Recommendation

The U.S. Small Business Administration should focus more on manufacturing and other traded-sector firms through its financing programs, including its 7(a) loan-guarantee program.

Details

Historically, the SBA has not given any special priority to traded-sector firms, such as manufacturers, treating all industries alike in its funding priorities. In fact, as of 2018, only 7.5 percent of SBA loans went to small manufacturers. Congress should pass legislation that would increase the maximum 7(a) loan guarantee rate for manufacturers to 90 percent and allow certified development companies to offer up to 50 percent of project financing through the 504 loan program (which is fully guaranteed by the SBA). The legislation could further reduce the guarantee fees that small manufacturers are required to pay on 7(a) loans by eliminating 7(a) guarantee fees for small manufacturers on loans less than $350,000 and by reducing fees by half on loans in excess of that amount.

Keep reading:

▪ Stephen J. Ezell, “Policy Recommendations to Stimulate U.S. Manufacturing Innovation” (ITIF, May 2020), https://itif.org/publications/2020/05/18/policy-recommendations-stimulate-us-manufacturing-innovation/.