House Small Business Committee Democrats

Summary

A House Small Business Committee Democrats document that proposes emergency programs and enhancements at the Small Business Administration (SBA) in response to the coronavirus (COVID-19) outbreak. It describes a new $100 billion grant program for emergency economic injury grants and a Paycheck Protection Program that would support $300 billion in 100 percent guaranteed, no fee loans of up to $10 million each. It also lists relief from SBA loan payments for six months, and EIDL changes including $25 billion in new subsidy to support additional $184 billion in EIDL lending. Other sections cover raising the 7(a) annual lending limit from $30 billion to $75 billion for two years, $265 million for resource partners, $25 million for language support and $700 million for SBA hiring.

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                  HOUSE SMALL BUSINESS COMMITTEE DEMOCRATS

American small businesses are facing an unprecedented economic disruption due to the novel coronavirus
(COVID-19) outbreak, with reports of small businesses experiencing major difficulties. Due to the nature of this
economic disruption, the existing disaster recovery programs for small businesses are insufficient. Congress must
find new, innovative ways to help our nation’s small businesses survive the coronavirus outbreak, and build
resiliency for the future.

House Democrats propose the following emergency programs and enhancements to improve and leverage the
tools available at the Small Business Administration (SBA) to support small businesses, and create new tools to
address the unprecedented pressure that small businesses face during this crisis.

Emergency Economic Injury Grants

The federal government has a duty to prevent small business from falling through the cracks during this public
health emergency. The bill would create a new $100 billion grant program, leveraging SBA’s Office of Disaster
Assistance infrastructure, to provide small businesses with quick, much needed capital.

The grants may be used to address any purpose that would have been allowable under the EIDL program,
including:
    • providing paid sick leave to employees unable to work due to the direct effect of the coronavirus
       (COVID–19);
    • maintaining payroll to retain employees during business disruptions or substantial slowdowns;
    • meeting increased costs to obtain materials unavailable from the applicant’s original source due to
       interrupted supply chains;
    • making rent or mortgage payments; and
    • repaying obligations that cannot be met due to revenue losses.

Paycheck Protection Program

This bill establishes a temporary guaranteed loan program at SBA for small businesses to cover payroll and
expenses during the immediate crisis. The Paycheck Protection Program would:
   • support $300 billion in 100 percent guaranteed, no fee loans of up to $10 million each with repayment
        deferred for the first year; and
   • forgive up to 100% of the loan if the borrower has retained the same number of employees as when they
        received the loan.


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Small Business Debt Relief

Small businesses in industries heavily impacted by coronavirus—such as travel, tourism, and hospitality—are
experiencing dramatic cash flow problems. SBA borrowers in the 7(a), 504, and microloan programs are
disproportionately in industries likely to be hurt by this crisis. By volume, hotels and restaurants are by far the
two largest industries represented. The government is ultimately responsible for guarantees on these loans and
has a vested interest in averting mass defaults.

To provide immediate relief to small businesses with SBA-backed loans, the bill would:
   • provide small businesses with relief from SBA loan payments, including principal, interest, and fees, for
       six months;
   • encourage banks to provide further relief to small business borrowers by enabling to extend the duration
       of existing loans beyond existing limits; and
   • enable small business lenders to assist more new and existing borrowers by providing a temporary
       extension on certain reporting requirements.

Expediting the EIDL Process

As the Coronavirus (COVID -19) spreads throughout the country, small businesses in the travel, tourism, and
hospitality industries are being hit hard by the travel bans, business travel reductions, and event cancellations.
And restaurants, pubs, and small shops all across the country are being called upon to temporarily shutter their
doors to protect the public’s health. As such, the Small Business Administration and its Office of Disaster
Assistance should relax some of the rules governing the EIDL program at a time when the program is
experiencing a spike in demand.

To get economic injury disaster loan proceeds into borrower’s hands faster and easier, the bill makes the
following enhancements to expedite the EIDL process:
    • Allows the use of credit scores to expedite processing;
    • Allows waivers of affiliation rules;
    • Bypasses the governor certification process;
    • Allows start-up businesses to apply; and
    • Authurizes $25 billion in new subsidy to support additional $184 billion in EIDL lending.

Increasing Access to Capital through 7(a), 504, and Microloan Programs

Unlike large companies, small businesses operate on narrow margins, which makes them more vulnerable to
long economic disruptions. Every day, small businesses experiencing disrupted supply chains and mandatory
closures for social distancing are losing money—inching toward going out of business.

To get capital to small businesses, the bill temporarily tailors SBA programs to:
   • reduce the cost of capital by waiving the fees associated with 7(a) and 504 loans, for borrowers and
       lenders, including for Community Advantage Loans and Export Loans;
   • provide a permanent fix to waive fees for veterans and their spouses on 7(a) Express Loans;
   • expand the pool of available capital for small businesses by increasing the annual lending limit of the
       7(a) loan program, SBA’s long-term loan program, from $30 billion to $75 billion for two years;
   • increase authorization for the 7(a) secondary market program to $60 billion;
   • raise the max loan amounts for 7(a) and 504 loans from $5 million to $10 million;
   • incentivize lenders to make loans by increasing the guarantee up to 90% on 7(a) loans;

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   •   enhance the 504 refinance program to reach more small businesses who need to refinance expensive
       fixed assets and lower their payments; and
   •   boost the microloan program with an additional $72 million in loans and $50 million in technical
       assistance grants, increase how much each lender can loan from $6 million to $10 million, and give
       borrowers an extra two years to repay.

SBIC Program

The Small Business Administration and the private equity funds that participate in the Small Business
Investment Company (SBIC) program can play a valuable role in enhancing access to affordable, long-term
capital for impacted small business, and provide an additional option for small businesses who struggle to
access reasonably termed investment capital conventionally.

The bill would call for SBIC Capital Infusion by making the following changes to the SBIC program:
   • Makes a maximum of $100 million in additional leverage available to SBICs that make equity
        investments in small businesses impacted by the COVID-19 outbreak.

Entrepreneurial Development

SBA resource partners to provide vital mentorship, guidance and expertise to small businesses. These
organizations will need to hire more staff to deal with the increasing number of small businesses that need their
help to respond to COVID-19.

   •   The bill would provide $265 million in additional funding.

Increasing Access to SBA Through Multiple Language Support

Immigrant-owned small businesses are an essential part of our economy. In 2018, more than 3.1 million
immigrants launched small businesses, employing more than 8 million people, generating more than $1.3
trillion in sales, and paying more than $4 billion in taxes. It is vitally important to ensure SBA provides services
and written materials in languages other than English.

   •   The bill would authorize $25 million for small business resource material and services in the ten most
       commonly spoken languages.

Federal Contracting

The federal government must grant flexibility to small business federal contractors and expedite the contract
award process so affected contractors can begin generating revenue. The bill would:
   • extend contract performance time by 45 days to small businesses whose contract performance was
       impacted by COVID-19 and have delivery times or completion schedules between the date of enactment
       of the legislation and September 21, 2021;
   • temporarily remove the requirement for contracting officers to conduct market research so that
       contracting officers may grant sole-source award contracts for small business programs, including the
       women-owned, HUBZone and service-disabled veteran-owned small business programs;
   • increase total sole-source award contract values to $8 million for services and $10 million for
       manufacturing;
   • require federal agencies to issue regulations in accordance with laws that require to promptly pay small
       business prime contractors and contractors with small business subcontractors within 15 days,
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   •   provide 8(a) firms with a one-year extension of their eligibility.

State Trade Expansion Program (STEP) Support

The State Trade Expansion Program (STEP) provides matching funds to states and territories to provide
opportunities for small businesses to participate in trade missions, international marketing efforts, workshops,
export trade show exhibits, and other promotional activities. With 95 percent of the world’s consumers living
outside the United States, the STEP program levels the playing field for small businesses and helps them to
enter new markets, in turn creating jobs and expanding our economy.

This bill would:
   • reimburse States for financial losses resulting from the cancellation of foreign trade missions or trade
        show exhibition due to COVID-19;
   • allow States to repurpose up to 10 percent of their funds, provided States notify the Associate
        Administrator and comply with program rules; and
   • allow States to use unspent funds from FY 2018 and FY 2019 to cover losses due to COVID-19
        outbreak through FY 2021.

SBA Staffing to Meet Demand

The Small Business Administration (SBA) can play a vital role in helping small businesses survive during these
unprecedented times. To support small businesses, Congress passed legislation to give SBA approximately $7
billion in low-cost loans to small businesses affected by COVID-19. Moreover, Small Business Committee
Democrats introduced new bills to leverage the tools available to the Small Business Administration and create
new grant programs to help small businesses recover. To execute these proposals swiftly, the SBA will need to
hire more staff.

   •   This bill would provide $700 million for SBA to hire employees to meet increased demand from small
       businesses impacted by COVID-19.




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