SBA administrator talks Jacksonville, 7(a) expansion and what she sees on horizon

The First Coast's economy is largely based on small businesses. Throughout May, the Business Journal will highlight these entrepreneurs that are a growing part of local business.

We sat with Isabella Casillas Guzman to mark Small Business Week. She spoke about SBA programs including the expansion 7(a) lenders and what she thinks is coming up.

The interview was edited to make it shorter and more concise.

Jacksonville is a large military town and I'm sure the SBA works with the Department of Defense on boosting the defense contracting process for small businesses. What is the SBA doing to support small defense contractors? And what else do you think should be done to further help them?

Our value proposition to small business is that we are an agency that was founded 70 years ago in order to ensure that we could get capital into small businesses' hands so that they could perform those contracts for federal government, as well as ensuring that they had the networks and resources. We want to support small businesses that innovate for the Department of Defense, and for warfighters to ensure our defense is strong.

Recently, we partnered with the Department of Defense's Office of Strategic Capital and Small Business Investment Company Critical Technologies Initiative to invest in the next generation of startups that will define our national security. We are focused on bringing critical capital to businesses and ensuring that they can become a part the federal supply chain. President Biden is adamant about using federal funds -- the enormous amount of money that the federal government spends -- to help our small businesses.

You have made it a priority to improve access to capital for entrepreneurs of color, a problem that is particularly difficult. What else can be done to solve this problem?

This is a serious problem, and Biden has been focusing on it since the beginning. We know that people of color and women start businesses at an incredibly high rate, but they don't get the capital. We need to invest more in small businesses because they can't create as many jobs and produce as much output. Florida, alone, had 1.2 millions new business applications in the last two years during the Biden and Harris administration. It was a record-breaking small business boom. These businesses require growth capital. We've leaned into regulatory reform to replicate the success that we had with PPP and COVID EIDL.

Some people have criticized your decision to expand the 7(a), lending network. Why do you think expanding the number of lenders who participate in this program is a positive thing to do.

We were able, during PPP, to provide 12 million PPPs to small businesses due to our wider distribution network. SBA typically has 1,500-2,000 lenders on its network. During PPP, we had over 5,000. Our small businesses go straight online to obtain capital. Unfortunately, according to the Federal Reserve, last year, two-thirds of those who applied for capital were unable to secure all or any capital they required.

We need to be more proactive in identifying creditworthy borrowers. By lifting the moratorium that was placed on our small-business licensing companies, a program that has been successful for decades, we can now allow alternative lenders to enter our network. These are our mission lender -- nonprofit community development financial institution that work in communities and do small dollar loans to underserved areas, such as rural lending or where there is disparity between women, people of color, veterans, and low-income neighborhoods. By working with nondepository lending institutions, we're attempting to fill these capital gaps and banking deserts.

Some people have expressed concern that the SBA may not have enough personnel to supervise an influx new lenders. Do you worry that the SBA will be overwhelmed by the influx of new lenders?

Everyone should be aware that our lending and investment programs have zero subsidies, meaning there is no extra cost to taxpayers. We can fund around $50 billion per year. This is a significant part of small business lending, and it's possible because we have a strong performance. We have internally strengthened our operations. The SBA was able to scale up to $1.2 trillion of relief during the pandemic.

It's important to remember that our intention in publishing these rules was to distribute them slowly and steadily. All nonprofit lenders will be made permanent under this program. This is a long list. We'd already agreed to give 30 additional licenses to nonprofit mission lenders. We committed to expand our small business licensing program in the first 12 months to include three more companies. We will continue to expand our business as we further strengthen and solidify it. We're confident in our credit risk management and strong oversight that we have been using for years across our entire portfolio.

You have been a strong advocate of the SBA lending directly, something that you are authorized to do, but do not have the funds to do. You've been a strong proponent of the SBA doing direct lending, which is something you are authorized to do but don't have the funding for.

We are trying to use every tool in our toolbox. I am very optimistic that the simplification of our programs and the reduction of red tape will increase the competition and access to capital. As the lender of the last resort and the gap-filler, we will continue to find all possible paths. Direct lending is one of them. I am committed to working closely with my lending network in order to make sure that the new rules allow us to increase capital using our current tools. I hope that as we continue to identify future gaps, the SBA can fully demonstrate its authority in order to help businesses obtain capital.

We will end with a question that is forward-looking. The small business sector has been resilient. It's hard for some companies, but it's not impossible. What are your predictions for the future?

This incredible number of new small businesses is what gives me hope. It takes courage to start your own business. We saw many entrepreneurs make that leap and succeed. I believe that the economic agenda of President Obama values hardworking families, Main Street and small business. We are trying to create a level playing field for the economy so that it can benefit everyone. This is centered on our small business owners who are tenacious and start at the micro-business level. We're investing in America so that they can have the opportunities.