Republicans submit bill to reform SBA

Republicans from the House Committee on Small Business recently introduced a bill called the “Improve the SBA (Small Business Administration) Act.”

They cited fraud and maladministration by the SBA as the reason. The SBA should not engage in direct loans, Republicans on the committee agreed.

The proposed legislation would increase oversight of the SBA and improve programs, according to the text in the bill.

GOP Introduces Improvement to SBA Act

The introduction of the Improve the SBA Act is largely perceived by Republicans as a saber rattling. The House is controlled by the Democrats.

While the bill doesn’t stand a chance of passing, it is indicative of the direction Republicans could take if the party regains control of Congress after the November election.

Response from Independent Community Bankers of America

“Direct lending is a poor and costly alternative to private sector lending and would reach fewer borrowers,” said Paul Merski, Group Executive VP, Independent Community Bankers of America. “Today, there is already a strong network of community banks, community development financial institutions and other lenders to meet the demand for small business borrowers.”

What’s in the bill?

These are the main features of the Improve the SBA Act:

The SBA would no longer be a lender for disaster loan programs (such as the Paycheck Protetion Plan or the Economic Impact Disaster Loan) or the 7(a) loan program. The SBA administrator would be required to testify before Congress annually or more frequently. The SBA would be held responsible for carrying out recommendations from auditors and inspectors general. Certain companies would be prohibited from accessing SBA funds. The banned companies include Planned Parenthood, lobbying companies, and companies owned by a Chinese entity or headquartered in China.

“Due to the pandemic, the SBA has been given too much of a role in managing emergency aid programs,” Luetkemeyer said when he introduced the bill to the House Committee on Small Business. “Through surveillance, we have discovered that the Small Business Administration is fraught with fraud, delays and mismanagement.”

Office of the Inspector General Report cites problems with EIDL funds

In a report released last week, the OIG said the SBA did not follow proper procedures in managing its economic impact disaster funds during the pandemic.

Specifically, the contractor who awarded the EIDL contract in 2018, RER, met the contract requirements for small business size (no more than $15 million in annual revenue), but its subcontractor (Rocket Loans) did not.

The OIG also said that SBA did not use procedures to ensure that its contracting officers used effective proposal analysis techniques to ensure that prices were fair and reasonable. Such procedures are required as part of the Federal Acquisition Regulation (FAR).

RER was chosen from 10 applicants and awarded a contract with a maximum of $100 million. After the CAREs Act was passed, the SBA increased RER’s contract limit to $850 million.

Problems with the implementation of the EIDL program mentioned by the OIG

RER outsourced with RockLoans Marketplace LLC, DBA Rocket Loans. Rocket Loans is a subsidiary of RockHoldings and Quicken Loans – one of the largest mortgage lenders in the country.

When RER relied on Rocket to fulfill contract requirements, that relationship defined them as affiliates. And Rocket is too big to meet the small business requirements specified in the 2018 contract.

“As a result, RER and RocketLoans have circumvented the outsourcing rule — which was put in place to prevent a larger company from using a small business as a conduit to take advantage of set-aside contracts intended to support diverse, small businesses,” the OIG said. concluded.

Image: Depositphotos

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