SBA should be tasked only with providing capital to small businesses

OPINION:

I believe that Isabel Guzman is one of the hardest-working people in the U.S. government.

Ms. Guzman heads up the Small Business Administration. Since taking on the job in 2021, she has relentlessly traveled the country visiting business owners representing every race, religion, gender, generation and culture, from New Jersey to California. She has been a tireless cheerleader of small businesses and a determined advocate for the SBA.

But to what end?

The SBA was established in 1953. Since then, its budget has grown to nearly $1 billion, and its staff has ballooned to over 4,000 employees.

What are all these people doing? Where is all this money going? What exactly does the SBA do for small businesses?

If you ask Ms. Guzman or visit the agency’s website, you’ll see that it’s doing a lot.

In its last fiscal year, the agency guaranteed $43 billion in funding to small businesses, providing more than 62,000 traditional loans through its 7(a), 504 and Microloan lending partners and over 1,200 investments through SBA-licensed small-business investment companies.

The agency has been making significant efforts to direct as much capital as possible to underserved, minority-owned companies and those doing business overseas and provides direct loans to small businesses and individuals in disaster areas.

During the pandemic, the agency played an instrumental role in overseeing the distribution of paycheck protection and economic injury disaster loans.

But couldn’t these same disaster loans have been handled through the Federal Emergency Management Agency?

And couldn’t the loan guarantees be overseen by one of the many agencies already funded by the Department of Commerce?

And considering the billions in fraud that occurred, is it unreasonable to wonder how just how much better another government agency — such as the Treasury Department — could have better handled all those pandemic loans?

Ms. Guzman will rightly argue that the SBA provides many other services to small businesses, including training, counseling and assistance in exporting products and getting government grants and contracts.

She would be correct in citing the great services provided by SCORE and its network of small-business development centers.

But one could also argue that the SBA is competing with hundreds of nonprofit organizations, chambers of commerce, private philanthropies and local governments in offering these same services that, in many cases, do a better job of providing business advice and guidance to entrepreneurs and small-business owners than many bureaucrats that get a paycheck from the federal government.

For these and other reasons, there have been calls for reform. Rep. Greg Landsman, Ohio Democrat, is advocating that the Small Business Administration rethink how it defines a small business so it can include more organizations to qualify for loans, like nonprofit child care providers.

And a task force from the Bipartisan Policy Center think tank has been working on other reform recommendations for the past 18 months.

“Through the years, the SBA has, like many governmental agencies, become harder to deal with and more complicated procedurally,” Ann Marie Mehlum, task force co-chair and former SBA associate administrator in the Office of Capital Access, told Federal News Network. “Fewer and fewer lenders are participating, small-dollar loans are decreasing annually to the point of practically nonexistence, and it’s very obvious that the SBA really needs to deploy technology and simplify its procedures.”

Ms. Mehlumtold says that over the years, there have been only a handful of highly concentrated SBA lenders, and although the agency has made some rules that open the door to new lenders, it hasn’t addressed how to work with the thousands of lenders in the program that “have done such an amazing job through the last 50 years.”

But is reforming this agency enough? What about abolishing it altogether? The argument for doing so goes back decades.

I get it: Instead of paying salaries, the government could invest that extra $1 billion directly in small businesses while parceling the agency’s services to other government departments.

Abolishing the SBA doesn’t make sense to me. Considering that the 33 million small businesses in this country provide over half our jobs and gross domestic product, it seems important that this significant community is represented and supported.

But the SBA does need significant reform, because it’s simply doing too many things.

The agency was established in 1953 with a mission to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.”

The agency is also charged with “ensuring that small businesses earn a ’fair proportion’” of government contracts and sales of surplus property.”

That was 70 years ago.

It’s time for a mission change to this: The SBA provides capital to small businesses.

I would eliminate all the education, counseling and consulting programs that the agency offers and instead hand those responsibilities over to the many nonprofit organizations, academic institutions and local authorities that can better serve their constituencies.

These services are of lesser value and have become a distraction. I would also move all “disaster” loans — and all the related overhead — to FEMA, an agency that exists for just such a purpose.

As a small-business owner, I would prefer to see the SBA focus on doing what it does best: being a low-cost capital provider for small businesses. Period.

I would prefer to see the SBA dole out more direct loans, grants and financing to small businesses rather than just offer guarantees to a lender network. I know many bankers who complain about the complexity of doing business with the SBA.

Fine. Then let the SBA take on the job instead. To me, that’s the best kind of public-private sector partnership a business owner needs.

Small-business owners seem to love it when Isabel Guzman visits. They’ll love it even more if she comes with a check in her hand.

• Gene Marks runs The Marks Group PC, a financial and technology consulting firm near Philadelphia. Mr. Marks covers the economy, public policy, workplace and technology issues for a number of well-known outlets. He also hosts the “Thrive” and “Small Biz Ahead” podcasts and appears regularly on Fox News, the “Wharton Business Daily” show on Sirius XM and “The John Batchelor Show.” He can be reached at gene@marksgroup.net.