Trump’s SBA Is Going After Collections

The Trump Administration is taking a different approach to run the Small Business Administration based on a new memo out from SBA chief Kelly Loeffler that promises to be more hardhearted to some distressed borrowers.

Loeffler’s 15 priorities fall into three categories: 1) supporting President Trump’s America First agenda; 2) clamping down on fraud and excess spending, and 3) lifting up small business, of course.

The top priority is to boost domestic manufacturing, but the memo doesn’t divulge a clear plan to do so. “The agency will transform its Office of International Trade into the Office of Manufacturing and Trade,” the memo reads, “which will focus on promoting economic independence, job creation, and fair trade practices to power the next blue-collar boom. SBA will also partner across agencies to scale innovative manufacturing and technology startups that will help our nation return to ‘Made in America.’” (Manufacturing comprised $2.3 trillion to GDP in 2023, 10.2 percent of the total. )

Yet Trump himself this week disavowed the Chips and Science Act, a Biden-era measure that infused billions, much of which to red states, to shore up domestic research and manufacturing, especially for semiconductors.

Some of Loeffler’s priorities build on the last administration’s work, such as enhancing the agency’s customer service and technology. Others are more in sync with Trump’s agenda, as in the SBA’s elimination of the Office of Diversity, Equity, Inclusion and Accessibility. That office worked to promote equal access to SBA programs to those from diverse backgrounds, in addition to making sure that entrepreneurs with disabilities could easily avail themselves of agency resources.

Loeffler, the former Georgia senator who lost her seat in 2020, will tap her experience in the financial services industry, having worked at the Intercontinental Exchange beginning in 2002. There, she spearheaded the effort to take the company public in 2005. She’s also a founder herself, having created the fintech company Bakkt in 2018 before she made her foray into politics

Here are five other priorities that will especially impact entrepreneurs.

A new fraud czar

Loeffler has been emphasized that her administration will have a zero-tolerance policy for fraud, a problem that has dogged SBA lending programs, particularly pandemic-era loan programs.

She intends to clamp down on fraud by prioritizing investigations. As such, the SBA has created a fraud working group and intends to name a fraud czar. That sounds very similar to the job of SBA Inspector General Mike Hannibal Ware, who was recently fired by the president.

Enhancing collections and underwriting processes

And if you are behind on an SBA loan, Loeffler may soon come knocking. She has pledged to restart SBA’s “dormant ” collections program “effective immediately.”
While the memo didn’t spell out which loans Loeffler wants to target, the SBA has previously faced scrutiny over the Biden administration’s choice to not pursue collections on small-dollar Economic Injury Disaster loans.

Of course, with the Department of Government Efficiency reducing the agency’s head count, it does beg the question of how effective fraud enforcement can be with a leaner staff. The full extent of the SBA’s job cuts remain unclear.

Last July, the agency stumbled when it failed to notify entrepreneurs that past due loans were hurtling towards collections. But an internal glitch actually halted the referral of $2.2 billion in Paycheck Protection Program loans to the Treasury Department.

The agency also plans to review its underwriting practices, likely making them more rigorous, and could increase oversight for non-bank lending partners as well.

Lower contracting goals for disadvantaged businesses

Loeffler is reversing course on the Biden administration’s decision to increase its federal contracting goals for small, disadvantaged businesses. Biden bumped up the 8(a) federal procurement goal to award 15 percent of contracts to small disadvantaged businesses by 2025, up from the goal of five percent. Loeffler will return the threshold back to five percent. “This action unfairly tipped the scales against any small business that did not qualify as “disadvantaged,” negatively impacting many veteran-owned small businesses,” the memo reads.

Voter Registration Promotion Is Over

When the Biden’s SBA announced that it had inked a first-of-a-kind agreement with Michigan to promote voter registration efforts, Republican lawmakers balked at the ideaand argued that it was the government’s way of interfering with the electoral process.

The agreement, which was supposed to run through 2036, invited Michigan businesses to register workers to vote during SBA events. Loeffler killed it, citing partisan politics. Michigan, which has some of the highest voter turnout in the country, is a critical swing state. Trump won Michigan during the last election, while former President Joe Biden had won it in 2020.

Punishing “Sanctuary Cities” by moving regional offices

The SBA is going to reshuffle its regional offices by moving those away from “sanctuary cities.” These are locales that don’t fully cooperate with national immigration law in part by extending protections to undocumented immigrants. There are 11 sanctuary states, according to the Federation for American Immigration Reform, including California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington. Washington D.C. is also deemed to be one.

The agency didn’t say how many offices would be relocated, but the new offices will be directed toward more rural areas. That strategy might create its own challenges, in that rural areas are less populous and often lacking the infrastructure best suited for manufacturing.