Public Sector Duplication of Small Business Administration Loan and Investment Programs

PUBLIC SECTOR DUPLICATION OF SMALL BUSINESS ADMINISTRATION LOAN AND INVESTMENT PROGRAMS: AN ANALYSIS OF OVERLAP BETWEEN FEDERAL, STATE, AND LOCAL PROGRAMS PROVIDING FINANCIAL ASSISTANCE TO SMALL BUSINESSES Final Report January 2008 Prepared for: U.S. Small Business Administration Prepared by: Rachel Brash The Urban Institute 2100 M Street, NW ● Washington, DC 20037 Public Sector Duplication of Small Business Administration Loan and Investment Programs: An Analysis of Overlap between Federal, State, and Local Programs Providing Financial Assistance to Small Businesses Final Report January 2008 Prepared By: Rachel Brash The Urban Institute Metropolitan Housing and Communities Policy Center 2100 M Street, NW Washington, DC 20037 Submitted To: U.S. Small Business Administration 409 Third Street, SW Washington, DC 20416 Contract No. GS23F8198H UI No. 07112-020-00 The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance problems facing the nation. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Public Sector Duplication of SBA Loan and Investment Programs i CONTENTS INTRODUCTION .......................................................................................................................... 1 BACKGROUND............................................................................................................................ 2 Definition of Duplication ........................................................................................................... 2 Program Overviews ................................................................................................................. 3 2.2.1 Section 7(a) Loan Guarantee Program .................................................................... 4 Certified Development Company (504) Loan Program ..................................................... 5 MicroLoan Program........................................................................................................... 5 Debenture Small Business Investment Company (SBIC) Program .................................. 6 METHODOLOGY ......................................................................................................................... 7 FINDINGS ................................................................................................................................... 11 Duplication Overview ............................................................................................................. 11 State and Local Programs Benefiting Businesses of All Sizes ....................................... 17 Duplication Analysis by Program and Sector ......................................................................... 18 Section 7(a) Loan Guarantee Program ........................................................................... 18 504/CDC Loan Program.................................................................................................. 39 MicroLoan Program......................................................................................................... 43 SBIC Program ................................................................................................................. 45 CONCLUSION ............................................................................................................................ 47 REFERENCES ........................................................................................................................... 49 Public Sector Duplication of SBA Loan and Investment Programs ii INDEX OF TABLES Table 1: SBA Program Overview ..................................................................................................4 Table 2: Study States.................................................................................................................... 8 Table 3: Study Cities ..................................................................................................................... 9 Table 4: Public Sector Financial Assistance Programs for Small Businesses ............................ 11 Table 5: Federal Financial Assistance Available to Small Businesses ....................................... 13 Table 6: State and Local Financial Assistance Programs for Small Businesses ........................ 16 Table 7: Size Standards for 504 and 7(a) Loans ........................................................................ 20 Table 8: Comparison of 7(a) and 504 Loan Program Attributes ................................................. 21 Table 9: Use of Proceeds by Firms Receiving 7(a) Loans Only, 1997–2005 ............................. 24 Table 10: Average Loan Amount for Firms Receiving 504 and/or 7(a) Loans, 1997–2005 ........ 24 Table 11: Average Maturity Term (in months) and Interest Rate, 1