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Congress should direct the Small Business Administration to shift its focus toward traded sector firms.

The U.S. Small Business Administration should focus more on traded-sector firms through its financing programs, including its 7(a) loan guarantee program. However, the SBA does not appear to give any special priority to traded sector firms, treating all industries alike in its funding priorities, in large part because this is SBA’s charge from Congress. But there are significant differences for U.S. job creation and prosperity between a small manufacturer and a small retail firm, for example. The former plays a significantly more important role in driving economic growth and—through the multiplier effect—jobs. Moreover, the United States will anyway have all the retail firms it needs (e.g., that the market demands), since the sector is not traded. As such, Congress should require the SBA to develop a report for Congress within six months on two items: an analysis of all SBA financing by sector (e.g., how much financing went to manufacturing, retail trade, personal services, information, etc.) and a plan for how SBA can significantly increase the share of SBA financing going to firms in traded sectors. Congress should then require that a significant share of SBA lending—both guarantee and direct lending—go to fund scale-up activities for SMEs in traded sectors.