For entrepreneurs who want a loan, a government contract or simply advice, Small Business Administration is generally a first stop. But in recent months, obtaining aid from the agency has become more difficult.
Under its administrator, Kelly Loeffler, a business manager who has become a senator of Georgia and a vocal supporter of President Donald Trump, the agency has aggressively reduced the staff. It makes the changes made during the Biden administration to reduce access to credit for the smallest companies, and lowered the objectives of the quantity of federal government.
The changes are particularly problematic for black, Hispanic and immigrant entrepreneurs. In the name of eradicating diversity, actions and inclusion practices, Small Business Administration manages programs aimed at helping disadvantaged companies, including those managed by women.
While the banks that administer the main SBA loan programs have hosted some of the changes, the Democrats and the defenders of small businesses have described them – especially since the agency is also supposed to inherit a portfolio of student loans at 1.66 billion of dollars from the largely dismantled education department.
“It is unacceptable that the Trump administration would deal with if such a vital agency,” said Senator Ed Markey of Massachusetts, the classification democrat of the Senate Committee for Small Business and Entrepreneurship.
He noted that Loeffler had ignored his requests for information on the changes. “They destroy the areas where they have an expertise and it is essential to invest, then to move to the areas where the agency will find itself exceeded,” said Markey.
Senator Joni Ernst from Iowa, the Republican President of the Committee, did not respond to requests for comments. But she applauded new policies in letters and audiences, saying that agency staff were inflated and that her subscription standards were too lax.
The Small Business Administration, created in 1953, has long been supported by the two parties. Its loan arm distributed $ 56 billion in 2024, and its flagship loan program is generally supposed to operate without government grant.
The past few years have been chaotic for the agency. Her responsibilities were widely widened during the pandemic, when she received more than 1 dollars billion to distribute through emergency rescue programs. Staff have temporarily doubled at nearly 10,000 employees to administer them. The number of workers fell to around 6,000 at the time of President Joe Biden left his duties and was to gradually contract a little more as the pandemic loans portfolio has decreased.
The Trump administration decided to quickly obtain this slaughter. In March, he announced a reduction of 43% of staff, amounting to 2,700 employees. Current and ancient employees say that the cuts have not been made in an organized manner. Staff Probations members were the first to be released, followed by those who took advantage of the Delayed Resignation Program of the Government Ministry of efficiency. After that, the workers were dismissed.
As a result, many district offices have been hollowed out, slowing response times.
A spokesperson for the agency, Caitlin O’Dea, has not developed the distribution of cuts, but wrote in a answer to questions that reorganization “would redirect all the resources to support the basic mission of small businesses and economic growth, instead of supporting the partisan programs that have taken root the Bide administration.”
During a Senate hearing Wednesday with Loeffler, Senator Jeanne Shaheen, DN.H., said that the district office of his state had been reduced to three seven employees, and she asked if the posts would be restored. Loeffler replied that she would rehire some of these workers who had withdrawn, but had not provided a calendar.
A corner of the agency that has been hampered is the maintenance of loans in the event of a cocvid era disaster. The agency kept the internal loan operation at the start in 2020, forcing hundreds of agents to manage payments and other problems. While these employees were starting to be expelled or leaving their own free will, live assistance on the program line of the program was closed. According to O’Dea, it was a four -day breakdown while the infrastructure of the call center was improved, but the call reports unanswered before this period.
Staff discounts can also affect the agency’s capacity to police officer Fraud in the loan program in the event of a disaster, which has been prey to abuse. In March, Loeffler dismissed the agency’s risk director and his team of 11 people, saying that the function would be “raised” under the financial director.
As the agency loses workers, it also tightens the requirements for these loans in the event of a disaster, which have been taken out with little evidence that the company would be able to reimburse. Previously, the borrowers had been able to obtain a series of accommodation of difficulties which allowed them to make only minimum interest payments. This allowance ended in March.
Jason Milleisen, a consultant who advises SBA borrowers on how to navigate loan regulations, said many of his customers were now more likely to be lacking.
“So many people call me, they want to pay, they don’t want to move away, but the SBA does not give them the choice,” said Milleansen. “People are in an impossible position here, which is why there are so many discussions on bankruptcy.”
LOEFFLER, while working to extend loans for manufacturers, goes to strict standards for the flagship program of the branch for loans up to $ 5 million, known as 7 (A). The Biden administration has softened credit requirements, has granted loan licenses to more types of businesses beyond traditional banks and has deleted costs to facilitate access to credit. Consequently, the number of smaller loans to companies belonging to women and people of color has increased considerably.
Loeffler reversed the course in April, saying that the new rules had caused an increase in fault defects, resulting in the program in a deficit.
Katie Frost, who directed these programs for the Biden administration until January, argued that the increase in interest rates, and not lower subscription standards, had led to higher faults. (An independent Lamos data analysis revealed that the two factors were at stake.)
“I think it will simply tighten the ability of small businesses to get credit,” said Frost. “The vast majority of borrowers are in fact able to make these loan payments. The interest of the program is to encourage lenders to accept a little more risks than they would conventionally. ”
The opinions of lenders on reversal vary, but large banks tended to promote the fact of returning to previous rules. “I think that in the end, it will be better,” said Tonya Mazurek, who runs SBA loans in Colorado for the Midwest Regional Bank. About loans, she added: “Those who are more difficult who do not live should probably not have.”
Although these changes affect all borrowers, many Loeffler efforts are targeting specific groups such as immigrants. In March, she announced that the agency moved six district offices to “sanctuary cities”, which are jurisdictions that limit cooperation with federal immigration officials.
The agency also announced that all borrowers should now provide proof of their citizenship status. For some programs, 100% of the company must belong to citizens or legal permanent residents. Consequently, anyone who has an investor without social security number does not qualify.
This change upset a SBA loan for Haley Pavone, which founded and manages a shoe company called Pashion. She has spent years preparing her business qualifying for a loan of 7 (A), which includes a significantly lower interest rate than many private options. It was about to sign final documents for a loan of $ 5 million when the agency announced an immediate modification of its citizenship requirements.
Pavone rushed to ask his investors for personal information, including social security cards and driving licenses. She quickly learned that less than 2% of Pashion equity belonged to Mexican nationals. The loan failed and she was forced to pivot while facing new prices on her products, which are imported from China.
“I hope that we can find a capital partner, but frankly, my level of optimism given the general level of chaos in space at the moment is not high,” said Pavone, born and raised in California. “It makes no sense.”
Loeffler has also focused on erasing programs that devote particular attention to women or people of color, in accordance with a presidential decree on diversity, equity and inclusion. For example, the Biden administration had launched an initiative in California called the inclusiveness project, teaming up with Wells Fargo to educate and supervise companies belonging to blacks.
Jay King, CEO of California Black Chamber of Commerce, said the program helped its members – and other companies of all races – became good loans. A few months ago, the local development center for small businesses told him that the inclusiveness project closed. King was disappointed, but not surprised.
“Donald Trump is trying to say:” We are trying to make everyone equal – everyone is the same “,” said King. “But we are not. It has never been equal.”
This article originally appeared in The New York Times.