The SBA’s disaster relief program ran out of money in October and more businesses than ever are defaulting on their loans from the agency.
Senator Joni Ernst (R., Iowa) has a list of recommendations for the Trump administration to streamline operations and eliminate waste at the Small Business Administration.
As chair of the Senate small business and entrepreneurship committee, Ernst is sending a letter to President Donald Trump detailing how he can downsize the agency and end its mismanagement of certain loan programs, National Review has learned.
“The entrenched Washington bureaucracy boomed over the last four years while small businesses across the country were put on the back burner,” Ernst said in a statement to NR.
“It is time for the SBA to operate more like Main Street, because if a small business failed to comply with a government audit, their doors would soon be closed. I am going to work with President Trump to right these wrongs by downsizing the SBA and shredding the burdensome regulations that sent costs skyrocketing.”
Ernst is chair of the Senate DOGE caucus and working with the Trump administration to reduce government bloat is one of her top priorities. In fiscal years 2023 and 2024, the SBA failed to complete an audit from the government accountability office because it could not deliver enough support for its loans receivable and loan guarantees.
Ernst’s letter details a number of SBA programs the Biden administration failed to properly manage, leading to a dire financial situation for the agency. Most importantly, Ernst describes how the SBA tweaked its disaster loan program in way that led to it running out of money in October until it received additional funding in December. The disaster loan shortfall took place because the SBA raised the maximum loan amount while deferring interest and principal payments, and increasing the unsecured loan limit.
Similarly, under President Biden, the SBA’s loan program that facilitates loans between the private sector and small businesses has seen a dramatic uptick in defaults, early defaults, and delinquencies. According to Ernst, this problem is a result of the Biden administration’s decision to relax underwriting criteria and expand the participation of non-bank lenders.
The loan program’s financial position is similarly dire, as its net cash flow is negative for the first time in 13 years due to an uptick in loan purchases and a decline in fee revenue. Similarly, the SBA is failing to collect pandemic era disaster loans and crack down on fraud, instead writing them off and allowing borrowers to enter a hardship relief program.
Ernst also warns of potential catastrophe for the SBA’s loan initiative for private equity and venture capital funds because of the Biden administration’s rule creating new licenses that lack stringent payment requirements.
Beyond that, Ernst highlights how the Biden administration injected diversity, equity, and inclusion programming into the multi-agency SBIR-STTR programs meant to give small businesses fund research and development.
“Allocating resources to small businesses based on the diversity of its key personnel or its racial equity-
oriented goals, rather than the quality of a technology and its innovation potential, takes away from a merit-based approach that is necessary for the SBIR-STTR program to meet its full potential,” the letter reads.
To end the letter, Ernst explains the cyber vulnerabilities facing the SBA’s information technology systems and online contracting certification portal.
Trump selected businesswoman and former Senator Kelly Loeffler (R., Ga.) to run the SBA after she was rumored to be in contention for Secretary of Agriculture. The president said Loeffler would provide the business expertise necessary to tackle waste, fraud, and abuse at the agency.