President Donald Trump and Capitol Hill are working on multiple fronts to make sure the U.S. Small Business Administration has the ability to offer small business owners across the U.S. as much as $50 billion in loans to stay afloat during the widening economic shutdown caused by the coronavirus. One huge issue goes beyond the money: The SBA has never faced a challenge of this magnitude in working with lenders to grant loans.

 

Marilyn Landis, who in a 30-year career as a commercial lender worked for three of the largest SBA lenders in the country, noted that the SBA has faced budget cuts in recent years. “I am critical because I love my child, but the SBA is being asked to take care of a lot, without being given funding to do it, and not as many resources to do it well.” Landis is currently president and CEO of consulting firm Basic Business Concepts which works with many small businesses on financial management.

“It is unprecedented,” said Chris Hurn, CEO and founder of Fountainhead, one of 14 nonbank SBA lenders in the country. While he believes the SBA will do everything it can as public servant to “step up,” he remains concerned that they don’t have the ability or infrastructure “to get the funds out.”

A look at a few of the numbers are daunting...

A 2016 Congressional review covering a 15-year period of the SBA’s disaster-relief loan program completed in 2016 shows that the SBA’s disaster authority has never dealt with anywhere near this level of what are called “economic injury” loans to businesses.

The vast majority (83%) of disaster loans the SBA made were to individuals for property damage caused by weather incidents. Only 11% were to businesses and even less (6%) for what is defined as “economic injury disaster loans (EIDL)” as opposed to property damage. In the decade between 2005 and 2015, the SBA handled a total of $4 billion in disaster loans, though catastrophic hurricanes have caused short-term spikes in vol

$50 billion may not be enough

In its more general lending program, known as 7(a) loans, the SBA has averaged 50,000 loans a year and $30 billion. 

Now if it’s to keep America’s small businesses from ruin, the SBA and its private-sector lending partners will be tasked with getting out to entrepreneurs almost double that annual loan amount, and in a fraction of the time. 

“Almost twice the number of dollars in half the time,” Hurn said.

And even $50 billion may fall far short of what is truly needed.

There are roughly 7 million business within the small and mid-sized sector in the country with employees (meaning not sole proprietorships). If the SBA and its lending partners provided $1 million loans on average up to $50 billion, that would help 50,000 companies.