SBA Transition Issues

Much of the federal government, including the Small Business Administration (SBA), is in transition as the Trump Administration assumes leadership of the executive branch. At the SBA, among the Trump Administration's first tasks are to populate the SBA with its appointees, starting with new SBA Administrator Linda E. McMahon to succeed Maria Contreras-Sweet, and establish its policy agenda for small businesses. One of the first policy questions facing the Trump Administration is whether it will continue, modify, or end several Obama Administration initiatives, including 7(a) loan guaranty fee waivers, two targeted venture capital initiatives, and several management and training initiatives, among others.

The first indication of the Trump Administration's policy agenda for the SBA is contained in the Administration's "America First" budget blueprint. The FY2018 budget blueprint requests $826.5 million for SBA, a $43.2 million or 5% decrease from the 2017 annualized continuing resolution (CR) level, including reductions for several Obama Administration initiatives.

Appointments

There are 108 positions at the SBA that are subject to presidential, noncompetitive appointment, including the SBA Administrator, Deputy Administrator, Inspector General, and Chief Counsel for Advocacy (all requiring Senate confirmation), and various Associate Administrators, Regional Administrators, Directors, and other officers.

On January 24, 2017, the Senate Committee on Small Business and Entrepreneurship held a confirmation hearing concerning the nomination of Linda E. McMahon to be the next SBA Administrator. The committee approved her nomination on January 31, 2017, by a vote of 18-1. The Senate confirmed her nomination on February 14, 2017, by a vote of 81-19. Mrs. McMahon co-founded and served as chief executive officer of World Wrestling Entertainment Inc.

Policy Agenda

During her confirmation hearing testimony, Mrs. McMahon indicated her interest in examining the effectiveness of the SBA's disaster assistance program, focusing on ways to improve the program's loan processing times, retaining the SBA as a standalone federal agency (as opposed to merging the SBA into the Department of Commerce), strengthening the Office of Advocacy, and reexamining all SBA programs for efficiencies and effectiveness.

Obama Administration Initiatives

The Obama Administration sponsored several initiatives that will likely be part of the SBA's reexamination of its programs, including

  • the waiver of the up-front, one-time loan guaranty fee for 7(a) loans of $150,000 or less as a means to encourage the demand for smaller 7(a) loans;
  • the waiver of 50% of the up-front, one time loan guaranty fee for all non-SBA Express 7(a) loans to veterans of $150,001 to $500,000 as a means to promote veteran's access to capital;
  • several management and training initiatives, including the Boots to Business initiative, which offers entrepreneurship training for veterans transitioning to civilian life; the Boots to Business: Reboot initiative, which offers entrepreneurship training for veterans of all eras; the Entrepreneurial Education (Emerging Leaders) initiative, which offers leaders of high‚Äźgrowth small businesses in underserved communities more than 100 hours of professional, specialized training and peer-to-peer counseling delivered over the course of seven months; the Entrepreneurial Development (Clusters) initiative, which provides funds to promote on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and expand a particular industry or related set of industries in a particular geographic area; and the Growth Accelerators initiative, which provides funds to organizations that help entrepreneurs start and scale their businesses by helping them access seed capital and mentors;
  • the Impact Investment Debenture Small Business Investment Company (SBIC) venture capital initiative, which targets underserved markets and communities facing barriers to access to credit and capital; and
  • the Early Stage Debenture SBIC venture capital initiative, which targets small businesses that have never achieved positive cash flow from operations in any fiscal year (typically startups and businesses that have been in operation for only a few years).

Another issue that may be examined is the Obama Administration's decision to administratively waive the statutory requirement (15 U.S.C. 632(p)(4)(A)) that the number of HUBZone qualified census tracts (QCTs) in a metropolitan statistical area "shall not exceed an area having 20 percent of the population of such metropolitan statistical area." Removing the population cap resulted in 2,015 additional census tracts qualifying as a HUBZone area, including an additional 516 census tracts in Puerto Rico.

FY2018 Budget Request

As mentioned previously, the Trump Administration's "America First" FY2018 budget blueprint requests $826.5 million for SBA, a $43.2 million or 5% decrease from the 2017 annualized CR level. The Administration indicated that its budget request would achieve $12 million in cost savings from the 2017 annualized CR level "through identifying and eliminating those SBA grant programs where the private sector provides effective mechanisms to foster local business development and investment. Eliminations include PRIME technical assistance grants, Regional Innovation Clusters, and Growth Accelerators." Other costs savings would be generated by strengthening "SBA's outreach center programs by reducing duplicative services, coordinating best practices, and investing in communities that would benefit from SBA's business center support."