The Trump administration’s focus on making federal grant-awarding and lending agencies more efficient offers a chance to consider how the Small Business Administration might be used more effectively. After making major upgrades during the COVID-19 crisis, the SBA now has modern systems and lending platforms that could help more U.S. businesses start and grow.
How Did PPP Change SBA?
In 2020 and 2021, the Paycheck Protection Program and other COVID-era initiatives turned the SBA into a vital financial lifeline for small firms and their employees. More than twelve million firms received forgivable PPP loans over 18 months—an enormous jump from the roughly 55,000 loans the SBA usually handles each year through its main loan program.
This sudden surge required operational and systems upgrades: SBA was essentially forced to develop and implement an unplanned modernization initiative. When the crisis eased, the agency emerged with stronger technology and a more advanced lending platform.
A Never-Waste-A-Crisis Moment
The SBA turned to cloud-based solutions to improve its lending operations, application processing, and customer service. These updates make the agency more flexible and prepared for sudden changes in loan demand. They also could catalyze the use of artificial intelligence and machine learning to boost efficiency and improve outcomes for borrowers.
During the pandemic, the SBA’s reach grew when the number of participating lenders rose from about 1,500 to over 5,000, although it has since gone back to earlier levels. That expansion taught the agency how to achieve a broader, more cost-effective lending platform by lowering barriers to entry, simplifying regulations, and clarifying program rules. The agency also modernized its lending systems to better share data with lenders.
Fraud was a serious problem early in PPP. forcing SBA to learn hard lessons about the need to use both manual and automated reviews, third-party data checks, and integrated technology solutions. The agency is now focusing on how to get the most out of these fraud-prevention and detection tools, including stronger data security and disaster recovery methods.
How Could SBA’s Enhanced Capabilities Be Used?
With its new capabilities, the SBA could be reimagined to meet new policy priorities. Lawmakers might explore how it could better target credit assistance, encourage the use of new financial technologies, and share its services with other lending agencies.
Targeting The Size And Reach Of Credit Assistance
SBA lending could be directed to firms that match certain policy goals, such as rebuilding U.S. manufacturing. Access to credit is key for many manufacturers, whether they make advanced technology or everyday goods. But if a company grows beyond a certain size—usually between 250 and 1,500 employees—it becomes ineligible for SBA assistance.
Although the SBA has helped finance iconic American brands like Nike and Ben & Jerry’s, its support does not always continue as those businesses scale up. Working with Congress, policymakers could adjust size standards and raise maximum loan amounts to give more support to growing manufacturers before they turn profitable.
Can SBA Stimulate The Use Of New Financial Technologies?
As the SBA and its lending partners continue to modernize, they could look for ways to adopt emerging financial technologies and practices. For example, the SBA has long used securitization—selling the guaranteed portions of loans on the secondary market—to free up capital for more lending.
In June 2024, however, the SBA approved a first-of-its-kind multiparty securitization of the unguaranteed portions of loans in a pool (launched by Falconbridge Capital in partnership with Guidehouse). This gives investors a chance to see how these pooled loans, without federal backing, perform and might lead to more securitizations of business loans. It also opens the door for the SBA to play a bigger role in growing liquidity on the secondary market. In the future, the SBA might even help securitize other types of SBA loans or those from other agencies.
Shared Services: Taking Advantage Of SBA Advancements
These upgraded systems and lending platforms could help other lending agencies, too. By sharing its lending tools—like cloud-based solutions, fraud-risk controls, and secondary market strategies—SBA could reduce costs across the federal government. AI tools could help with outreach, protect program integrity, speed up processing, and lower expenses. Better data-sharing between agencies could allow direct connections between their systems to verify financial information and keep track of lender performance.
It’s still unclear how much the SBA will change as the government undertakes various reforms. But with its enhanced technology and lending capabilities, a stronger and reimagined SBA may be on the horizon.