BACKGROUND:
The COVID-19 pandemic was a direct assault on small businesses. From state and local shutdown orders to altered capacity restrictions, American small businesses faced severe economic and operating challenges over the last two years. In response, former President Trump and Congress created and activated numerous relief measures in March of 2020 to stabilize small businesses and to support the American worker. The Paycheck Protection Program (PPP), which was delivered to small businesses through private sector lenders, provided approximately $800 billion to small businesses and other eligible entities. The second primary small business relief measure was the SBA’s Economic Injury Disaster Loan (EIDL) program, which was a direct loan program through the SBA. While both aimed to assist the nation’s smallest firms during challenging times, the results have been different. 

While the PPP operated with speed due to private sector efficiencies, the EIDL program was plagued with delays and communication issues. Moreover, both programs had different fraud risk and oversight measures. The PPP excelled as private sector lenders protected American taxpayer dollars by following federal financial regulations. In comparison, the EIDL program was a direct lending program that suffered from disparate underwriting controls and a lack of oversight metrics resulting in potentially $80 billion in fraudulent activity, according to the SBA’s Inspector General. Similar to how the country was experiencing challenges, the SBA was put under stress during a time of uncertainty. Unfortunately, the results show that the SBA should not be involved in direct lending. 

Beyond the COVID-19 small business relief programs, the SBA traditionally bridges the capital access gap for small businesses that cannot obtain conventional credit. From the 7(a) Loan program, which serves as the primary access to capital tool to the 504 Loan program, which provides long-term, fixed rate loans, the SBA’s programs stimulate business growth and job creation for eligible small businesses. Additionally, the SBA’s Microloan Program provides loans of up to $50,000, but importantly also requires technical assistance to ensure the small business owners have the tools to expand. Generally, within these programs, the SBA does not provide direct loans to participating small businesses; rather, the SBA guarantees the repayment of loans made by lenders. 

The Democrats continued push for government expansion includes a direct lending option under the 7(a) Loan Program. This is a movement away from private-sector lenders having a role within these programs toward a pure government lending option. The government should not be in the business of making direct loans.

GOALS:
-Restore the integrity of the SBA’s lending programs by prohibiting direct lending
-Empower private sector lenders to serve small businesses
-Increase oversight and reduce fraud

SOLUTION:
IMPROVE the SBA Act, Title II — Small Business Administration Capital Programs
This section prohibits direct lending within the 7(a) Loan program. Additionally, this section removes the SBA as a direct lender under the SBA’s Disaster Loan Program and replaces it with a private sector lender driven program. By enhancing the role of banks and credit unions under the Disaster Loan program, this section will deliver efficiencies for small businesses and safeguard American taxpayer dollars. Lastly, this section heightens the SBA’s oversight controls by creating a high-risk loan review process and requires annual testimony from program officials.

ADDITIONAL LEGISLATION AND ENGAGEMENT:
COVID–19 EIDL Fraud Statute of Limitations Act of 2022 | March 31, 2022
H.R. 7334 would extend the statute of limitations for fraud by borrowers under the COVID–19 EIDL program. Introduced by Rep. Blaine Luetkemeyer (R-MO) | Original House Cosponsor: Rep. Nydia Velazquez (D-NY)

To Prohibit the Administrator of the Small Business Administration from Directly Making Loans Under the 7(a) Loan Program | November 18, 2021
H.R. 6037 would prohibit the SBA Administrator from directly making loans under the 7(a) loan program.

 Groups Supporting: Arkansas Bankers Association; Bank Policy Institute; Community Bankers Association of Georgia; Community Bankers Association of Illinois; Community Bankers of Iowa; Community Bankers of Michigan; Consumer Bankers Association; Credit Union National Association; CrossState Credit Union Association; Florida Bankers Association; Georgia Bankers Association; Independent Community Bankers of America; Independent Community Bankers of Minnesota; Iowa Bankers Association; Job Creators Network; Kansas Bankers Association; Mississippi Bankers Association; Missouri Bankers Association; Missouri Independent Bankers Association; National Association of Federally-Insured Credit Unions; Nebraska Bankers Association; North Carolina Bankers Association; Ohio Bankers League; Pennsylvania Association of Community Bankers; Secured Finance Network; Small Business and Entrepreneurship Council; Texas Bankers Association; Wisconsin Bankers Association; Introduced by Rep. Blaine Luetkemeyer (R-MO) | Original House Cosponsors: Reps. Roger Williams (R-TX); Jim Hagedorn (R-MN); Pete Stauber (R-MN); Dan Meuser (R-PA); Claudia Tenney (R-NY); Rep. Andrew Garbarino (R-NY); Young Kim (R-CA); Beth Van Duyne (R-TX); Byron Donalds (R-FL); Maria Salazar (R-FL); Rep. Scott Fitzgerald (R-WI)

 7(a) Loan Agent Oversight Act | July 19, 2021
H.R. 4531 requires the SBA to submit an annual report on 7(a) loan agents. Introduced by Rep. Dan Meuser (R-PA) | Original House Cosponsors: Rep. Dean Phillips (D-MN)

 ENTREE Act | July 20, 2021
H.R. 4568 amends the American Rescue Plan Act to provide additional funding and increased oversight over the Restaurant Revitalization Fund. Introduced by Rep. Blaine Luetkemeyer (R-MO) | Original House Cosponsors: Reps. Jim Hagedorn (R-MN); Pete Stauber (R-MN); Dan Meuser (R-PA); Claudia Tenney (R-NY); Rep. Andrew Garbarino (R-NY); Young Kim (R-CA); Beth Van Duyne (R-TX); Byron Donalds (R-FL); Maria Salazar (R-FL); Scott Fitzgerald (R-WI)

 EIDL Oversight Act of 2021 | May 13, 2021
H.R. 3202 establishes oversight requirements for EIDL grants and loans. Introduced by Rep. Blaine Luetkemeyer (R-MO) | Original House Cosponsors: Reps. Roger Williams (R-TX); Jim Hagedorn (R-MN); Pete Stauber (R-MN); Dan Meuser (R-PA); Claudia Tenney (R-NY); Rep. Andrew Garbarino (R-NY); Young Kim (R-CA); Beth Van Duyne (R-TX); Byron Donalds (R-FL); Maria Salazar (R-FL); Rep. Scott Fitzgerald (R-WI)

American Innovation and Manufacturing Act | March 26, 2021
H.R. 2262 establishes within the SBA a credit facility to provide financial assistance to investment companies that finance small manufacturing businesses. Introduced by Rep. Claudia Tenney (R-NY)

 Letter to the SBA Inspector General Requesting Answers on SBA Direct Lending | December 14, 2021  
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) sent a letter to the SBA Inspector General requesting answers on how the SBA has performed as a direct government lender in the past.  

Letter to SBA Administrator Guzman Opposing Ineffective Direct Lending Efforts | November 17, 2021  
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) and Rep. French Hill (R-AR) sent a letter to SBA Administrator Guzman urging the SBA to stop its direct lending efforts to allow the private sector lenders to do their job. Signees: Reps. Blaine Luetkemeyer (R-MO); French Hill (R-AR)  

Letter to House Leadership Expressing Concerns with Democrat Proposals to Expand Government Direct Lending | October 1, 2021  
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) and Committee Republicans sent a letter urging House Leadership to exercise extreme caution with any proposals that rely solely on the federal government to underwrite and disburse small business assistance.Signees: Reps. Blaine Luetkemeyer (R-MO); Roger Williams (R-TX); Jim Hagedorn (R-MN); Pete Stauber (R-MN); Dan Meuser (R-PA); Claudia Tenney (R-NY); Andrew Garbarino (R-NY); Young Kim (R-CA); Beth Van Duyne (R-TX); Byron Donalds (R-FL); Maria Salazar (R-FL); Scott Fitzgerald (R-WI)  

 Letter to SBA Administrator Guzman Demanding Answers from SBA as EIDL Fraud Runs Rampant | August 26, 2021  
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) sent a letter to SBA Administrator Guzman requesting a timeline of when all SBA Inspector General and Government Accountability Office recommendations focused on the EIDL program will be implemented.   

Letter to SBA Administrator Guzman Regarding Identity Theft Concerns within the EIDL Program | April 4, 2021  
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) sent a letter to SBA Administrator Guzman requesting more information about identity theft within the EIDL program.  

Letter to the SBA Administrator Guzman Requesting Answers to Questions on the 90-Day PPP Loan Forgiveness Timeline | March 31, 2021
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) sent a letter to SBA Administrator Guzman inquiring into the SBA’s 90-day PPP loan forgiveness timeline.

Letter to SBA Administrator Guzman Urging the SBA to Increase Oversight of the EIDL Program | March 19, 2021  
House Committee on Small Business Ranking Member Blaine Luetkemeyer (R-MO) sent a letter to SBA Administrator Guzman urging the SBA to expand oversight on the EIDL program to protect taxpayer money from fraud, waste, and abuse.