Review of Small Business Administration (SBA) Efforts

SBA Requirements Under the Recovery Act

The Recovery Act requires SBA to implement eight administrative provisions to help facilitate small business lending and enhance liquidity in the secondary markets. These provisions include:

  • temporarily requiring SBA to reduce or eliminate certain fees on 7(a) and 504 loans;
  • temporarily increasing the maximum 7(a) guarantee from 85 percent to 90 percent; and
  • implementing provisions designed specifically to facilitate secondary markets, such as extending existing guarantees in the 504 program and making loans to systemically important brokerdealers that operate in the 7(a) secondary market.

Further, the act establishes deadlines for SBA to issue regulations extending the guarantee related to the 504 program within 15 days after enactment (March 4, 2009) and for making loans to systemically important broker-dealers within 30 days after enactment (March 19, 2009).

GAO's Review of SBA's Efforts

The Recovery Act mandates that GAO, within 60 days after the date of the Act's enactment, or by April 17, 2009, report on SBA's initial efforts to comply with administrative provisions that were established to facilitate small business lending and related secondary markets.

The following tables provide a summary of GAO's review of the status of SBA's efforts to implement the Recovery Act's eight administrative provisions. For additional information on GAO's review of SBA's efforts to comply with Recovery Act provisions, see Small Business Administration's Implementation of Administrative Provisions in the American Recovery and Reinvestment Act of 2009.


Status of SBA's Implementation of Key Administrative Provisions in the Recovery Act
Provision number and title Primary requirements and sunset provisions SBA's actions, as of April 16, 2009
501 Fee Reductions Permits temporary reduction or elimination of fees, until September 30, 2010, for 7(a) and 504 loans until $375 million of appropriated funds are expended. Operational on March 16, 2009.
502 Economic Stimulus Lending Program Permits SBA to guarantee up to 90 percent of qualifying 7(a) loans made by SBA lenders. No loan guarantees under this provision can be made 12 months after the date of enactment or until appropriated funds are expended. Operational on March 16, 2009.
503 Establishment of SBA Secondary Market Guarantee Authority Allows the SBA Administrator to establish a secondary market guarantee for pools of first-lien 504 loans to sell to third-party investors. This authority terminates 2 years after enactment. Under emergency rulemaking authority, requires the Administrator to issue regulations within 15 days after enactment. Missed deadline of March 4, 2009. In process of clearing regulations.
509 Establishment of SBA Secondary Market Lending Authority Authorizes the SBA Administrator to make loans to systemically important broker-dealers that operate in the SBA 7(a) secondary market. Under emergency rulemaking authority, requires the Administrator to issue regulations within 30 days after enactment. This authority terminates 2 years after enactment. Missed deadline of March 19, 2009. In process of drafting regulations.
Source: GAO analysis of Recovery Act administrative provisions and SBA information. Note: Defined as key administrative provisions for purposes of this report.

Status of SBA's Implementation of Other Administrative Provisions in the Recovery Act
Provision number and title Primary requirements and sunset provisions SBA's actions, as of April 16, 2009
504 Stimulus for Community Development Lending

Authorizes SBA to refinance a limited amount of certain existing loans as new 504 loans.

Changes an eligibility criterion for 504 loans from creating one job for every $50,000 guaranteed to one job for every $65,000 guaranteed.

The refinancing program and job creation goals are permanent changes to the 504 loan program.

Issued notice on April 2, 2009, to announce the amended job creation eligibility criterion/requirement followed by publication in the Federal Register on April 10, 2009.

In process of analyzing remaining issues and clearing regulations
505 Increasing Small Business Investment Increases the maximum amount of outstanding leverage made available to a small business investment company (SBIC), to the lesser of 300 percent of the SBIC's private capital or $150,000,000. In addition, leverage allowed for two or more SBICs operated under common control (as determined by the Administrator) and that are financially sound cannot exceed $225,000,000. In process of analyzing remaining issues and clearing regulations
506 Business Stabilization Program

Creates a new program that allows SBA to guarantee loans of $35,000 or less to small business concerns that have existing qualifying small business loans and are suffering immediate financial hardship.

Under emergency rulemaking authority, requires the Administrator to issue regulations within 15 days after enactment.

The program ends on September 30, 2010.

Missed deadline of March 4, 2009.

In process of clearing regulations.

508 Surety Bonds

Increases maximum contract amount for SBA bond guarantee to $5,000,000 and up to $10,000,000 if a federal agency contracting officer certifies the necessity.

Establishes conditions of SBA's liability up to $5,000,000.

Requires SBA to study and report on the program's current funding structure.

Provisions remain in effect until September 30, 2010.

Issued notice on March 27, 2009, to increase maximum contract amount for SBA bond guarantee to $5,000,000.

In process of analyzing remaining issues and drafting regulations.

Source: GAO analysis of Recovery Act administrative provisions and SBA information.