COVID-19 Stimulus Assistance to Small Businesses: Issues and Policy Options

Summary

The U.S. Small Business Administration (SBA) administers several types of programs to support small businesses, including direct disaster loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; loan guaranty and venture capital programs to enhance small business access to capital; small business management and technical assistance training programs to assist business formation and expansion; and contracting programs to increase small business opportunities in federal contracting.

Congressional interest in these programs has always been high, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs, but it has become especially acute in the wake of the coronavirus (COVID-19) pandemic’s widespread adverse economic impact on the national economy, including productivity losses, supply chain disruptions, major labor dislocation, and significant financial pressure on both businesses and households.

This report provides a brief description of the SBA’s programs, examines congressional action to assist small businesses during and immediately following the Great Recession (2007-2009), and discusses recent legislation to assist small businesses adversely affected by the COVID-19 pandemic. This legislation includes

P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, which provided the SBA an additional $20 million for SBA disaster assistance administrative expenses and deemed the coronavirus to be a disaster under the SBA’s Economic Injury Disaster Loan (EIDL) program. This change made economic injury from the coronavirus an eligible EIDL expense.

S. 3519, the Small Business Debt Relief Act, as introduced, which would authorize to be appropriated $16.8 billion to pay the principal, interest, and any associated fees that are owed on a 7(a) loan, 504/CDC loan, or Microloan for six-months.

S. 3518, the COVID-19 RELIEF for Small Businesses Act of 2020, as introduced, which would make numerous changes to the SBA’s programs.

S. 3548, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as introduced and amended, which would make numerous changes to the SBA’s programs.

Many of the proposals being considered to address the needs of small businesses adversely affected by the COVID-19 pandemic were used to address the severe economic slowdown during and immediately following the Great Recession. The main difference today is that given the unique nature of the COVID-19 pandemic’s impact on households, especially physical distancing and the resulting decrease in consumer spending, there is an added emphasis today on SBA loan deferrals and loan forgiveness.

One lesson learned from the actions taken during the 111th Congress to assist small businesses during and immediately following the Great Recession is the potential benefits that can be derived from providing additional funding for the SBA’s Office of Inspector General (OIG) and the Government Accountability Office (GAO). GAO and the SBA’s OIG can provide Congress information that could prove useful as Congress engages in congressional oversight of the SBA’s administration of the stimulus package. It could also provide an early warning if unforeseen administrative problems should arise, and, through investigations and audits, serve as a deterrent to fraud. Also, requiring the SBA to report regularly on its implementation of the stimulus package could promote transparency and assist Congress in performing its oversight responsibilities. Requiring both output and outcome performance measures and requiring the SBA to report this information to Congress and the public by posting that information on the SBA’s website could enhance congressional oversight and public confidence in the SBA’s efforts to assist small businesses.