Small black-owned businesses, among the nation’s most rapidly growing firms in recent years, could be hindered by President Trump’s budget cuts, entrepreneur advocates say.
U.S. Sen. Ben Cardin (D-MD) recently stated that the Trump Administration’s fiscal 2020 budget could cost small businesses millions in additional loan fees owed to the U.S. Small Business Administration (SBA) and reduce critical business counseling. He and organizations like the U.S. Black Chambers (USBC) are concerned that the proposed budget will burden the SBA, which black and other minority-owned firms often turn to for capital and support to help grow their businesses. For instance, the uptick of black-women owned businesses helped the SBA achieve double-digit dollar gains in 2018 in loan approvals for those firms, BLACK ENTERPRISE reported.
A senior administration official stated the SBA’s total new request in the president’s FY2020 budget is $820 million. He added that amount is offset by fiscally responsible proposals to provide the SBA the flexibility to adjust existing fee structure across its business loan guarantee programs. The adjustments mean the SBA could have an actual operating budget of $665 million next year, a 5% reduction from its annualized budget for 2019.
Last fall, President Trump directed federal agencies to identify how they can cut a nickel out of every dollar they spend, the spokesman said. He mentioned hard-working American families make these sorts of tough decisions every day. The president believes Washington should be no different.
The USBC, serving roughly 250,000 small businesses, recently called Trump’s budget “a low blow to black business progress.” The potential budget cuts come after the most recent U.S. government shutdown hurt small businesses. One report claims over $2 billion in SBA loans were deferred to those firms tied to the shutdown.
The SBA’s 7(a) Loan Program, the agency’s primary and most common lending program, approved 696 loans for just over $166.7 million for African American women businesses, up 3% in the number of loans and a 20% jump in dollar amount in the fiscal year 2018 from 2017. Businesses can use loans from that program for multiple purposes, including working capital, acquiring land or purchasing equipment. When the SBA announced last October its fiscal year 2018 lending numbers, the agency revealed it guaranteed over $30 billion to small businesses that otherwise would not have had access to capital. The activity included over 72,000 approved loans.
Cardin, a ranking member of the U.S. Senate Committee on Small Business & Entrepreneurship, stated Trump’s fiscal year 2020 budget proposes these cuts to programs that benefit small businesses:
- A 23% cut to funding for Small Business Development Centers. The centers offer counseling to U.S. small businesses, allowing them to improve their capacity and increase their productivity;
- Higher loan fees on the thousands of businesses participating in the SBA’s loan programs, leading to increased borrowing costs for small, local businesses seeking to grow.
- A five percent cut to the SBA’s Microloan program, and a 19% cut to the agency’s Microloan Technical Assistance program, both of which disproportionately serve women, minority and rural small businesses.
Cardin says for small businesses, which operate on razor-thin margins, the budget is bad for business. “On the heels of a month-long government shutdown that cost small businesses billions of dollars, this budget is another sign that small businesses are not a priority, but an afterthought, for the Trump Administration.”
USBC President Ron Busby called the budget a “recipe for disaster” for small business owners in a statement. “As the voice of the nation’s Black business owners, we are unequivocally against Trump’s proposed budget cuts and see it as a threat to Black business progress. Black entrepreneurs remain the fastest growing population in the small business community, yet continues to endure a government that stifles small business progress.”
Likewise, Nydia Velazquez, (D-NY), the House Small Business Committee Chairwoman, blasted Trump’s 2020 budget for cutting funding for the SBA, a critical resource for entrepreneurs. “The President is proposing a 5 percent cut to the Small Business Administration, doing so by reducing funds to proven entrepreneurial development initiatives. At the same time as it seeks to enact these cuts, the budget also would raise fees on small businesses that access capital through the SBA.”