
and loan modification was exhausted. The fee subsidies were designed to increase the demand for
SBA loans by reducing loan costs.
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 extend the loan
subsidies and 90% maximum loan guaranty percentage:
• P.L. 111-118, the Department of Defense Appropriations Act, 2010, provided the
SBA $125 million to continue the fee subsides and 90% maximum loan guaranty
percentage through February 28, 2010.
• P.L. 111-144, the Temporary Extension Act of 2010, provided the SBA $60
million to continue the fee subsides and 90% maximum loan guaranty percentage
through March 28, 2010.
• P.L. 111-150, an act to extend the Small Business Loan Guarantee Program, and
for other purposes, provided the SBA authority to reprogram $40 million in
42 The act also temporarily allows the SBA to waive, in whole or in part, for successive fiscal years, the non-federal
share requirement for loans to the Microloan program’s intermediaries and for grants made to Microloan intermediaries
for small business marketing, management, and technical assistance under specified circumstances (e.g., the economic
conditions affecting the intermediary). See P.L. 111-240, the Small Business Jobs Act of 2010, §1401. Matching
Requirements Under Small Business Programs.
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previously appropriated funds to continue the fee subsides and 90% maximum
loan guaranty percentage through April 30, 2010.
• P.L. 111-157, the Continuing Extension Act of 2010, provided the SBA $80
million to continue the SBA’s fee subsides and 90% maximum loan guaranty
percentage through May 31, 2010.
• P.L. 111-240, the Small Business Jobs Act of 2010, provided $505 million (plus
an additional $5 million for administrative expenses) to continue the SBA’s fee
subsides and 90% maximum loan guaranty percentage from the act’s date of
enactment (September 27, 2010) through December 31, 2010.
• P.L. 111-322, the Continuing Appropriations and Surface Transportation
Extensions Act, 2011, authorizes the SBA to use funds provided under the Small
Business Jobs Act of 2010 to continue the SBA’s fee subsides and 90% maximum
loan guaranty percentage through March 4, 2011, or until available funding is
exhausted.
On January 3, 2011, the SBA announced that funding for the fee subsidies and 90% maximum
loan guaranty percentage had been exhausted and that it had formed a SBA Loan Queue for loan
applicants should any funding with the enhancements should come available from loan
cancellations.43 Typically, 5% to 10% of SBA-approved loans are canceled by the borrower or
lender and are not disbursed for a variety of reasons.
ARRA also included 11 tax relief provisions that have the potential to benefit small businesses in
a broad range of industries.44 By reducing costs, it could be argued that providing tax relief for
small businesses may lead to increased demand for small business loans because small business
owners have additional resources available to invest in their business. The following five ARRA
tax provisions provided about $5.7 billion in tax relief and were targeted at small businesses,
whereas the other ARRA tax provisions were available to businesses of all sizes:
• allows businesses with $15 million or less in average annual gross receipts in the
past three years to carry back net operating losses from 2008 for up to five years
instead of two years.
• extended through 2009 the enhanced expensing allowance, which allows
businesses to deduct up to $250,000 of the cost of eligible assets placed in
service in 2009, within certain limits.
• increased the exclusion of the gain on the sale of small business stock to 75%
(instead of 50%) of any gain realized on the sale of eligible small business stock
acquired between February 18, 2009, and December 31, 2010.
• reduced the recognition period from 10 years to seven years for corporate tax on
sale of appreciated assets in 2009 or 2010 by S corporations that once were
organized as C corporations.
43 U.S. Small Business Administration, “Jobs Act Supported More Than $12 Billion in SBA Lending to Small
Businesses in Just Three Months,” Washington, DC, January 3, 2011, http://www.sba.gov/content/jobs-act-supported-
more-12-billion-sba-lending-small-businesses-just-three-months.
44 For further analysis see CRS Report R40728, Small Business Tax Benefits and the American Recovery and
Reinvestment Act of 2009, by Gary Guenther.
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• allowed individuals who had an adjusted gross income in 2008 of less than
$500,000 and can prove that over half their income came from a small business
to base their estimated tax payments for 2009 on 90% of their tax liability for
2008.
As mentioned previously, the Small Business Jobs Act of 2010 was designed to increase the
demand for SBA loans by providing $505 million (plus an additional $5 million for related
administrative expenses) to temporarily subsidize SBA’s fees and increase the 7(a) program’s
maximum loan guaranty percentage to 90%. The act also requires the SBA to establish an
alternative size standard for the SBA’s 7(a) and 504/CDC loan guaranty programs that uses
maximum net worth and average net income as an alternative to the use of industry standards. It
also establishes the following interim alternative size standard for both the 7(a) and 504/CDC
programs: the business qualifies as small if it does not have a tangible net worth in excess of $15
million and does not have an average net income after federal taxes (excluding any carry-over
losses) in excess of $5 million for two full fiscal years before the date of application. These
changes are designed to increase the demand for small business loans by increasing the number of
small businesses that are eligible for SBA assistance.45
The Small Business Jobs Act of 2010 also provides small businesses with about $12 billion in tax
relief. The act
• raises the exclusion of gains on the sale or exchange of qualified small business
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 the end of 2010;
• increases the deduction for qualified start-up expenditures from $5,000 to
$10,000 in 2010, and raises the phaseout threshold from $50,000 to $60,000 for
2010;
• places limitations on the penalty for failure to disclose reportable transactions
based on resulting tax benefits;
• allows general business credits of eligible small businesses for 2010 to be carried
back five years;
• exempts general business credits of eligible small businesses in 2010 from the
alternative minimum tax;
• allows a temporary reduction in the recognition period for built-in gains tax;
• increases expensing limitations for 2010 and 2011 and allows certain real
property to be treated as Section 179 property;
• allows additional first-year depreciation for 50% of the basis of certain qualified
property; and
• removes cellular telephones and similar telecommunications equipment from
listed property so their cost can be deducted or depreciated like other business
property.46
45 For further analysis, see CRS Report R40860, Defining Small Business: A Historical Analysis of Contemporary
Issues, by Robert Jay Dilger.
46 For further analysis of the Small Business Jobs Act of 2010’s, tax provisions, see CRS Report R41385, Small
(continued...)
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Discussion
Historically, small businesses (firms with less than 500 employees), especially those in the retail
and construction sectors, have experienced greater job loss during economic recessions than
larger businesses. Conversely, small businesses have led job creation during recent economic
recoveries.47 As a result, many federal policymakers look to small businesses to lead the nation’s
recovery from its current economic difficulties.48
During the 111th Congress, the question debated in Congress was not whether the federal
government should act to enhance small business access to capital, but which federal policies
would provide the most effective means to increase the capital available to small businesses and
result in higher levels of employment. As mentioned earlier, some, including President Obama,
argued that economic conditions made it imperative that the SBA be provided additional
resources to assist small businesses in acquiring capital necessary to start, continue, or expand
operations and create jobs.49
Others worried about the long-term adverse economic effects of spending programs that increase
the federal deficit. They also pointed to surveys of small business firms conducted by the
National Federation of Independent Business (NFIB), which indicated that small business owners
consistently placed financing issues near the bottom of their most pressing concerns.50 Instead of
increasing federal funding for the SBA, they advocated small business tax reduction, reform of
financial credit market regulation, and federal fiscal restraint as the best means to assist small
business and foster increased levels of economic growth and job creation.51
Some advocates of providing additional resources to the SBA also argued that the federal
government needed to enhance small business access to capital by creating a direct lending
program for small businesses.52 H.R. 3854, the Small Business Financing and Investment Act of
(...continued)
Business Legislation During the 111th Congress, by Robert Jay Dilger and Gary Guenther.
47 U.S. Small Business Administration, Small Business Economic Indicators for 2003, Washington, DC, August 2004,
pp. 3, 4.
48 U.S. Congress, House Committee on Small Business, Creating Opportunities for Small Businesses in an Economic
Recovery, 110th Cong., 2nd sess., October 28, 2008, H. Hrg. 110-116 (Washington: GPO, 2008), p. 2.
49 Representative Nydia Velázquez, “Small Business Financing and Investment Act of 2009,” House debate,
Congressional Record, daily edition, vol. 155, no. 159 (October 29, 2009), pp. H12074, H12075; Senator Mary
Landrieu, “Statements on Introduced Bills and Joint Resolutions,” remarks in the Senate, Congressional Record, daily
edition, vol. 155, no. 185 (December 10, 2009), p. S12910; and The White House, “Remarks by the President on Job
Creation and Economic Growth,” Washington, DC, December 8, 2009, http://www.whitehouse.gov/the-press-office/
remarks-president-job-creation-and-economic-growth.
50 Bruce D. Phillips and Holly Wade, Small Business Problems and Priorities (Washington, DC: NFIB Research
Foundation, June 2008), p. 5, http://www.nfib.com/Portals/0/ProblemsAndPriorities08.pdf. The survey was conducted
from mid-January to March of 2008 across a randomly drawn sample of the NFIB’s 20,000 members. Useable
questionnaires were returned by 3,530 small business owners, a 17.7% response rate.
51 Susan Eckerly, “NFIB Responds to President’s Small Business Lending Initiatives,” Washington, DC, October 21,
2009, http://www.nfib.com/newsroom/newsroom-item/cmsid/50080/; NFIB, “Government Spending,” Washington,
DC, http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49051/; and National Federation of Independent
Business, “Payroll Tax Holiday,” http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49039/.
52 U.S. Congress, House Committee on Small Business, Small Business Financing and Investment Act of 2009,
committee print, 111th Cong., 1st sess., October 26, 2009, H.Rept. 111-315 (Washington: GPO, 2009), pp. 13-20,
26, 27.
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2009, which was passed by the House on October 29, 2009, by a vote of 389-32, would have
authorized a temporary SBA direct lending program.53 Also, H.R. 3007, the Give Credit to Main
Street Act of 2011, introduced on September 21, 2011, and referred to the House Committee on
Small Business, would authorize the SBA to provide direct loans to small businesses that have
been in operation as a small business for at least two years prior to its application for a direct
loan. The maximum loan amount would be the lesser of 10% of the firm’s annual revenues or
$500,000.
The SBA currently has authority to make direct loans to small businesses, but, with the exception
of disaster loans, has not exercised that authority since 1994.54 Advocates for a small business
direct lending program have argued that such a program would provide “rapid access to much-
needed capital without having to face the administrative delays posed by the current Small
Business Administration lending process.”55 Advocates of a temporary SBA direct lending
program argued that such a program was necessary during periods of economic difficulty because
In prosperous times, small businesses are able to shop around to different lenders to find the
best available terms and conditions for a loan. But in times of economic downturns, those
same lenders aren’t as willing to lend to small businesses. More than ever during these times,
it’s the government’s responsibility to step in to help small businesses access the loans they
need to keep their businesses running and workers employed.56
Opponents of a small business direct lending program argue that the SBA’s mission is to augment
the private sector by guaranteeing loans, not compete with it by providing direct loans to small
businesses.57 They also argue that these loans hold greater risk than most, otherwise the private
sector would accept them. They worry that SBA defaults may increase, resulting in added
expense, either to taxpayers in the form of additional appropriations or to other small business
borrowers in the form of higher fees, to cover the defaults.58 They argue that the SBA stopped
offering direct loans in 1995, primarily because the subsidy rate was “10 to 15 times higher than
that of our guaranty programs.”59 They also assert that providing direct loans to small businesses
might invite corruption. They note that the Reconstruction Finance Corporation (RFC), the SBA’s
predecessor, made direct loans to business and was accused of awarding loans based on the
53 H.R. 3854, the Small Business Financing and Investment Act of 2009, §111. Capital Backstop Program.
54 U.S. Congress, Senate Committee on Small Business, Hearing on the Proposed Fiscal Year 1995 Budget for the
Small Business Administration, 103rd Cong., 2nd sess., February 22, 1994, S. Hrg. 103-583 (Washington: GPO, 1994),
p. 20.
55 Dan Gerstein, “Big Stimulus For Small Business, A new direct lending program would benefit millions,”
Forbes.com, January 14, 2009; Sharon McLoone, “Landrieu: Small Business to Benefit from Economic Plan,” The
Washington Post, February 6, 2009; George Dooley, “ASTA Renews Call For SBA Direct Lending Program,”
American Society of Travel Agents, Washington, DC, February 18, 2009; and Anne Kim, Ryan McConaghy, and Tess
Stovall, “Federal Direct Loans to Small Businesses,” Third Way Idea Brief, Washington, DC, April 2009.
56 Anne Kim, Ryan McConaghy, and Tess Stovall, “Federal Direct Loans to Small Businesses,” Third Way Idea Brief,
Washington, DC, April 2009.
57 Sue Malone, Myth: The SBA will make direct loans under the stimulus bill, Strategies For Small Business, Danville,
CA, March 12, 2009.
58 Representative Jeff Flake, “Providing for Consideration of H.R. 3854, Small Business Financing and Investment Act
of 2009,” House debate, Congressional Record, daily edition, vol. 155, no. 159 (October 29, 2009), pp. H12070,
H12072.
59 U.S. Congress, Senate Committee on Small Business, Hearing on the Proposed Fiscal Year 1995 Budget for the
Small Business Administration, 103rd Cong., 2nd sess., February 22, 1994, S. Hrg. 103-583 (Washington: GPO, 1994),
p. 20.
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applicant’s political connections or personal ties with RFC loan officers.60 Opponents also argue
that the SBA does not have the human, physical, and technical resources to make direct loans.
Still others argue that providing additional funding for SBA programs is largely a symbolic
gesture because the SBA’s guaranteed loan programs account for a relatively small fraction of
small business lending.61 They argue that, in a typical year, no more than 1% of small businesses
receive an SBA-guaranteed loan, and those loans account for less than 3% of the total amount
loaned to small businesses.62 They assert that “these numbers show that the private banking
system finances most loans and that the SBA is therefore largely irrelevant in the capital
market.”63
SBA Funding
As mentioned previously, some, including President Obama, have argued that economic
conditions make it imperative that the SBA be provided additional resources to assist small
businesses in acquiring capital necessary to start, continue, or expand operations and create jobs.
Others worry about the long-term adverse economic effects of spending programs that increase
the federal deficit. They advocate fiscal restraint as the best means to assist small business and
foster increased levels of economic growth and job creation.
Both of these views have been reflected in recent SBA budget discussions as Congress has
focused on ways to reduce the SBA’s budget while not compromising the SBA’s ability to assist
small businesses access capital. As shown in Table 2, the SBA’s FY2011 appropriation was
$729.7 million, a reduction of $94.3 million from its FY2010 appropriation of $824.0 million.
The reductions (aside from a 0.2% across-the-board rescission imposed by P.L. 112-10, the
Department of Defense and Full-Year Continuing Appropriations Act, 2011, on most
appropriations accounts) were taken from programs that do not have a direct role in assisting
small businesses access capital—$59.0 million for special projects, $1.0 million for the surety
bond revolving fund (the SBA has indicated that there are sufficient funds in reserve to cover the
cost of claim defaults), and disaster assistance ($32.8 million).64
60 Representative Jeff Flake, “Providing for Consideration of H.R. 3854, Small Business Financing and Investment Act
of 2009,” House debate, Congressional Record, daily edition, vol. 155, no. 159 (October 29, 2009), pp. H12070,
H12072.
61 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Federal
Financial Management, Government Information, Federal Services, and International Security, The Effectiveness of the
Small Business Administration, 109th Cong., 2nd sess., April 6, 2006, S. Hrg. 109-492 (Washington: GPO, 2006), p. 92;
and Discover Financial Services, “Discover® Small Business WatchSM: Small Business Economic Outlook Remains
Cautious,” Riverwoods, IL, October 26, 2009, http://investorrelations.discoverfinancial.com/phoenix.zhtml?c=
204177&p=irol-newsArticle&ID=1346088&highlight=.
62 Raymond J. Keating, “Keating: Obama’s policies will hurt, not help,” Long Island Business News, The Debate
Room, October 30, 2009, http://libn.com/thedebateroom/2009/10/30/keating-obama%e2%80%99s-policies-will-hurt-
not-help/.
63 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Federal
Financial Management, Government Information, Federal Services, and International Security, The Effectiveness of the
Small Business Administration, 109th Cong., 2nd sess., April 6, 2006, S.Hrg. 109-492 (Washington: GPO, 2006), p. 92.
64 P.L. 112-10, Department of Defense and Full-Year Continuing Appropriations Act, 2011, §1566, §1567 and §1568;
and U.S. Office of Management and Budget, The Appendix, Budget of the United States Government, Fiscal Year 2012,
Washington, DC, February 14, 2011, p. 1163, http://www.whitehouse.gov/sites/default/files/omb/budget/
fy2012/assets/sba.pdf.
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Table 2. Small Business Administration Funding, FY2000-FY2011
($ millions)
SBA Disaster
Assistance and
Other SBA
Temporary,
SBA Disaster
Other SBA
Programs
Additional
FY
Assistance
Programs
Combined
Funding Total
Funding
FY2011 $45.4 $684.3 $729.7 NA
$729.7a
FY2010 $78.2 $745.8 $824.0 $962.5b
$1,786.5
FY2009 $0.0c $615.2 $615.2 $730.0d $1,345.2
FY2008
$1,052.8 $581.9
$1,634.7 NA $1,634.7
FY2007 $114.9
$456.9
$571.8
NA
$571.8
FY2006
$1,700.0 $533.4
$2,233.4 NA $2,233.4
FY2005
$1,042.2 $498.0
$1,540.2 NA $1,540.2
FY2004 $200.5
$585.7
$786.2
NA
$786.2
FY2003 $191.5
$594.8
$786.3
NA
$786.3
FY2002 $337.9
$580.1
$918.0
NA
$918.0
FY2001 $284.5
$715.0
$999.5
NA
$999.5
FY2000 $317.3
$597.3
$914.6
NA
$914.6
Sources: U.S. Small Business Administration, Congressional Budget Justification, various years, Washington, DC,
http://www.sba.gov/about-sba-services/217; and P.L. 112-10, the Department of Defense and Ful -Year
Continuing Appropriations Act, 2011.
a. The SBA’s FY2012 appropriation of $731,201,000 ($45.5 million for SBA disaster assistance and $685.7
mil ion for other SBA programs) was reduced to $729,738,000 by a 0.2% across-the-board rescission
imposed on most appropriations accounts by P.L. 112-10, the Department of Defense and Ful -Year
Continuing Appropriations Act, 2011.
b. $775.0 million in temporary funding for 7(a) and 504/CDC loan guaranty program fee subsidies and loan
modifications, and $187.5 million for other SBA programs. P.L. 111-118, the Department of Defense
Appropriations Act, 2010, provided $125 million, P.L. 111-144, the Temporary Extension Act of 2010,
provided $60 million, P.L. 111-157, the Continuing Extension Act of 2010, provided $80 million, and P.L.
111-240, the Smal Business Jobs and Credit Act of 2010, provided $510 million to provide temporary fee
subsidies for the SBA’s 7(a) and 504/CDC loan guaranty programs and to temporarily increase the 7(a)
program’s maximum loan guaranty percentage to 90%. P.L. 111-240 extended the subsidies and 90% loan
guaranty through December 31, 2010, and provides $187.5 million for other SBA programs that are to
remain available through FY2011. Also, P.L. 111-150, to permit the use of previously appropriated funds to
extend the Small Business Loan Guarantee Program, authorized the SBA to use $40 million in previously
appropriated funds for fee subsidies and the 7(a) loan modification.
c. SBA disaster assistance funding in FY2009 was carried over from the previous fiscal year.
d. P.L. 111-5, the American Recovery and Reinvestment Act of 2009, provided $730 million for SBA programs,
including $375 million for loan subsidies and loan modifications for the 7(a) and 504/CDC programs and
$255 million for a new, temporary small business stabilization program, later named the America’s Recovery
Capital (ARC) Loan program.
Congress is currently considering the SBA’s FY2012 appropriation. It has continued to focus on
finding ways to reduce the SBA’s appropriation while not compromising the SBA’s role in
assisting small businesses access capital. For example, the House Committee on Small Business
has indicated that it “believes that the [SBA’s FY2012] budget request needs to trim funds from
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duplicative and ineffective programs and reallocate some of those funds to programs that will be
more helpful to America’s entrepreneurs.”65 At the same time, the committee reported that it
has held hearings over the past three years in which numerous small businesses testified that
they have had significant difficulty in obtaining needed credit to operate. In some cases,
businesses with solid operating histories have seen their credit lines reduced or eliminated,
Unlike large enterprises that can seek out funds from commercial debt and equity markets,
small businesses must rely on their own personal assets, retained earnings, and commercial
bank funds for needed capital. With the retrenchment in the normal commercial credit
markets, the SBA capital access programs, provide businesses with necessary capital and
credit to create jobs that the economy needs.66
One issue complicating congressional consideration of the SBA’s budget is a recent increase in
the SBA’s loan guaranty programs’ subsidy costs. According to the Obama Administration’s
FY2012 budget request, the SBA’s loan subsidy costs have increased from zero in FY2008 to $80
million in FY2010 and are projected to reach $215.8 million in FY2012. The Administration
attributes the increased subsidy costs to “projected economic conditions and higher than
anticipated defaults.”67
The Administration has indicated that it intends to submit a legislative package to provide SBA
the flexibility to adjust fees in the 7(a) loan guaranty program “to enable it to be self-sustaining
over time.”68 It indicated that these changes “in the program’s fee structure would become
effective for loans originated after 2012.”69 It also requested $129 million in new FY2012 SBA
budget authority to help cover the increased subsidy costs. The House Committee on Small
Business indicated in its views and estimates for the concurrent resolution on the budget for
FY2012 that “while the Committee will consider an increase in fees paid by borrowers and
lenders to reduce the funds that must be appropriated, that may be counterproductive as it would
impose additional costs on small businesses as they are trying to create jobs needed to resuscitate
the economy.”70
65 U.S. Congress, House Committee on Small Business, Views and Estimates of the Committee on Small Business on
Matters to be set forth in the Concurrent Resolution on the Budget for Fiscal Year 2012, 112th Cong., 1st sess., March
17, 2011 (Washington: GPO, 2011), p. 1, http://smbiz.house.gov/UploadedFiles/
March_17_Views_and_Estimates_Letter.pdf.
66 Ibid.
67 U.S. Office of Management and Budget, The Appendix, Budget of the United States Government, Fiscal Year 2012,
Washington, DC, February 14, 2011, p. 1165, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/
sba.pdf.
68 Ibid.
69 Ibid.
70 U.S. Congress, House Committee on Small Business, Views and Estimates of the Committee on Small Business on
Matters to be set forth in the Concurrent Resolution on the Budget for Fiscal Year 2012, 112th Cong., 1st sess., March
17, 2011 (Washington: GPO, 2011), p. 2, http://smbiz.house.gov/UploadedFiles/
March_17_Views_and_Estimates_Letter.pdf.
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Concluding Observations
Congress approved many changes during the 111th Congress to enhance small business access to
capital. For example, P.L. 111-240, the Small Business Jobs Act of 2010, authorizes the Secretary
of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to make capital
investments in eligible community banks with total assets equal to or less than $1 billion or $10
billion ($4 billion was issued).71 It authorizes a $1.5 billion State Small Business Credit Initiative
Program to be administered by the Department of the Treasury.72 It made numerous changes to
SBA programs in an attempt to make them more accessible to small businesses, such as
increasing maximum loan amounts, creating an alternative size standard so more businesses can
qualify for assistance, waiving some matching requirements, and expanding refinancing options
under the 504/CDC program. It provided funding to extend SBA fee subsidies and the 7(a)
program’s 90% maximum loan guaranty percentage, made several changes to federal contracting
law to increase small business opportunities in federal contracting, and provided about $12 billion
in tax relief for small businesses. In addition, P.L. 111-312, the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010, temporarily reduced for calendar year
2011 payroll taxes by two percentage points for workers (including self-employed small business
owners) who pay into Social Security. The NFIB has long advocated a reduction of federal
payroll taxes as a means to reduce small business expenses.73
Because Congress approved many changes during the 111th Congress to enhance small business
access to capital, the question before the 112th Congress is what, if any, additional action should
the federal government take to enhance small business access to capital? Should Congress decide
to take further action, three not necessarily mutually exclusive options are readily apparent.
First, Congress could consider additional changes to the SBA’s programs in an effort to enhance
small business access to capital, such as considering a direct lending program, providing
additional funding for SBA fee subsidies and loan modifications, or increasing funding for SBA
programs. For example, S. 3967, the Small Business Investment and Innovation Act of 2010, was
introduced on November 18, 2010. It would authorize funding increases for the SBA’s training
and technical assistance programs, establish a Rural Small Business Technology Pilot Program,
increase maximum loan limits for the SBA’s home and business disaster loan programs, increase
surety bond limits, and expand eligibility for the SBA’s State Trade and Export Promotion Grant
Program to cities and other major metropolitan areas. Advocates of this approach could argue that
small business access to capital improved during 2010, but, as the Federal Reserve has asserted,
“remain quite stringent following the prolonged and widespread tightening that took place over
the past few years.”74
71 P.L. 111-240, the Small Business Jobs Act of 2010, §4103. Small Business Lending Fund.
72 For further analysis see CRS Report R41385, Small Business Legislation During the 111th Congress, by Robert Jay
Dilger and Gary Guenther.
73 National Federation of Independent Business, “Payroll Tax Holiday,” Washington, DC, http://www.nfib.com/issues-
elections/issues-elections-item/cmsid/49039/; and National Federation of Independent Business, “Tax Package
Compromise Represents a Big Victory for Small Business,” Washington, DC, http://www.nfib.com/issues-elections/
issues-elections-item?cmsid=55506.
74 Federal Reserve Board, “The April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices,”
Washington, DC, http://www.federalreserve.gov/boarddocs/SnLoanSurvey/201005/default.htm.
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Second, Congress could adopt a wait-and-see strategy that focuses on congressional oversight of
the Small Business Jobs Act of 2010, and the impact of the SBA’s programs on small business
access to capital. Advocates of this approach could argue that because small business access to
capital improved during 2010 and 2011, and SBA lending increased during FY2011, the impact of
the Small Business Jobs Act of 2010 on small business access to capital should be evaluated to
determine if any further action is necessary.
Third, Congress could consider the repeal of portions of the Small Business Jobs Act of 2010, or
other SBA programs. For example, on March 15, 2011, the House Committee on Small Business
approved its views and estimates for the concurrent resolution on the budget for FY2012,
recommending that the SBA’s budget be “cut nearly $100 million.”75 The committee
recommended that 14 programs, including several management and technical assistance training
programs, be defunded “because they duplicate existing programs at the SBA or at other
agencies” or “where there is an absence of any evidence that they will help small businesses
create new jobs.”76 Advocates of this option argue that instead of increasing federal funding for
the SBA, the federal government should focus on small business tax reduction and federal fiscal
restraint as the best means to assist small business and foster increased levels of economic growth
and job creation.77
75 Representative Sam Graves, “Opening Statement for Views and Estimates Markup,” Washington, DC, March 15,
2011, http://www.smallbusiness.house.gov/Calendar/EventSingle.aspx?EventID=227626.
76 Ibid. For further information concerning the funding recommendations contained in the House Committee on Small
Business views and estimates for the concurrent resolution on the budget for FY2012 see U.S. Congress, House
Committee on Small Business, “Views and Estimates of the Committee on Small Business on Matters to be set forth in
the Concurrent Resolution on the Budget for FY2012, communication to the Chairman, House Committee on the
Budget,” 112th Cong., 1st sess., March 17, 2011, http://smbiz.house.gov/UploadedFiles/
March_17_Views_and_Estimates_Letter.pdf.
77 Susan Eckerly, “NFIB Responds to President’s Small Business Lending Initiatives,” Washington, DC, October 21,
2009, http://www.nfib.com/newsroom/newsroom-item/cmsid/50080/; NFIB, “Government Spending,” Washington,
DC, http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49051/; and National Federation of Independent
Business, “Payroll Tax Holiday,” http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49039/.
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Appendix. Selected Provisions in the Small
Business Jobs Act of 2010
Table A-1. Selected Provisions, the Small Business Jobs Act of 2010
Issue/Program
The Small Business Jobs Act of 2010
SBA 7(a) Program
increases the 7(a) Program’s loan limit from $2 million to
$5 million.
SBA 504 Program
increases the 504/CDC Program’s loan limits from
$1.5 million to $5 million for “regular” borrowers, from
$2 million to $5 million if the loan proceeds are directed
toward one or more specified public policy goals, and from
$4 million to $5.5 million for manufacturers; and
temporarily expands for two years the eligibility for low-
interest refinancing under the SBA’s 504/CDC program for
qualified debt.
SBA Express Program
temporarily increases for one year the Express Program’s
loan limit from $350,000 to $1 mil ion (expired on
September 26, 2011).
SBA Microloan Program
increases the Microloan Program’s loan limit for borrowers
from $35,000 to $50,000; and increases the loan limits for
Microloan intermediaries after their first year in the
program from $3.5 million to $5 million.
Temporary SBA fee subsidies and loan modifications
temporarily increases the SBA’s guaranty on 7(a) loans to
90% and provide for the elimination of selected fees on the
SBA’s 7(a) and 504 loans through December 31, 2010.
SBA secondary market
extends the SBA’s secondary market lending authority
under ARRA from 2 years from enactment to 2 years from
the first sale of a pool of first lien position 504 loans
guaranteed under this authority investor (which took place
on September 24, 2010).
SBA size standards
authorizes the SBA to establish an alternative size standard
for the SBA’s 7(a) and 504 programs that would use
maximum tangible net worth and average net income; and
to establish an interim alternative size standard of not more
than $15 million in tangible net worth and not more than
$2 million in average net income for the two full fiscal years
before the date of the application.
SBA International Trade Finance Program
increases the International Trade Finance Program’s loan
limit from $1.75 million, of which not more then
$1.25 million may be used for working capital, supplies, or
financings, to $4.5 million.
State Trade and Export Promotion Grant Program
establishes an associate administrator for the SBA’s Office
of International Trade and a state trade and export
promotion grant program.
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Issue/Program
The Small Business Jobs Act of 2010
Federal contracting
imposes contract bundling accountability measures directing
federal agencies to include in each solicitation for any
contract award above the agency’s substantial bundling
threshold a provision soliciting bids by small business teams
and joint ventures;
requires federal agencies to publish on its website its policy
on contract bundling and consolidation, as well as a
rationale for any bundled contract solicited or awarded;
repeals the small business competitiveness demonstration
program; and
provides parity among the smal business contracting
programs (including striking “shal ” and inserting “may” in
15 U.S.C. 657a(b)(2)(B), which refers to the agency’s
discretion to provide contracting preference to HUBZone
small businesses).
Small Business Lending Fund
authorizes the U.S. Treasury to make up to $30 billion of
capital investments ($4 billion was issued);
CBO estimates the program would raise $1.1 billion over
10 years.
State Small Business Credit Initiative Program
authorizes $1.5 billion for the State Small Business Credit
Initiative Program.
SBA Intermediary Lending Pilot Program
authorizes a three-year Intermediary Lending Pilot Program
to allow the SBA to make direct loans to not more than 20
eligible nonprofit lending intermediaries each year totaling
not more than $20 million. The intermediaries, in turn,
would be allowed to make loans to new or growing small
businesses, not to exceed $200,000 per business.
Capital gains taxation
temporarily raises to 100% the exclusion of gains on certain
small business stock from enactment to end of calendar
year.
Limitation on penalties for failure to disclose
places limitations on the penalty for failure to disclose
reportable transactions
reportable transactions based on resulting tax benefits.
Deduction for start-up expenditures
increases the deduction for qualified start-up expenditures
from $5,000 to $10,000 in 2010, and the phaseout
threshold from $50,000 to $60,000 for 2010.
Business carry back
allows general business credits of eligible small businesses
for 2010 to be carried back 5 years.
Alternative Minimum Tax
exempts general business credits of eligible small businesses
in 2010 from the alternative minimum tax.
Recognition period for built-In gains tax
allows a temporary reduction in the recognition period for
built-in gains tax.
Expensing and Section 179 property
increases expensing limitations for 2010 and 2011; and
al ows certain real property to be treated as Section 179
property.
Depreciation
al ows additional first-year depreciation for 50% of the basis
of certain qualified property.
Deduction for health insurance costs
allows the deduction for health insurance costs in
computing self-employment taxes in 2010.
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Issue/Program
The Small Business Jobs Act of 2010
Deduction for cellular telephones
removes cellular telephones and similar telecommunications
equipment from listed property so their cost can be
deducted or depreciated like other business property.
Crude tall oil
makes crude tall oil ineligible for the cellulosic biofuel
producer credit.
Section 561 of the Hiring Incentives to Restore
increases the percentage under Section 561 of the Hiring
Employment Act
Incentives to Restore Employment Act by 36 percentage
points.
Rental income reporting
requires taxpayers that receive rental income from leasing
real property to file information returns to the IRS and to
service providers that report receiving payments of $600 or
more during the tax year for rental property expenses.
Penalties for failing to file information returns to the
increases the penalties for failing to file information returns
IRS
to the IRS and to payees in a timely manner.
Treasury Department authority to apply a continuous
expands the Treasury Department’s authority to apply a
levy on federal contractors
continuous levy to government payments to federal
contractors that owe the IRS for unpaid taxes to include
payments for property such as a new office building.
Current law allows the levy to be applied to payments for
goods and services only.
Predictive modeling to identify Medicaid waste, fraud,
authorizes the use of predictive modeling to identify and
and abuse
prevent waste, fraud, and abuse in the Medicare fee-for-
service program.
Roth Retirement Accounts
allows participants in government Section 457 plans to treat
elective deferrals as Roth contributions; and
allows rol overs from elective deferral plans to designated
Roth accounts.
Nonqualified annuities
al ows holders of nonqualified annuities (i.e., annuity
contracts held outside of a tax-qualified retirement plan or
IRA) to elect to receive a portion of the contract in the
form of a stream of annuity contracts, leaving the remainder
of the contract to accumulate income on a tax-deferred
basis.
Source: P.L. 111-240, the Smal Business Jobs Act of 2010.
Author Contact Information
Robert Jay Dilger
Senior Specialist in American National Government
rdilger@crs.loc.gov, 7-3110
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Acknowledgments
This report was originally co-authored with Oscar R. Gonzales, formerly an analyst in Economic
Development Policy, who has since left CRS.
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