H.R. 6445, Small Business Development Centers Improvement Act of 2022 — Backgrounder and Section-by-Section

Summary

A backgrounder and section-by-section summary of H.R. 6445, the Small Business Development Centers Improvement Act of 2022, introduced by Representative Jared Golden (D-ME) and Representative Jim Hagedorn (R-MN). The background describes the Small Business Administration's Resource Partners and the SBDC network of 62 lead centers, reporting that SBDCs trained or counseled almost 511,000 entrepreneurs in 2020. It states that the bill would authorize SBDC funding at $175 million for each fiscal year FY2022-FY2025 and require an annual report on the program. The section-by-section covers 14 sections, including marketing of services, data collection, fees from partnerships, raising accreditation funding to $600,000, client confidentiality, limits on grantees, matching funds and contract prerequisites.

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      H.R. 6445, the “Small Business Development Centers Improvement Act of 2022”
      Representative Jared Golden (D-ME) and Representative Jim Hagedorn (R-MN)
                                      Backgrounder

Background
America’s 30 million small businesses account for more than 56 million jobs and create two out
of three private sector jobs in the United States. 1 The Small Business Administration (SBA) offers
a wide range of free or low-cost counseling and training services through its entrepreneurial
ecosystem to help entrepreneurs launch and grow their small businesses. To deliver these
resources, the SBA relies on its four primary Resource Partners: Small Business Development
Centers (SBDCs), Women’s Business Centers (WBCs), SCORE, and Veterans Business Outreach
Centers (VBOCs).

The largest of the Resource Partners within SBA’s entrepreneurial ecosystem is the SBDC
network, SBDCs receive grants from SBA to leverage a unique mix of federal, state, and private
sector financial resources to foster the economic growth of small businesses that generates business
revenue, creates and retains jobs, and enhances local and regional economies. SBDCs deliver
management and technical assistance to small businesses through an extensive business education
network comprised of 62 lead centers managing nearly 1,000 outreach locations throughout the
country. 2 SBDCs deliver professional business advice and training focused on strategic planning,
business development, financial planning, and cash flow management to hundreds of thousands of
business clients annually. In 2020, SBDCs provided training and counseling to almost 511,000
entrepreneurs and small business owners. 3 In 2019, SBDCs helped clients start more than 20,000
small businesses and obtain $6 billion in financing. 4 For every federal dollar spent on the SDBC
program in 2019, SBDC services generated $1.99 in federal revenue. 5

Legislation
H.R. 6445, the “Small Business Development Centers Improvement Act of 2022”, was introduced
by Representative Jared Golden (D-ME) and Representative Jim Hagedorn (R-MN). The
legislation will:
     • Modernize and strengthen the SBDC network;
     • Authorize funding for the SBDC program for four years (FY2022-FY2025) at $175
         million for each fiscal year;
     • Require an annual report to measure the effectiveness of the SBDC program; and
     • Increase awareness of SBDC program and services.




1
  SBA, FY 2021 CONGRESSIONAL BUDGET JUSTIFICATION AND FY2019 ANNUAL PERFORMANCE REPORT at 5.
2
  America’s SBDC, About Us, https://americassbdc.org/about-us/ (last visited May 4, 2021).
3
  America’s SBDC, 2021 Annual Report, https://www.sbdcimpact.org/results (last visited May 10, 2021).
4
  Id.
5
  Id.

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     H.R. 6445, the “Small Business Development Centers Improvement Act of 2022”
     Representative Jared Golden (D-ME) and Representative Jim Hagedorn (R-MN)
                                   Section-by-Section
Section 1. Short Title.
This Act may be cited as the “Small Business Development Centers Improvement Act of 2022”.

Section 2. Annual Report on Entrepreneurial Development Programs.
This section amends Section 10 of the Small Business Act (15 U.S.C. 639) by creating a new
subsection (i).

Subsection (i) — Annual Report.
This subsection requires the SBA to include in its comprehensive annual report to the President,
the President of the Senate, the Senate Select Committee on Small Business, and the Speaker of
the House of Representatives information on all Entrepreneurial Development activities during the
previous fiscal year. This subsection prescribes items that must be included within the report
including: a description and operating details for each program and activity; operating circulars,
manuals, and standard operating procedures for each program and activity; a list of all awardees,
contractors, and vendors (including organization name and location) and the amounts of awards
for the previous fiscal year for each program and activity; the amount of funding obligated for the
previous fiscal year for each program and activity; and the date, names, and titles for those
individuals responsible for each program and activity. The data required in the report will help
ensure that the Committees of jurisdiction have the necessary information to ascertain whether
taxpayer dollars are being spent wisely.

Section 3. Marketing of Services.
The Small Business Act (Act) is currently silent on the question of whether SBDCs can market
and advertise their products and services. This section amends Section 21 of the Act by adding a
new subsection (o), which ensures the SBDCs can utilize up to 10 percent of their budget to market
and advertise their products and services. Greater awareness of the services available through the
SBDCs will allow more small businesses to receive entrepreneurial assistance without imposing
any more financial burdens on SBDCs, the SBA, or the taxpayer.

Section 4. Data Collection by the Small Business Development Center Association.
This section amends the Small Business Act to direct the SBA to consult with SBDC Association
to develop documents governing data collection activities related to grant recipients. Section 21 is
further amended to require the Administrator to provide an annual report on data collection
activities related to the SBDC program, and to establish a Data Collection Working Group,
consisting of members from the SBA, as well as representatives from each Resource Partner, to
develop a plan for the collection of data and submit this plan to the Senate Committee on Small
Business and Entrepreneurship and the House Committee on Small Business within 180 days.




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Section 5. Fees from Private Partnerships and Co-Sponsorships.
In order to obtain funding, SBDC grantees must match funds provided by the federal government
with non-federal resources, such as private donations or state funds. As a result, SBDCs work
alongside other community partners, such as a local chamber of commerce, to host events as a
partnership or a co-sponsor. In these instances, a participation fee may be charged to businesses
by the partnership or co-sponsorship party. Under current law, SBDCs are not allowed to collect
the necessary fee. This provision permits SBDCs to collect fees or other income related to the
operation of partnerships or sponsorships. This does not alter the requirements for SBDCs to
provide no-cost counseling to individual small businesses.

Section 6. Equity for Small Business Development Centers.
Under current law, up to $500,000 of authorized funding to SBDCs could be utilized by the
Administrator to pay the America’s SBDC (ASBDC) for the performance of accreditation services
and an additional $500,000 of authorized funding for SBDCs could be utilized by the
Administrator for financial examinations expenses associated with reviewing SBDCs. This section
eliminates the award of $500,000 of SBDC grant monies to reimburse the SBA for program
administration while raising the amount of funding to $600,000 to be provided to the ASBDC for
accreditation. This promotes ongoing accreditation, which is necessary to ensure strong SBDCs
across the country.

Section 7. Confidentiality Requirements.
SBA requires SBDCs to collect certain information on the businesses that they counsel. This
information is the basis for the performance metrics the agency uses to determine the effectiveness
of the SBDCs in fulfilling their mission. Some of the information, while relevant and necessary
for the SBA and SBDCs is sensitive information that small business would prefer to be treated as
confidential. This sensitive information, such as the name of the small business, is not necessary
to develop performance metrics. Its forced disclosure could dissuade small businesses from
seeking assistance through SBDCs, thereby undermining the intent of Congress when it created
the SBDCs. This section prohibits the SBA from distributing and sharing SBDC client information
with other parties and reinforces the Committee’s longstanding efforts to ensure the confidentiality
of the information that small businesses provide to SBDCs.

Section 8. Limitation on Award of Grants to Small Business Development Centers.
A majority of SBDC grantees are partnered with higher education institutions, which bolster
SBDCs ability to obtain private matching funds as required under the law. This section prohibits
entities other than institutions of higher education from becoming grantees under Section 21. An
exception is provided for current SBDC grantees who are not institutions of higher education.
These institutions can continue to renew their status as a grantee until they no longer wish, or the
SBA determines that, these grandfathered grantees are incapable of providing these services.
Furthermore, a rule of construction is added to make it clear that while Women’s Business Centers
may not lead a center under the SBDC program, they are allowed to receive funds from lead centers
and to act as subgrantees.




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Section 9. Management of Program Activities.
This section requires SBA to work in partnership with the SBDC program to determine program
functions and services to ensure that the program best meets the needs of individual state networks
and the national small business economy.

Section 10. Authorization of Appropriations for Formula Grants Received by States.
This section authorizes appropriations in the amount of $175 million for each fiscal year from
2022 through 2025.

Section 11. Requirements Relating to Matching Funds.
Beginning in 2019 the SBA required SBDCs to expend matching funds dollar for dollar with
federal funds. In addition, SBA has delayed the Notice of Award and reimbursement funds because
SBDCs may not have their full match “in hand”. This practice does not take into account that
SBDCs match is often based on state legislative action, which is on a different timeline than the
federal appropriations process and grant disbursements. This section remedies this issue by
allowing SBDCs to obtain funding from SBA by providing good faith assertations that they will
acquire the necessary matching funds.

Section 12. Contract Prerequisites.
Currently, SBA requires SBDCs to submit contracts or grants they enter into with other Federal
agencies to the Assistant Administrator for the Office of Small Business Development Centers
(OSBDC) for review and approval. This section streamlines the process for both the SBA and the
SBDCs by assuming that these contracts or grants are approved unless the Assistant Administrator
provides a written objection within 15 business days after award of the contract. The Assistant
Administrator may object to the contract or grant if it is determined it will not provide assistance
to small businesses or hinder the operation of the SBDC.

Section 13. Duties of the Associate Administrator for Small Business Development Centers.
This section requires the Associate Administrator for the Office of Small Business Development
Centers to actively promote the services of SBDCs to other Federal programs. This will allow for
greater visibility of the SBDC program and the resources it provides.

Section 14. Determination of Budgetary Effects.
This section requires the act to comply with the Pay-As-You-Go Act of 2010.




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