SBA Assistance to Small Business Startups:
Client Experiences and Program Impact
Updated November 24, 2020
Congressional Research Service
https://crsreports.congress.gov
R43083

SBA Assistance to Small Business Startups: Client Experiences and Program Impact

Summary
The Smal Business Administration (SBA) administers several programs to support smal
businesses, including loan guaranty and venture capital programs to enhance smal business
access to capital; contracting programs to increase smal business opportunities in federal
contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery
from natural disasters; and smal business management and technical assistance training programs
to assist business formation and expansion.
Congressional interest in these programs, and the SBA’s assistance provided to smal business
startups in particular (defined as new businesses that meet the SBA’s criteria as smal ), has
increased in recent years, primarily because these programs are viewed by many as a means to
stimulate economic activity and create jobs.
Economists general y do not view job creation as a justification for providing federal assistance to
smal businesses. They argue that in the long term such assistance wil likely real ocate 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 on smal business assistance
programs may result in additional jobs in the short term.
Congressional interest in assistance to business startups is derived primarily from economic
research suggesting that startups play a very important role in job creation. That research suggests
that business startups create many new jobs, but have a more limited effect on net job creation
over time because fewer than half of al startups remain in business after five years. However,
that research also suggests that the influence of smal business startups on net job creation varies
by firm size. Startups with fewer than 20 employees tend to have a negligible effect on net job
creation over time whereas startups with 20-499 employees tend to have a positive employment
effect, as do surviving younger businesses of al sizes (in operation for one year to five years).
This report examines smal business startups’ experiences with the SBA’s management and
technical assistance training programs, focusing on Smal Business Development Centers
(SBDCs), Women Business Centers (WBCs), and SCORE (formerly the Service Corps of Retired
Executives); the SBA’s 7(a), 504/CDC, and Microloan lending programs; and the SBA’s Smal
Business Investment Company (SBIC) venture capital program. Although data collected by the
SBA concerning these programs’ impact on economic activity and job creation are somewhat
limited and subject to methodological chal enges concerning their validity as reliable
performance measures, most smal business owners who have participated in these programs
report in surveys sponsored by the SBA that the programs were useful. Given the data limitations,
however, it is difficult to determine the cost effectiveness of these programs.
The report also discusses the SBA’s growth accelerators initiative, which targets entrepreneurs
looking to “start and scale their business” by helping them access “seed capital, mentors, and
networking opportunities for customers and partners,” and the recently sunset SBIC early stage
debenture program, which focused on providing venture capital to startups.
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Congressional Research Service

SBA Assistance to Small Business Startups: Client Experiences and Program Impact

The SBA’s Missions
The Smal Business Administration (SBA) administers several programs to support smal
businesses, including the 7(a), 504/CDC, and Microloan lending programs to enhance smal
business access to capital; the Smal Business Investment Company (SBIC) program to enhance
smal business access to venture capital; contracting programs to increase smal business
opportunities in federal contracting; direct loan programs for businesses, homeowners, and
renters to assist their recovery from natural disasters; and smal business management and
technical assistance training programs to assist business formation and expansion.1 Congressional
interest in these programs, and the SBA’s assistance to smal business startups in particular
(defined as new businesses that meet the SBA’s criteria as smal ), has increased in recent years,
primarily because these programs are viewed by many as a means to stimulate economic activity
and create jobs.
The Smal Business Act specifies four missions for the SBA:
It is the declared policy of the Congress that the Government should aid, counsel, assist,
and protect, insofar as is possible, the interests of small-business concerns in order to
preserve free competitive enterprise, to insure that a fair proportion of the total purchases
and contracts or subcontracts for property and services for the Government (including but
not limited to contracts or subcontracts for maintenance, repair, and construction) be placed
with small-business enterprises, to insure that a fair proportion of the total sales of
Government property be made to such enterprises, and to maintain and strengthen the
overall economy of the Nation.2
As part of its mission to maintain and strengthen the overal economy of the nation, the SBA has
always been interested in promoting job creation and job retention.3 For example, the SBA
currently gathers data from its clients concerning the number of jobs either created or retained as
a result of the assistance they receive from the SBA. The SBA refers to these self-reported data as
the number of “jobs supported.”4 The SBA also regularly sponsors research on the role of smal
businesses in job creation and retention, and considers that research when designing its programs.
Economists general y do not view job creation as a justification for providing federal assistance to
smal businesses. They argue that in the long term such assistance wil likely real ocate jobs

1 U.S. Small Business Administration (SBA), Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual
Perform ance Report, pp. 18-20, at https://www.sba.gov/document/report —congressional-budget-justification-annual-
performance-report. For further analysis of the SBA’s loan guaranty programs, see CRS Report R41146, Sm all
Business Adm inistration 7(a) Loan Guaranty Program , by Robert Jay Dilger; and CRS Report R41184, Sm all Business
Adm inistration 504/CDC Loan Guaranty Program , by Robert Jay Dilger. For further analysis of the SBA’s Small
Business Investment Company program, see CRS Report R41456, SBA Sm all Business Investm ent Com pany Program ,
by Robert Jay Dilger. For further analysis of the New Markets Venture Capital program, see CRS Report R42565, SBA
New Markets Venture Capital Program , by Robert Jay Dilger. For further analysis of the SBA’s disaster loan
programs, see CRS Report R41309, The SBA Disaster Loan Program : Overview and Possible Issues for Congress, by
Bruce R. Lindsay. For further analysis of the SBA’s contracting programs, see CRS Report R41268, Sm all Business
Adm inistration HUBZone Program , by Robert Jay Dilger.
2 15 U.S.C. §631; and P.L. 83-163, the Small Business Act of 1953 (as amended).
3 U.S. Senate, Select Committee on Small Business, Citation of Statement by Wendell B. Barnes, SBA Administrator,
Annual Report, 83rd Cong., 2nd sess., March 25, 1954, H.Rept. 83-1092 (Washington: GPO, 1954), p. 60.
4 T he SBA reports that in FY2019 the 7(a) loan guarantee program supported 482,083 jobs, the 504/CDC loan
guarantee program supported 52,701 jobs, the Microloan lending program supported 2 1,235 jobs, and the Small
Business Investment Company venture-capital program supported 111,201 jobs. SBA, Fiscal Year 2021 Congressional
Budget Justification and FY2019 Annual Perform ance Report, p. 28, 31, 35, and 38, at https://www.sba.gov/document/
report —congressional-budget-justification-annual-performance-report.
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SBA Assistance to Small Business Startups: Client Experiences and Program Impact

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 research does suggest that increased federal spending on smal business assistance
programs may result in additional jobs in the short term.5
Small Business Startups and Job Creation
The SBA’s interest, and congressional interest, in providing assistance to smal business startups
is derived primarily from economic research indicating that startups play an important role in job
creation.6 That research suggests that startups create many, and in some years almost al , net jobs
in the national economy.
Although there is a consensus that startups have an important role in job creation and retention,
economic research suggests that startups have a more limited effect on net job creation over time
because fewer than half of al startups are stil in business after five years. That research also
suggests that the influence of startups on net job creation varies by firm size. Startups with fewer
than 20 employees tend to have a negligible effect on net job creation over time whereas startups
with 20-499 employees tend to have a positive employment effect, as do surviving younger
businesses of al sizes (in operation for one year to five years).7
Given the relatively high rate of firm deaths among startups, providing SBA assistance to
startups, especial y in the form of a SBA guaranteed loan or venture capital investment, is
general y viewed as a relatively “high risk-high reward” endeavor, with advocates focusing on the
possibility of job creation and opponents focusing on the risk of default. For example, opponents
point to the SBA’s experiences with its SBIC Participating Securities program as an example of
the risk in providing venture capital to startups. The SBIC Participating Securities program was
established in 1994, with congressional authorization, to encourage the formation of participating

5 For further information concerning economic research and small business assistance, see CRS Report RL32254,
Sm all Business Tax Benefits: Current Law and Argum ents For and Against Them , by Gary Guenther and CRS Report
R41523, Sm all Business Adm inistration and Job Creation , by Robert Jay Dilger. For an economic argument to repeal
the SBA, see Veronique de Rugy, Why the Sm all Business Adm inistration’s Loan Program s Should Be Abolished ,
American Enterprise Institute for Public Policy Research, AEI Working Paper #126, April 13, 2006, at
http://www.aei.org/wp-content/uploads/2011/10/20060414_wp126.pdf.
6 Charles Brown, James Hamilton, and James Medoff, Employers Large and Small (Cambridge: Harvard University
Press, 1990); Zoltan Acs, William Parsons, and Spencer T racy, “ High -Impact Firms: Gazelles Revisited,” SBA, Office
of Advocacy, June 2008, at http://www.massmac.org/newsline/0902/high_impact_firms.pdf; Dane Stangler and Robert
E. Litan, “Where Will T he Jobs Come From?” Kaufman Foundation Research Series: Firm Formation and Economic
Growth, November 2009, at https://www.kauffman.org/-/media/kauffman_org/research-reports-and-covers/2009/11/
where_will_the_jobs_come_from.pdf; and Dane Stangler and Paul Kedrosky, “ Neutralism and Entrepreneurship: T he
Structural Dynamics of Startups, Young Firms, and Job Creation,” Kaufman Foundation Research Series: Firm
Formation and Economic Growth, September 2010, at https://www.kauffman.org/-/media/kauffman_org/research-
reports-and-covers/2010/09/firmformationneutralism.pdf.
7 Zoltan Acs, William Parsons, and Spencer T racy, “High-Impact Firms: Gazelles Revisited,” SBA, Office of
Advocacy, June 2008, at http://www.massmac.org/newsline/0902/high_impact_firms.pdf; Dane Stangler and Robert E.
Litan, “Where Will T he Jobs Come From?” Kaufman Foundation Research Series: Firm Formation and Economic
Growth, November 2009, at https://www.kauffman.org/-/media/kauffman_org/research-reports-and-covers/2009/11/
where_will_the_jobs_come_from.pdf; John Haltiwanger, Ron S. Jarmin, and Javier Miranda, “ Who Creates Jobs?
Small vs. Large vs. Young,” Cambridge, MA: National Bureau of Economic Research, Working Paper 16300, August
2010, at http://www.nber.org/papers/w16300; and Ian Hathaway, “ Small Business and Job Creation: T he
Unconventional Wisdom,” Bloomberg Government, October 31, 2011.
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SBA Assistance to Small Business Startups: Client Experiences and Program Impact

securities SBICs that would make equity investments in startup and early stage smal businesses.8
The SBA created the program to fil a perceived investment gap created by the SBIC debenture
program’s focus on investments in mid- and later-stage smal businesses.9 The SBA stopped
issuing new commitments for participation securities on October 1, 2004, following relatively
major losses (exceeding $2.7 bil ion in losses on investments of just over $6.0 bil ion) in the
program following the burst of the “technology stock market bubble” from 2000 to 2002.10 The
SBA’s action began a process to end the program, which continues today.
Report Overview
This report examines startups’ experiences with the SBA’s management and technical assistance
training programs, focusing on Smal Business Development Centers (SBDCs); Women Business
Centers (WBCs); SCORE (formerly the Service Corps of Retired Executives); the SBA’s 7(a),
504/CDC, and Microloan lending programs; and the SBA’s SBIC venture capital program. The
SBA’s growth accelerators initiative, which targets entrepreneurs looking to “start and scale their
business” by helping them access “seed capital, mentors, and networking opportunities for
customers and partners,” and the recently sunset SBIC early stage debenture program, which
focused on providing venture capital to startups, are also discussed.11
With some notable exceptions, such as the Microloan lending program and SBA’s growth
accelerators initiative, these programs are designed to assist smal businesses at al developmental
stages, as opposed to targeting startups for special attention. Nonetheless, al of these programs
provide assistance to startups, and report both outcome data (e.g., the number of smal businesses
receiving training and the number and amount of loans and venture capital provided) and
performance data (e.g., the usefulness of the training and the number of jobs supported by the
loan) based on the age of the business. As a result, the experiences of startups can be compared
with the experiences of older firms both within and across the SBA’s programs. For example, as
wil be shown, the SBA programs that specifical y target startups for special attention provide a
relatively larger share of its assistance to startups than other SBA programs.
Although the data collected by the SBA concerning these programs’ impact on economic activity
and job creation are somewhat limited and subject to methodological chal enges concerning their
validity as reliable performance measures, most smal business owners who have participated in
these programs report in surveys sponsored by the SBA that the programs were useful. Given the
data limitations, however, it is difficult to determine the cost effectiveness of these programs.

8 P.L. 102-366, the Small Business Credit and Business Opportunity Enhancement Act of 1992 (T itle IV, the Small
Business Equity Enhancement Act of 1992). For furt her information and analysis of the SBIC program, see CRS
Report R41456, SBA Sm all Business Investm ent Com pany Program , by Robert Jay Dilger.
9 Debenture SBICs are required to pay interest and SBA annual charges semiannually on their debentures through
maturity. As a result, although debenture SBICs make a broad range of equity investments, they generally invest in
later-stage and mezzanine companies which demonstrate an ability to make early and regular p ayments on the
investment. Participating securities SBICs were not required to make these semiannual payments to encourage
investments in firms, such as startups, which had not yet established an ability to make early and regular payments on
the investment .
10 U.S. Congress, House Committee on Small Business, Proposed Legislative Remedy for the Participating Securities
Program , 109th Cong., 1st sess., July 27, 2005, Serial No. 109-27 (Washington: GPO, 2005), p. 3; and SBA, Office of
Inspector General, “ T he SBIC Program: At Significant Risk For Losses,” May 24, 2004, at https://www.sba.gov/sites/
default/files/oig/oig_4-21.pdf.
11 SBA, Fiscal Year 2018 Congressional Budget Justification and FY2016 Annual Performance Report, p. 75, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/FINAL_SBA_FY_2018_CBJ_May_22_2017 c.pdf.
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SBA Assistance to Small Business Startups: Client Experiences and Program Impact

SBA Management and Technical Assistance
Training Programs
The SBA has provided management and technical assistance training “to smal -business concerns,
by advising and counseling on matters in connection with government procurement and on
policies, principles and practices of good management” since it began operations in 1953.12
Initial y, the SBA provided its own management and technical assistance training programs. Over
time, the SBA has relied increasingly on third parties to provide that training. The SBA reports
that more than 1 mil ion aspiring entrepreneurs and smal business owners receive training from
an SBA-supported resource partner each year.13
The SBA has argued that its support of management and technical assistance training for smal
businesses has contributed “to the long-term success of these businesses and their ability to grow
and create jobs.”14 It currently provides financial support to about 14,000 resource partners,
including 63 smal business development centers (SBDCs) and over 900 local SBDC service
locations, over 200 women’s business centers (WBCs), and more than 250 chapters of the
mentoring program, SCORE (Service Corps of Retired Executives).15
The SBDC, WBC, and SCORE programs are the SBA’s three largest management and technical
assistance training programs.16 These programs provide training assistance to smal businesses at
al stages of development, and do not target their assistance exclusively at startups.
Al three of these programs provide assistance to smal businesses, as defined by the SBA’s size
standards and regulations.17 However, there are some differences in the smal businesses that tend
to seek their services. For example, businesses owned by SBDC clients tend to be somewhat
larger, both in terms of annual revenue and employment, than those owned by SCORE and WBC
clients.18 Also, as expected given their mission, WBCs’ clients are more likely to be female than
SBDC and SCORE clients.19

12 U.S. Congress, Senate Committee on Banking and Currency, Extension of the Small Business Act of 1953, report to
accompany S. 2127, 84th Cong., 1st sess., July 22, 1955, S.Rept. 84-1350 (Washington: GPO, 1955), p. 17.
13 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 83, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report.
14 SBA, Fiscal Year 2011 Congressional Budget Justification and FY2009 Annual Performance Report, p. 4, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification.pdf.
15 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, pp. 83-100, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report; SBA,
“Women’s Business Centers Directory,” at http://www.sba.gov/about-offices-content/1/2895/resources/13729; and
SCORE, “ Frequently Asked Questions About SCORE,” at https://www.score.org/frequently-asked-questions-about-
score.
16 For further information and analysis concerning the SBA’s management and technical assistance training programs,
see CRS Report R41352, Sm all Business Managem ent and Technical Assistance Training Program s, by Robert Jay
Dilger.
17 For further information and analysis concerning the SBA’s size standards, see CRS Report R40860, Small Business
Size Standards: A Historical Analysis of Contem porary Issues, by Robert Jay Dilger.
18 In 2012, SBDC clients had average revenue of $762,962 and, on average, 10.05 employees; SCORE clients had
average revenue of $465,828 and, on average, 5.56 employees; and WBC clients had average revenue of $192,734 and,
on average, 4.67 employees. See SBA, Office of Entrepreneurial Development, “ Impact Study of Entrepreneurial
Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,” September 2013, p.
26, at https://www.sba.gov/sites/default/files/files/OED_ImpactReport_09302013_Final.pdf.
19 In 2012, 82% of the businesses served by WBCs were owned by a female compared to 47% of the businesses served
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SBA Assistance to Small Business Startups: Client Experiences and Program Impact

SBDCs, WBCs, and SCORE
SBDCs are “hosted by leading universities, colleges, and state economic development agencies”
to deliver management and technical assistance training “to smal businesses and nascent
entrepreneurs (pre-venture) in order to promote growth, expansion, innovation, increased
productivity and management improvement.”20 These services are delivered, in most instances, on
a nonfee, one-on-one confidential counseling basis and are administered by 63 lead service
centers, with at least one located in each state (four in Texas and six in California), the District of
Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.21 These lead
centers manage over 900 local SBDC service centers, located throughout the United States and
the territories.22 In FY2019, SBDCs provided technical assistance training services to 254,821
unique clients.23 In addition, 14,422 new businesses were formed with assistance from SBDC
counselors in FY2019.24
WBCs are private, nonprofit organizations that provide financial, management, and marketing
assistance to smal businesses, including startup businesses, owned and control ed by w omen.
Since its inception, the program has targeted the needs of social y and economical y
disadvantaged women.25 In FY2019, WBCs provided management and technical training
assistance training services to 64,527 unique clients.26 They also assisted in the formation of
2,087 new businesses in FY2019.27
SCORE is a national volunteer organization which provides management and technical assistance
training to smal business owners and prospective owners.28 In FY2019, SCORE’s volunteer
network of business professionals provided management and technical assistance training

by SBDCs and 47% of the businesses served by SCORE. See SBA, Office of Entrepreneurial Development, “ Impact
Study of Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face
Counseling,” September 2013, p. 17, at https://www.sba.gov/sites/default/files/files/
OED_ImpactReport_09302013_Final.pdf.
20 SBA, “Small Business Development Center FY/CY 2011 Program Announcement for Renewal of the Cooperative
Agreement for Current Recipient Organizations,” p. 3, at https://www.sba.gov/sites/default/files/files/
2011%20Program%20Announcement.pdf.
21 SBA, “OSBDC Program Announcement FY/CY 2016 Program Announcement No. OSBDC-2016-01 & OSBDC-
2016-02,” p. 5, at https://www.sba.gov/sites/default/files/files/2016_Program_Announcement.pdf.
22 Association of Small Business Development Centers, “ About Us,” Burke, Virginia, at http://americassbdc.org/about-
us/.
23 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 85, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report (hereinafter
SBA, Fiscal Year 2021 Congressional Budget Justification.)
24 SBA, Fiscal Year 2021 Congressional Budget Justification.
25 U.S. Congress, House Committee on Small Business, Review of Women’s Business Center Program , 106th Cong.,
February 11, 1999, Serial No. 106-2 (Washington: GPO, 1999), p. 4.
26 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 87, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report.
27 SBA, Fiscal Year 2021 Congressional Budget Justification.
28 U.S. Congress, Senate Select Committee on Small Business and House Select Committee on Small Business, 1966
Federal Handbook for Sm all Business: A Survey of Sm all Business Program s in the Federal Governm ent Agencies,
committee print, 89th Cong., 3rd sess., January 31, 1966 (Washington: GPO, 1966), p. 5; and U.S. Congress, House
Committee on Small Business, Subcommittee on Rural Development, Entrepreneurship, and T rade, Subcommittee
Hearing on Legislative Initiatives to Modernize SBA’s Entrepreneurial Developm ent Program s, 111th Cong., 1st sess.,
April 2, 2009 (Washington: GPO, 2009), p. 6.
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services to 195,242 unique clients.29 SCORE also assisted in the formation of 480 new businesses
in FY2019.30
Program Performance
In addition to compiling program output data, such as the number of unique clients served, from
2003 to 2012, the SBA’s Office of Entrepreneurial Development commissioned an annual “multi-
year time series study to assess the impact of the programs it offers to smal businesses.”31 The
survey asked questions about several aspects of the client’s experiences with these programs,
including the impact of the programs on their staffing decisions and management practices. The
survey is sent each year to a stratified random sample of clients participating in the SBDC, WBC,
and SCORE programs. The SBA’s 2012 survey included responses from nascent clients
(individuals who have taken one or more steps to start a business), startup clients (individuals
who have been in business one year or less), and in-business clients (individuals who have been
in business more than one year and their business was classified as smal by the SBA).
The 2012 survey was released in February 2013. There were 8,263 SBDC client respondents
(19% response rate), 7,217 SCORE client respondents (16% response rate), and 340 WBC client
respondents (15% response rate).
The survey data reported in Table 1 through Table 6 indicate that (1) these programs assisted
smal businesses at al stages of development, (2) most of the respondents reported that the
assistance they received was useful, and (3) most of the respondents reported that the assistance
they received resulted in them changing their management practices or strategies. However,
relatively few of the respondents reported that the assistance they received resulted in them hiring
new staff, retaining staff, or increasing their profit margin.
A statistical analysis of the survey data conducted by the survey’s authors suggested that clients
receiving three or more hours of counseling, female clients, startups, and clients owning relatively
large smal businesses were more likely, at a statistical y significant level, than clients receiving
less than three hours of counseling, male clients, nonstartups, and clients owning relatively
smal er businesses to report positive results concerning the financial impact of the assistance they
received.32
Extent of SBA Management and Technical Training Assistance, by
Developmental Stage
As shown in Table 1, the survey indicated that SBDCs, WBCs, and SCORE served businesses at
al three stages of development, with 44% of SBDC clients being either a nascent (25%) or
startup (19%) client; 55% of SCORE clients being either a nascent (33%) or startup (22%) client;
and 47% of WBC clients being either a nascent (32%) or startup (15%) client.

29 SBA, Fiscal Year 2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 89, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report.
30 SBA, Fiscal Year 2021 Congressional Budget Justification.
31 SBA, Office of Entrepreneurial Development, “Impact Study of Entrepreneurial Development Resources,”
September 10, 2009, p. 2, at https://www.sba.gov/sites/default/files/2009%20ED%20Impact%20Report.pdf.
32 SBA, Office of Entrepreneurial Development, “Impact Study of Entrepreneurial Dynamics: Office of Entrepreneurial
Development Resource Partners’ Face-to-Face Counseling,” September 2012, p. 70, at https://www.sba.gov/sites/
default/files/files/SBA_Converted_2012_d.pdf.
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Table 1. SBA Management and Technical Assistance Training Programs’ Clients,
Percentage by Client Business Development Stage, 2011
SBA Resource Partner
Nascent
Startup
In-Business
Total
Smal Business Development
25%
19%
56%
100%
Centers
SCORE
33%
22%
45%
100%
Women Business Centers
32%
15%
53%
100%
Source: U.S. Smal Business Administration, Office of Entrepreneurial Development, “Impact Study of
Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,”
September 2012, pp. 5, 9, at https://www.sba.gov/sites/default/files/files/SBA_Converted_2012_d.pdf.
Notes: The survey’s authors defined nascent clients as individuals who have taken one or more steps to start a
business; startup clients as individuals who have been in business one year or less; and in-business clients as
individuals who have been in business more than one year and their business was classified as smal by the SBA.
Impact of the SBA’s Management and Technical Training Assistance, by
Developmental Stage
The survey asked SBA management and training assistance participants if they thought that the
information they received from counselors was extremely useful, useful, no opinion, somewhat
useful, or not useful. As shown in Table 2, most of the SBDC, WBC, and SCORE clients that
responded to the survey, including both nascent and startup clients, rated the usefulness of the
information provided during their face-to-face management and technical assistance training as
either extremely useful or useful.
Table 2. Usefulness of SBA Management and Technical Assistance Training Programs,
Percentage by Client Business Development Stage, 2011
(percentage responding extremely useful or useful)
SBA Resource Partner
Nascent
Startup
In-Business
Overall
Smal Business Development
81%
81%
76%
79%
Centers
SCORE
76%
72%
71%
73%
Women Business Centers
75%
84%
78%
79%
Source: U.S. Smal Business Administration, Office of Entrepreneurial Development, “Impact Study of
Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,”
September 2012, pp. 38, 50, 62, at https://www.sba.gov/sites/default/files/files/SBA_Converted_2012_d.pdf.
Notes: The survey’s authors defined nascent clients as individuals who have taken one or more steps to start a
business; startup clients as individuals who have been in business one year or less; and in -business clients as
individuals who have been in business more than one year and their business was classified as smal by the SBA.
The survey also asked SBA management and training assistance participants if they had changed
their management practices or strategies as a result of the SBA management and technical
assistance training they received. As shown in Table 3, more than half of SBDC and SCORE
startup clients that responded to the survey reported that they had changed their management
practices or strategies as a result of the SBA management and technical assistance training they
received, slightly less than the percentages reported by in-business clients. In comparison, three-
quarters of WBC startup clients that responded to the survey reported that they changed their
management practices or strategies as a result of the assistance they received, somewhat higher
than the percentage reported by in-business clients.
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Table 3. Percentage of Businesses That Changed Their Management
Practices/Strategies As a Result of the SBA Management and Technical Assistance
Training Received, by Client Business Development Stage, 2011
(percentage responding yes)
SBA Resource Partner
Startup
In-Business
Smal Business Development Centers
56%
60%
SCORE
57%
61%
Women Business Centers
75%
59%
Source: U.S. Smal Business Administration, Office of Entrepreneurial Development, “Impact Study of
Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,”
September 2012, pp. 40, 52, 64, at https://www.sba.gov/sites/default/files/files/SBA_Converted_2012_d.pdf.
Notes: The survey’s authors defined startup clients as individuals who have been in business one year or less;
and in-business clients as individuals who have been in business more than one year and their business was
classified as smal by the SBA.
As shown in Table 4, 14% of SBDC startup clients, 11% of SCORE startup clients, and 12% of
WBC startup clients of survey respondents reported that they agreed or strongly agreed with the
statement that the management and technical assistance training they received enabled them to
retain current staff, somewhat less than the percentages reported by in-business clients.
Table 4. Percentage of Businesses That Retained Current Staff As a Result of the
SBA Management and Training Technical Assistance Received, by Client Business
Development Stage, 2011
(percentage responding agree or strongly agree)
SBA Resource Partner
Startup
In-Business
Smal Business Development Centers
14%
26%
SCORE
11%
19%
Women Business Centers
12%
22%
Source: U.S. Smal Business Administration, Office of Entrepreneurial Development, “Impact Study of
Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,”
September 2012, pp. 42, 54, 66, at https://www.sba.gov/sites/default/files/files/SBA_Converted_2012_d.pdf.
Notes: The survey’s authors defined startup clients as individuals who have been in business one year or less;
and in-business clients as individuals who have been in business more than one year and their business was
classified as smal by the SBA.
As shown in Table 5, 13% of SBDC startup clients, 10% of SCORE startup clients, and 10% of
WBC startup clients that responded to the survey reported that they either agreed or strongly
agreed with the statement that the SBA management and technical assistance training they
received enabled them to hire new staff, somewhat less than the percentages reported by in-
business clients.
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Table 5. Percentage of Businesses That Hired New Staff As a Result of the SBA
Management and Training Technical Assistance Received, by Client Business
Development Stage, 2011
(percentage responding agree or strongly agree)
SBA Resource Partner
Startup
In-Business
Smal Business Development Centers
13%
20%
SCORE
10%
16%
Women Business Centers
10%
15%
Source: U.S. Smal Business Administration, Office of Entrepreneurial Development, “Impact Study of
Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,”
September 2012, pp. 42, 54, 66, at https://www.sba.gov/sites/default/files/files/SBA_Converted_2012_d.pdf.
Notes: The survey’s authors defined startup clients as individuals who have been in business one year or less;
and in-business clients as individuals who have been in business more than one year and their business was
classified as smal by the SBA.
As shown in Table 6, 30% of SBDC startup clients, 24% of SCORE startup clients, and 31% of
WBC startup clients that responded to the survey reported that they either agreed or strongly
agreed with the statement that the SBA management and technical assistance training they
received had a positive impact on their profit margin, somewhat less than the percentages
reported by in-business clients.
Table 6. Percentage of Businesses That Experienced an Increase in Their Profit
Margin As a Result of the SBA Management and Training Technical Assistance
Received, by Client Business Development Stage, 2011
(percentage responding agree or strongly agree)
SBA Resource Partner
Startup
In-Business
Smal Business Development Centers
30%
32%
SCORE
24%
28%
Women Business Centers
31%
34%
Source: U.S. Smal Business Administration, Office of Entrepreneurial Development, “Impact Study of
Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,”
September 2012, pp. 42, 54, 66, at https://www.sba.gov/sites/default/files/files/SBA_Converted_2012_d.pdf.
Notes: The survey’s authors defined startup clients as individuals who have been in business one year or less;
and in-business clients as individuals who have been in business more than one year and their business was
classified as smal by the SBA.
The SBA’s Growth Accelerators Initiative
Growth accelerators are organizations that help entrepreneurs start and scale their business.
Accelerators are typical y run by experienced entrepreneurs and help smal businesses, especial y
startups, “access seed capital, mentors, and networking opportunities” and provide “targeted
advice on revenue growth, job growth, and sourcing outside funding.”33 In 2012, the SBA hosted
four regional events (Northeast, Midwest, South, and Mid-Atlantic), which were attended by

33 SBA, FY2016 Congressional Budget Justification and FY2014 Annual Performance Report, p. 81, at
https://www.sba.gov/sites/default/files/1-FY%202016%20CBJ%20FY%202014%20APR.PDF.
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representatives “from over 100 universities and accelerators to discuss working with high-growth
entrepreneurs.”34 These meetings “culminated in a White House event co-hosted by the SBA and
the Department of Commerce which wil help formalize the network of universities and
accelerators, provide a series of ‘train the trainer’ events on various government programs that
benefit high-growth entrepreneurs, and provide a playbook of best practices on engaging
universities on innovation and entrepreneurship.”35
The Obama Administration requested $5.0 mil ion, and Congress recommended an appropriation
of $2.5 mil ion, for the SBA’s growth accelerator initiative for FY2014. The SBA proposed to use
the funding to provide matching grants to universities and private-sector accelerators “to start a
new accelerator program (based on successful models) or scale an existing program.”36 The SBA
also indicated that it planned to request funding for five years ($25 mil ion in total funding) and
feature a required 4:1 private-sector match.37 However, because it received half of its budget
request ($2.5 mil ion), the SBA decided to reconsider the program’s requirements. As part of that
reconsideration, the SBA dropped the 4:1 private-sector match in an effort to enable the program
to have a larger effect.38
On May 12, 2014, the SBA announced the availability of 50 growth accelerator grants of $50,000
each. It received more than 800 applications by the August 2, 2014, deadline. The 50 awards were
announced in September 2014.39
Congress subsequently recommended that the program receive $4 mil ion in FY2015, $1 mil ion
in FY2016, FY2017, and FY2018, and $2 mil ion in FY2019, FY2020, and FY2021 under the
Continuing Appropriations Act (funding through December 11, 2020).40 Congress also directed

34 SBA, FY2014 Congressional Budget Justification and FY2012 Annual Performance Report, p. 59, at
http://www.sba.gov/sites/default/files/files/1-FY%202014%20CBJ%20FY%202012%20APR.PDF (hereinafter SBA,
FY2014 Congressional Budget Justification ).
35 SBA, FY2014 Congressional Budget Justification, pp. 59-60.
36 SBA, FY2014 Congressional Budget Justification, p. 60.
37 SBA, FY2014 Congressional Budget Justification.
38 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” May 6, 2014.
39 SBA, “SBA Launches Accelerator Competition to Award $2.5 million for Small Business Startups,” May 12, 2014,
at https://www.sba.gov/content/sba-launches-accelerator-competition-award-25-million-small-business-startups-0;
SBA, “ More than 800 Small Business Startups Compete for 50 Cash Prizes in SBA’s Growth Accelerator
Competition,” August 4, 2014, at https://www.sba.gov/content/more-800-small-business-startups-compete-50-cash-
prizes-sbas-growth-accelerator-competition; and SBA, “ SBA Spurs Economic Growth, Announces 50 Awards to
Accelerators,” September 4, 2014, at https://www.sba.gov/content/sba-spurs-economic-growth-announces-50-awards-
accelerators.
40 Rep. Harold Rogers, “Explanatory Statement Submitted by Mr. Rogers of Kentucky, Chairman of the House
Committee on Appropriations Regarding the House Amendment to the Senat e Amendment on H.R. 83,” Congressional
Record, vol. 160, part 151 (December 11, 2014), p. H9740; Rep. Harold Rogers, “ Explanatory Statement Submitted By
Mr. Rogers of Kentucky, Chairman of the House Committee on Appropriations Regarding House Amendment No . 1 to
the Senate Amendment on H.R. 2029 Consolidated Appropriations Act,” Congressional Record, vol. 161, no. 184-
Book II (December 17, 2015), p. H10139 ; Rep. Rodney Frelinghuysen, “ Explanatory Statement Submitted By Mr.
Frelinghuysen of New Jersey, Chairman of the House Committee on Appropriations Regarding the House Amendment
to the Senate Amendments on H.R. 244 [the Consolidated Appropriations Act, 2017],” Congressional Record, vol. 163,
no. 76-Book II (May 3, 2017), p. H3786; “ Explanatory Statement Submitted by Mr. Frelinghuysen, Chairman of the
House Committee on Appropriations Regarding the House Amendment to the Senate Amendments on H.R. 1625 [the
Consolidated Appropriations Act, 2018] (Division E – Financial Services and General Government Approp riations Act,
2018),” p. 87, at http://docs.house.gov/billsthisweek/20180319/
DIV%20E%20FSGG%20SOM%20FY18%20OMNI.OCR.pdf ; P.L. 116-6, the Consolidated Appropriations Act, 2019,
H.Rept. 116-9, conference report accompanying the Consolidated Appropriations Act, 2019; and Rep. Nita M. Lowey,
“Explanatory Statement Submitted by Mrs. Lowey, Chair-Woman of the House Committee on Appropriations
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the SBA in its explanatory statements accompanying P.L. 113-235 and P.L. 114-113 to “require $4
of matching funds for every $1 awarded under the growth accelerators program.”41
The SBA announced the award of 80 growth accelerator grants of $50,000 each on August 4,
2015 ($4 mil ion), 68 on August 31, 2016 ($3.4 mil ion), 20 on October 30, 2017 ($1 mil ion),
and 60 on September 26, 2019 ($3 mil ion). The SBA also announced the availability of 60
growth accelerator grants of $50,000 each on February 6, 2020 ($3 mil ion).42 The SBA did not
issue a competitive announcement for Growth Accelerator awards in FY2018.
Reports from the first round of awardees indicated that more than 1,000 smal businesses
graduated from the accelerators initiative, with each accelerator graduating about 10 smal
businesses per year. Award recipients also reported supporting the creation or retention of nearly
4,800 jobs.43
The Trump Administration requested that the program receive no funding in FY2018, FY2019,
FY2020, and FY2021.44
During the 116th Congress, H.R. 4387 (to establish Growth Accelerator Fund Competition within
the Smal Business Administration, and for other purposes) would provide the Growth
Accelerators initiative statutory authorization. Similar legislation was introduced during the 115th
Congress (H.R. 2686).

Regarding H.R. 1158, Consolidated Appropriations Act, 2020,” House debate, Congressional Record, vol. 165, part
No. 204-Book II (December 17, 2019), p. H10994; and P.L. 116-159, Continuing Appropriations Act, 2021 and Other
Extensions Act .
41 Rep. Harold Rogers, “Explanatory Statement Submitted by Mr. Rogers of Kentucky, Chairman of the House
Committee on Appropriations Regarding the House Amendment to the Senate Amendment on H.R. 83,” Congressional
Record, vol. 160, part 151 (December 11, 2014), p. H974 1; and Rep. Harold Rogers, “ Explanatory Statement
Submitted By Mr. Rogers of Kentucky, Chairman of the House Committee on Appropriations Regarding House
Amendment No. 1 to the Senate Amendment on H.R. 2029 Consolidated Appropriations Act,” Congressional Record,
vol. 161, no. 184-Book II (December 17, 2015), p. H101 40.
42 SBA, “SBA Boosts Economic Impact of Accelerators with $4.4 Million in Prizes,” August 4, 2015, at
https://www.sba.gov/content/sba-boosts-economic-impact -accelerators-44-million-prizes-0; SBA, “ SBA Announces
$3.4 Million for Small Business Startups,” August 31, 2016, at https://www.sba.gov/content/sba-announces-34-million-
small-business-startups; SBA, “ SBA Announces 20 Growth Accelerator Fund Competition Recipients,” October 30,
2017, at https://www.sba.gov/node/1594788; SBA, “ SBA Announces $3 Million for 60 Growth Accelerator Fund
Competition Recipients Supporting Startups and ST EM Focused Entrepreneurs,” September 26, 2019, at
https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-announces-3-million-60-growth-
accelerator-fund-competition-recipients-supporting-startups-and; and SBA, “ SBA Announces $3 Million for 60 Growth
Accelerator Fund Competition Recipients Supporting Startups and ST EM Focused Entrepreneurs,” February 6, 2020, at
https://www.sba.gov/article/2020/feb/06/sba-announces-3-million-60-growth-accelerator-fund-competition-recipients-
supporting-startups-stem.
43 SBA, FY2017 Congressional Budget Justification and FY2015 Annual Performance Report, p. 85, at
https://www.sba.gov/sites/default/files/FY17-CBJ_FY15-APR.pdf.
44 SBA, FY2018 Congressional Budget Justification and FY2016 Annual Performance Report, p. 12, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/FINAL_SBA_FY_2018_CBJ_May_22_2017c.pdf ; SBA,
FY2019 Congressional Budget Justification and FY2017 Annual Perform ance Report , p. 13, at https://www.sba.gov/
sites/default/files/aboutsbaarticle/SBA_FY_2019_CBJ_APR_2_12_post.pdf; SBA, FY2020 Congressional Budget
Justification and FY2018 Annual Perform ance Report, p. 11, at https://www.sba.gov/sites/default/files/2019-04/
SBA%20FY%202020%20Congressional%20Justification_final%20508%20%204%2023%20201 9.pdf; and SBA,
FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 11, at https://www.sba.gov/
document/report —congressional-budget-justification-annual-performance-report.
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SBA Lending Programs
The SBA’s business lending programs are designed to encourage lenders to provide loans to
smal businesses “that might not otherwise obtain financing on reasonable terms and
conditions.”45 Historical y, the SBA’s lending programs have been justified on the grounds that
smal businesses can be at a disadvantage, compared with other businesses, when trying to obtain
access to sufficient capital and credit.46 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.47
In FY2020, the SBA enhanced smal business access to capital by approving about $28.4 bil ion
in loans to smal businesses. The SBA’s two largest loan guaranty programs are the 7(a) loan
guaranty program (nearly $22.6 bil ion approved in FY2020) and the 504/CDC loan guaranty
program (over $5.8 bil ion approved in FY2020). In addition, the SBA’s Microloan program,
which includes startups among its targeted audiences, provides direct loans to 144 active
nonprofit intermediary Microloan lenders to provide “microloans” of up to $50,000 to smal
business owners, entrepreneurs, and nonprofit child care centers. The Microloan program
provided $81.5 mil ion in loans to smal businesses in FY2019.48
The SBA’s 7(a), 504/CDC, and Microloan Programs
7(a) Loan Guaranty Program49
The SBA’s 7(a) loan guaranty program is considered the agency’s flagship loan guaranty
program.50 It is named from Section 7(a) of the Smal Business Act of 1953 (P.L. 83-163, as
amended), which authorizes the SBA to provide business loans to American smal businesses.
The SBA provides participating, certified lenders a guaranty of repayment in the case of a default
of up to 85% of qualified loan amounts of $150,000 or less and up to 75% of qualified loan
amounts exceeding $150,000 to the program’s loan limit of $5 mil ion.

45 SBA, Fiscal Year 2010 Congressional Budget Justification, p. 30, at https://www.sba.gov/sites/default/files/
aboutsbaarticle/Congressional_Budget_Justification_2010.pdf.
46 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.
47 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, at http://www.aei.org/wp-
content/uploads/2011/10/20060414_wp126.pdf. Also, see U.S. Government Accountability Office, Sm all Business
Adm inistration: 7(a) Loan Program Needs Addition al Perform ance Measures, GAO-08-226T , November 1, 2007, pp.
3, 9-11, at http://www.gao.gov/new.items/d08226t.pdf.
48 SBA, “Microloan Nationwide Loan Report, October 1, 2018 through September 30, 2019,” October 8, 2019.
49 For further information and analysis concerning the SBA’s 7(a) program , see CRS Report R41146, Small Business
Adm inistration 7(a) Loan Guaranty Program , by Robert Jay Dilger.
50 U.S. Congress, House Committee on Small Business, Subcommittee on Finance and T ax, Subcommittee Hearing on
Improving the SBA’s Access to Capital Programs for Our Nation’s Small Business, 110th Cong., 2nd sess., March 5,
2008, H.Hrg. 110-76 (Washington: GP O, 2008), p. 2.
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Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation,
acquisition, or expansion of an existing business. Specific uses include to acquire land (by
purchase or lease); improve a site (e.g., grading, streets, parking lots, and landscaping); purchase,
convert, expand, or renovate one or more existing buildings; construct one or more new
buildings; acquire (by purchase or lease) and instal fixed assets; purchase inventory, supplies,
and raw materials; finance working capital; and refinance certain outstanding debts.51
504 Certified Development Company Loan Guaranty Program52
The SBA’s 504 Certified Development Company (504/CDC) loan guaranty program provides
long-term fixed rate financing for major fixed assets, such as land, buildings, equipment, and
machinery. A 504/CDC loan cannot be used for working capital or inventory. It is named from
Section 504 of the Smal Business Investment Act of 1958 (P.L. 85-699, as amended), which
authorized the sale of debentures pursuant to Section 503 of the act, which previously authorized
the program.53
The 504/CDC program is administered through nonprofit CDCs. Of the total project costs, a
third-party lender must provide at least 50% of the financing, the CDC provides up to 40% of the
financing backed by a 100% SBA-guaranteed debenture, and the applicant provides at least 10%
of the financing.
The SBA’s debenture is backed with the full faith and credit of the United States and is sold to
underwriters who form debenture pools. Investors purchase interests in the debenture pools and
receive certificates representing ownership of al or part of the pool. The SBA and CDCs use
various agents to facilitate the sale and service of the certificates and the orderly flow of funds
among the parties.54 After a 504/CDC loan is approved and disbursed, accounting for the loan is
set up at the Central Servicing Agent (CSA, currently PricewaterhouseCoopers Public Sector
LLP), not the SBA. The SBA guarantees the timely payment of the debenture. If the smal
business is behind in its loan payments, the SBA pays the difference to the investor on every
semiannual due date.
The 504/CDC program is somewhat unique in that borrowers must meet one of two specified
economic development objectives. First, borrowers, other than smal manufacturers, must create
or retain at least one job for every $75,000 of project debenture. Borrowers who are smal
manufacturers must create or retain one job per $120,000 of project debenture. The jobs created
do not have to be at the project facility, but 75% of the jobs must be created in the community
where the project is located. Using job retention to satisfy this requirement is al owed only if the

51 13 C.F.R. §120.120.
52 For further information and analysis of the SBA’s 504/CDC program , see CRS Report R41184, Small Business
Adm inistration 504/CDC Loan Guaranty Program , by Robert Jay Dilger.
53 T he 504/CDC program was preceded by a 501 state development company program (1958 -1982), a 502 local
development company program (1958-1995), and a 503/CDC program (1980-1986). The 504/CDC program started in
1986. T here are a small number of for-profit CDCs that participated in these predecessor programs that have been
grandfathered into the current 504/CDC program. See SBA, “ SOP 50 10 5(G): Lender and Development Company
Loan Programs,” (effective October 1, 2014), p. 43, at https://www.sba.gov/sites/default/files/sops/
SOP%2050%2010%205%20G%20FINALWEB%20VERSION%20 -%20CLEAN%20Eff,%2010-1-2014.pdf.
54 13 C.F.R. §120.801. 504/CDC debentures are normally sold and proceeds disbursed on the Wednesday after the
second Sunday of each month. See SBA, “ SOP 50 10 5(I): Lender and Development Company Loan Programs,”
(effective January 1, 2017), pp. 295-297, at https://www.sba.gov/sites/default/files/sops/
SOP_50_10_5_I_FINAL_Clean_Highlighted_Changes.pdf .
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CDC “can reasonably show that jobs would be lost to the community if the project was not
done.”55
Second, if the borrower does not meet the job creation or retention requirement, the borrower can
retain eligibility by meeting (1) any 1 of 5 community development goals, (2) any 1 of 10 public
policy goals, or (3) any 1 of 3 energy reduction goals provided that the CDC’s overal portfolio of
outstanding debentures meets or exceeds the job creation or retention criteria of at least 1 job
opportunity created or retained for every $75,000 in project debenture (or for every $85,000 in
project debenture for projects located in special geographic areas such as Alaska, Hawai , state-
designated enterprise zones, empowerment zones, enterprise communities, labor surplus areas, or
opportunity zones).56 Loans to smal manufacturers are excluded from the calculation of this
average.57
The Microloan Program58
The SBA’s Microloan program was authorized in 1991 (P.L. 102-140, the Departments of
Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1992) as a
five-year demonstration program to address the perceived disadvantages faced by very smal
businesses in gaining access to capital. The program became operational in 1992, and it was made

55 SBA, “SOP 50 10 5(J): Lender and Development Company Loan Programs,” (effective January 1, 2018), p. 297, at
https://www.sba.gov/sites/default/files/2017-12/
SOP%2050%2010%205%28J%29_Technical%20Corrections%20%28FINAL%29_1.pdf .
56 SBA, “Development Company Loan Program - Job Creation and Retention Requirements; Additional Areas for
Higher Portfolio Average,” 83 Federal Register 55225-55226, November 2, 2018. Previously, P.L. 108-447, the Small
Business Reauthorization and Manufacturing Assistance Act of 2004, had set these thresholds as: at least one job
opportunity per every $50,000 guaranteed by the Administration and per every $75,000 guaranteed by the
Administration for small manufactures. P.L. 111-5, the American Recovery and Reinvestment Act of 2009 , increased
the $50,000 threshold to every $65,000 guaranteed by the Administration.
T he five community development goals are improving, diversifying, or stabilizing the economy of the locality;
stimulating other business development; bringing new income into the community; assisting manufacturing firms; or
assisting businesses in labor surplus areas as defined by the U.S. Department of Labor.
T he 10 public policy goals are revitalizing a business district of a community with a written revitalization or
redevelopment plan; expanding exports; expanding the development of women -owned and -controlled small
businesses; expanding small businesses owned and controlled by veterans (especially service -disabled veterans);
expanding minority enterprise development; aiding rural development; increasing productivity and competitiveness
(e.g., retooling, robotics, modernization, and competition with imports); modernizing or upgrading facilities to meet
health, safety, and environmental requirements; assisting businesses in or moving to areas affected by federal budget
reductions, including base closings, either because of the loss of federal contracts or the reduction in revenues in the
area due to a decreased federal presence; or reducing unemployment rates in labor sur plus areas, as defined by the U.S.
Department of Labor.
T he three energy reduction goals are reducing existing energy consumption by at least 10%; increasing the use of
sustainable designs, including designs that reduce the use of greenhouse gas-emitting fossil fuels or low-impact design
to produce buildings that reduce the use of nonrenewable resources and minimize environmental impact; and upgrading
plant, equipment, and processes involving renewable energy sources such as the small-scale production of energy for
individual buildings’ or communities’ consumption, commonly known as micropower, or renewable fuel producers
including biodiesel and ethanol producers.
57 A job opportunity is defined as a full-time (or equivalent) permanent , or contracted, job created within two years of
receipt of 504/CDC funds or retained in the community because of a 504/CDC loan . See SBA, “ SOP 50 10 5(J):
Lender and Development Company Loan Programs,” effective January 1, 2018, p. 2 56, at https://www.sba.gov/
document/sop-50-10-5-lender-development-company-loan-programs.
58 For further information and analysis concerning the SBA’s Microloan program , see CRS Report R41057, Small
Business Adm inistration Microloan Program , by Robert Jay Dilger.
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permanent, subject to reauthorization, in 1997 (P.L. 105-135, the Smal Business Reauthorization
Act of 1997). Its stated purpose is
to assist women, low-income, veteran ... and minority entrepreneurs and business owners
and other individuals possessing the capability to operate successful business concerns; to
assist small business concerns in those areas suffering from a lack of credit due to economic
downturns; ... to make loans to eligible intermediaries to enable such intermediaries to
provide small-scale loans, particularly loans in amounts averaging not more than $10,000,
to start-up, newly established, or growing small business concerns for working capital or
the acquisition of materials, supplies, or equipment; [and] to make grants to eligible
intermediaries that, together with non-Federal matching funds, will enable such
intermediaries to provide intensive marketing, management, and technical assistance to
microloan borrowers.59
The maximum Microloan amount is $50,000 and no borrower may owe an intermediary more
than $50,000 at any one time.60 Microloan proceeds may be used only for working capital and
acquisition of materials, supplies, furniture, fixtures, and equipment. Loans cannot be made to
acquire land or property, and must be repaid within seven years.61 Within these parameters, loan
terms vary depending on the loan’s size, the planned use of funds, the requirements of the
intermediary lender, and the needs of the smal business borrower. Interest rates are negotiated
between the borrower and the intermediary (within statutory limits), and typical y range from 7%
to 9%.62 Each intermediary establishes its own lending and credit requirements. However,
borrowers are general y required to provide some type of collateral, and a personal guarantee to
repay the loan. The SBA does not review the loan for creditworthiness.63
Program Performance
The SBA maintains a relatively extensive output database for its business lending programs (e.g.,
number and amount of loans approved and disbursed by program and by year; number and
amount of loans approved and disbursed by program and by year to various demographic groups,
including startups; number and amount of loans approved and disbursed by program by state;
amount of loan purchases and recoveries by program and by year). It also asks borrowers to
report information concerning the impact the loans have on job creation and retention.
As wil be shown, these data suggest that the SBA provides lending support to smal businesses at
al stages of development, but to varying degrees, with the Microloan program providing a
relatively higher share of its lending to startups than the 7(a) and 504/CDC programs. The data
also suggest that these programs have a general y positive impact on job creation and retention,
but, as wil be discussed, the data are self-reported and subject to methodological limitations.
Extent of SBA Lending Assistance, by Developmental Stage
As expected given their missions, the Microloan program provides a greater percentage of its loan
proceeds to startups (30.0% of total loan disbursements in FY2020) than do the 7(a) program

59 15 U.S.C. §636 7(m)(1)(A).
60 13 C.F.R. §120.707. P.L. 111-240, the Small Business Jobs Act of 2010, increased the loan limit for borrowers from
$35,000 to $50,000.
61 SBA, “Express Loan Programs; Affiliation Standards,” 85 Federal Register 7632, February 10, 2020.
62 In FY2019, Microloan borrowers were charged, on average, an interest rate of 7.513%. See SBA, “Microloan
Nationwide Loan Report, October 1, 2018 through September 30, 2019,” October 8 , 2019.
63 SBA, “Microloan Program,” at https://www.sba.gov/content/microloan-program.
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(13.8% of total approved loan amounts in FY2020) and the 504/CDC program (14.5% of total
approved loan amounts in FY2020).64
SBA Venture Capital Programs
The SBA has two venture capital programs. The SBIC program, authorized by P.L. 85-699, the
Smal Business Investment Act of 1958, as amended, is the SBA’s flagship venture capital
program.65 It is designed to “improve and stimulate the national economy in general and the smal
business segment thereof in particular” by stimulating and supplementing “the flow of private
equity capital and long-term loan funds which smal business concerns need for the sound
financing of their business operations and for their growth, expansion, and modernization, and
which are not available in adequate supply.”66 The SBA also sponsors the much smal er New
Markets Venture Capital Program, which is not discussed here given its relatively smal size
($1.65 mil ion in financing to four smal businesses in FY2015, and no new financing since then).
It is designed to promote economic development and the creation of wealth and job opportunities
in low-income geographic areas by addressing the unmet equity investment needs of smal
businesses located in those areas.67
The SBIC Program
The SBA does not make direct investments in smal businesses. It partners with privately owned
and managed SBICs licensed by the SBA to provide financing to smal businesses with private
capital the SBIC has raised (cal ed regulatory capital) and with funds (cal ed leverage) the SBIC
borrows at favorable rates because the SBA guarantees the debenture (loan obligation). As of
June 30, 2020, there were 303 licensed SBICs participating in the SBIC program.68
A licensed debenture SBIC in good standing, with a demonstrated need for funds, may apply to
the SBA for financial assistance (leverage) of up to 300% of its private capital. However, the SBA
has traditional y approved debenture SBICs for a maximum of 200% of their private capital and
no fund management team may exceed the al owable maximum amount of leverage of $175
mil ion per SBIC and $350 mil ion for two or more licenses under common control.69
SBICs pursue investments in a broad range of industries, geographic areas, and stages of
investment. Some SBICs specialize in a particular field or industry, while others invest more

64 SBA, “Microloan Nationwide Loan Report, October 1, 201 8 through September 30, 2019,” October 8, 2019; and
SBA, “SBA Lending Statistics for Major Programs as of (9-30-2020),” at https://www.sba.gov/sites/default/files/2020-
10/WebsiteReport_asof_20200930-508.pdf.
65 For further information and analysis of the SBA’s SBIC program, see CRS Report R41456, SBA Small Business
Investm ent Com pany Program , by Robert Jay Dilger.
66 15 U.S.C. §661.
67 For further information and analysis of the SBA’s New Markets Venture Capital program, see CRS Report R42565,
SBA New Markets Venture Capital Program , by Robert Jay Dilger.
68 SBA, “SBIC Program Overview as of June 30, 2020,” at https://www.sba.gov/article/2020/aug/13/quarterly-data-
june-30-2020.
69 13 C.F.R. §107.1120; 13 C.F.R. §107.1150; P.L. 114-113, the Consolidated Appropriations Act, 2016, which
increased the multiple licenses/family of funds limit to $350 million from $225 million ; and P.L. 115-187, the Small
Business Investment Opportunity Act of 2017, which increased the maximum amount of leverage for individual SBICs
to $175 million from $150 million.
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general y. Most SBICs concentrate on a particular stage of investment (i.e., startup, expansion, or
turnaround) and geographic area.
SBICs provide equity capital to smal businesses in various ways, including by
 purchasing smal business equity securities (e.g., stock, stock options, warrants,
limited partnership interests, membership interests in a limited liability company,
or joint venture interests);70
 making loans to smal businesses, either independently or in cooperation with
other private or public lenders, that have a maturity of no more than 20 years;71
 purchasing debt securities from smal businesses;72 and
 providing smal businesses (subject to limitations) a guarantee of their monetary
obligations to creditors not associated with the SBIC.73
The SBIC program currently has invested or committed about $32.0 bil ion in smal businesses,
with the SBA’s share of capital at risk about $14.0 bil ion. In FY2019, the SBA provided nearly
$1.93 bil ion to SBICs. SBICs invested another $3.94 bil ion from private capital for a total of
$5.87 bil ion in financing for 1,191 smal businesses.74
Extent of SBIC Financial Assistance, by Developmental Stage
The SBIC program provides financing to small businesses at al developmental stages, with most
of its financing provided to businesses that have been in operation for at least five years. The
amount of SBIC financing provided to startups (defined as being in operation for one year or less)
as a share of SBIC financing has increased somewhat since FY2014 (16.5% in FY2014, 17.9% in
FY2015, 15.3% in FY2016, 19.3% in FY2017, 23.0% in FY2018, and 20.6% in FY2019).75
Early Stage Debenture SBIC Initiative
In 2012, the Obama Administration established the early stage debenture SBIC initiative to
encourage additional SBIC investments in startups (up to $150 mil ion in SBIC leverage in
FY2012, and up to $200 mil ion in SBIC leverage per fiscal year thereafter until the initiative’s
$1 bil ion limit was reached).76 Early stage debenture SBICs are required to invest at least 50% of
their financings in early stage smal businesses, defined as smal businesses that have never
achieved positive cash flow from operations in any fiscal year.77

70 13 C.F.R. §107.800. A SBIC is not allowed to become a general partner in any unincorporated business or become
jointly or severally liable for any obligations of an unincorporated business.
71 13 C.F.R. §107.810; and 13 C.F.R. §107.840.
72 13 C.F.R. §107.815. Debt securities are instruments evidencing a loan with an option or any other right to acquire
equity securities in a small business or its affiliates, or a loan which by its terms is convertible into an equity position,
or a loan with a right to receive royalties that are excluded from the cost of money.
73 13 C.F.R. §107.820.
74 SBA, “SBIC Program: Fiscal Year Data for the period ending December 31, 2019,” at https://www.sba.gov/article/
2020/feb/25/quarterly-data-december-31-2019.
75 SBA Office of Congressional and Legislative Affairs, “Correspondence with the author,” December 20, 2018 and
March 26, 2019.
76 SBA, “Small Business Investment Companies - Early Stage SBICs,” 77 Federal Register 25043, 25050, April 27,
2012.
77 SBA, “Small Business Investment Companies - Early Stage SBICs,” 77 Federal Register 25051, 25053, April 27,
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In recognition of the higher risk associated with investments in early stage smal businesses, the
initiative includes “several new regulatory provisions intended to reduce the risk that an early
stage SBIC would default on its leverage and to improve SBA’s recovery prospects should a
default occur.”78 For example, early stage debenture SBICs are required to raise more regulatory
capital (at least $20 mil ion) than debenture SBICs (at least $5 mil ion). They are also subject to
special distribution rules to require pro rata repayment of SBA leverage when making
distributions of profits to their investors. In addition, early stage debenture SBICs are also
provided less leverage (up to 100% of regulatory capital, $50 mil ion maximum) than debenture
SBICs (up to 200% of regulatory capital, $150 mil ion maximum per SBIC and $225 mil ion for
two or more SBICs under common control).
On May 1, 2012, the SBA announced its first annual cal for venture capital fund managers to
submit an application to become a licensed early stage debenture SBIC.79 Thirty-three venture
capital funds submitted preliminary application materials. After these materials were examined
and interviews held, the SBA announced on October 23, 2012, that it had issued Green Light
letters to six funds, formal y inviting them to file license applications.80
The SBA’s second, third, fourth, and fifth annual cal s for venture capital fund managers to
submit an application to become a licensed early stage debenture SBIC took place on December
18, 2012, February 4, 2014, January 12, 2015, and February 2, 2016, respectively.81
Five of the 63 investment funds that applied to participate in the program were granted an early
stage SBIC license.82 As of September 30, 2019, the five early stage SBICs had raised $251.3
mil ion in private capital, received $152.5 mil ion in SBA-guaranteed leverage, had $29.7 mil ion
in outstanding commitments, and invested $307.1 mil ion in 88 smal businesses. In FY2019,
early stage SBICs invested $39.6 mil ion in 30 smal businesses.83
On September 19, 2016, the SBA published a notice of proposed rulemaking in the Federal
Register, which included proposed changes to the early stage SBIC initiative to “make material

2012.
78 SBA, “Small Business Investment Companies - Early Stage SBICs,” 77 Federal Register 25043, April 27, 2012.
79 T he deadline for completing the four-step application process for applicants with signed commitments for at least
$15 million in regulatory capital and evidence of their ability to raise the remaining $5 million in regulatory capi tal was
July 30, 2012. T he deadline for all other applicants was May 15, 2013 . Applicants must first complete a Management
Assessment Questionnaire (MAQ), then, if invited, complete an interview process, then receive a Green Light letter,
and, finally, submit the SBIC license application, consisting of SBA Form 2181 and SBA Form 2182. See SBA, “ Small
Business Investment Companies—Early Stage SBICs,” 77 Federal Register 25775-25779, May 1, 2012.
80 SBA, “ SBA’s Growth Capital Program Sets Record For T hird Year in a Row $2.95 Billion in Financing for Small
Businesses in FY12,” at https://www.sba.gov/content/sbas-growth-capital-program-sets-record-third-year-row; and
SBA, “ T he Small Business Investment Company (SBIC) Program: Annual Report FY2012,” p. 20, at
https://www.sba.gov/sites/default/files/files/SBI C%20Program%20FY%202012%20Annual%20Report.pdf .
81 SBA, “Small Business Investment Companies—Early Stage SBICs,” 77 Federal Register 74908-74913, December
18, 2012; SBA, “ Small Business Investment Companies—Early Stage SBICs,” 79 Federal Register 6665, February 4,
2014; SBA, “ Small Business Investment Companies—Early Stage SBICs,” 79 Federal Register 18750, April 3, 2014;
SBA, “Small Business Investment Companies—Early Stage SBICs,” 80 Federal Register 1575-1579, January 12,
2015; and SBA, “ Small Business Investment Companies—Early Stage SBICs,” 81 Federal Register 5508-5511,
February 2, 2016.
82 SBA, “Small Business Investment Companies‒Early Stage,” 80 Federal Register 14034, March 18, 2015; and SBA,
Office of Innovation and Investment, slides, “ SBIC Early Stage Innovation Program,” at https://www.sba.gov/sites/
default/files/articles/OII_Early_Stage_Slide_Deck_January_2016.pdf.
83 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” March 26, 2020.
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improvements to the program” and “attract more qualified early stage fund managers.”84 The
SBA, at that time, indicated its intention to continue the initiative beyond its initial five-year
term.85 However, the SBA, under the Trump Administration, stopped accepting new applications
for the early stage SBIC initiative in 2017. In addition, on June 11, 2018, the SBA withdrew the
September 19, 2016, proposed rule that included provisions designed to encourage qualified
SBICs to participate in the initiative.86 The SBA indicated that it took this action “because very
few qualified funds applied to the Early Stage SBIC initiative, the costs were not commensurate
with the results, and the comments to the proposed rule did not demonstrate broad support for a
permanent Early Stage SBIC program.”87
It is too early to determine the extent to which the SBA’s decision to stop accepting new
applications for the early stage debenture initiative may affect the share and amount of total SBA
financing provided to startups.
Concluding Observations
The SBA has indicated, from the very start of the agency, that assisting smal businesses to create
and retain jobs is part of its mission. However, the SBA also has a long-established tradition of
providing assistance to al qualifying smal businesses. With some exceptions, the SBA has
general y not taken actions or requested authorization to focus its assistance solely onto those
businesses, such as startups, that are judged to be the ones most likely to contribute to job growth
or wealth creation. The tradition of providing SBA assistance to al qualified smal businesses
without regard to their potential for job growth or wealth creation is perhaps understandable given
that the tradition aligns with one of the SBA’s primary missions, which is to promote free
markets—by limiting monopoly and oligarchy formation within al industries. In addition, the
tradition of providing assistance to al qualified smal businesses has, for the most part, never
been chal enged by Congress or interested smal business organizations.
The SBA’s recent initiatives to focus increased attention to assisting startups (e.g., the Growth
Accelerators initiative and the recently sunset early stage debenture SBIC initiative) are less of a
chal enge to the SBA’s tradition of assisting al qualified smal businesses than a recognition of
the potential role of startups in job creation and concerns about the pace of job growth during the

84 SBA, “Small Business Investment Companies (SBIC); Early Stage Initiative,” 81 Federal Register 64075-64080,
September 19, 2016. T he proposed changes were based in part on feedback received on an earlier, advance notice of
proposed rulemaking. See SBA, “Small Business Investment Companies‒Early Stage,” 80 Federal Register 14034,
March 18, 2015. T he proposed changes would have allowed early stage applicants to apply at any time, similar to other
SBIC applicants, instead of only during limited time frames identified in the Federal Register (which the SBA has
published on an annual basis since 2012); allowed early stage SBICs to obtain an unsecured line of credit without SBA
approval under specified conditions; allowed an application from an applicant under common control with an existing
early stage SBIC that has outstanding debentures or debenture commitments; and increased the initiative’s maximum
leverage commitment of 100% of regulatory capital or $50 million, whichever is less, to 100% of regulatory capital or
$75 million, whichever is less.
85 SBA, “Small Business Investment Companies (SBIC); Early Stage Initiative,” 81 Federal Register 64075,
September 19, 2016.
86 SBA, “Small Business Investment Companies (SBIC); Early Stage Initiative,” 83 Federal Register 26875, June 11,
2018.
87 SBA, “Small Business Investment Companies (SBIC); Early Stage Initiative,” 83 Federal Register 26875, June 11,
2018.
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current economic recovery.88 For example, the SBA has offered the initiatives as supplements to,
rather than replacements of, existing programs.
As mentioned previously, the relatively “high risk-high reward” of targeting SBA assistance to
startups makes it tempting for some and controversial for others. Most who have participated in
these programs report in surveys sponsored by the SBA that the programs were useful. However,
determining if the risk of financial losses associated with targeting SBA assistance to startups
outweighs the startups’ potential for job growth is difficult because the data collected by the SBA
concerning these programs’ impact on economic activity and job creation are somewhat limited
and subject to methodological chal enges concerning their validity as reliable performance
measures.

Author Information

Robert Jay Dilger

Senior Specialist in American National Government

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

88 For additional information concerning the recently sunset early stage debenture SBIC initiative see SBA, “Small
Business Investment Companies - Early Stage SBICs,” 76 Federal Register 76907-76917, December 9, 2011; SBA,
“Small Business Investment Companies - Early Stage SBICs,” 77 Federal Register 25042-25055, April 27, 2012; and
CRS Report R41456, SBA Sm all Business Investm ent Com pany Program , by Robert Jay Dilger.
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