Bill Overview
Title: A bill to repeal the sunset for collateral requirements for Small Business Administration disaster loans.
Description: This bill makes permanent the increase from $14,000 to $25,000 the minimum disaster loan amount for which the Small Business Administration may require collateral. Under current law, this increase is set to expire on November 25, 2022.
Sponsors: Sen. Kennedy, John [R-LA]
Target Audience
Population: Small business owners and entrepreneurs potentially seeking SBA disaster loans
Estimated Size: 1000000
- SBA disaster loans are typically used by small businesses that have experienced significant physical or economic damage following a declared disaster.
- The increase in minimum loan amount for which collateral is required impacts businesses seeking loans above this threshold.
- The U.S. Small Business Administration is primarily a United States institution, so the impact will predominantly be on U.S. small businesses and entrepreneurs.
- Globally, the concept of SBA does not exist, but the impact could provide a model to other countries' small business loan programs.
Reasoning
- The population of small businesses potentially impacted by the policy change is estimated to be around 1,000,000 in the US.
- The policy increases the minimum collateral threshold, potentially affecting loan accessibility for small businesses seeking loans between $14,000 and $25,000.
- Small business owners with limited collateral may find it harder to secure loans, affecting their recovery from disasters.
- The budget constraints mean not all businesses can be reached immediately, and the direct impact will vary across different types of businesses and industries.
Simulated Interviews
Restaurant Owner (Tennessee)
Age: 45 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- I need to rebuild after the last major storm damaged my restaurant.
- Not sure if I can provide collateral for the increased loan threshold, which is stressful.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Retail Store Owner (California)
Age: 34 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- I'm grateful for the assistance available to us but worried about qualifying for larger loans.
- Collateral requirements make it harder to secure the necessary funds.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Tech Startup Founder (New York)
Age: 29 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 1.0 years
Commonness: 14/20
Statement of Opinion:
- Our startup is less affected by physical disasters, but economic ones hit hard.
- Loans are considered for expansion, not sure if it's worth the collateral.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Home Construction Business Owner (Louisiana)
Age: 55 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 9/20
Statement of Opinion:
- The increased threshold helps some businesses but hinders others who can't meet the requirements.
- We face challenges finding new clients if they can't secure loans themselves.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Tourist Shop Owner (Florida)
Age: 41 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 6.0 years
Commonness: 8/20
Statement of Opinion:
- Every hurricane season is a gamble, and loans are often necessary.
- I worry about making enough profit to justify the loans under new terms.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Auto Repair Shop Owner (Texas)
Age: 48 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 11/20
Statement of Opinion:
- We rebuilt after the last storm, and now need funding to sustain the business.
- Collateral might be an issue given the current family finances.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Farm Owner (Kansas)
Age: 37 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 13/20
Statement of Opinion:
- These loans are crucial for farming continuity.
- New terms make it harder to expect long-term loans without sufficient collateral.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Fishing Supply Store Owner (Mississippi)
Age: 61 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 6.0 years
Commonness: 7/20
Statement of Opinion:
- Every storm season, I'm in danger of losing everything.
- Collateral requirement increases anxiety since my assets are tied up in stock.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Art Gallery Owner (Washington)
Age: 26 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 10/20
Statement of Opinion:
- Increasing loan requirements concern me due to tight profit margins.
- Cultural and tourism recovery is essential, but tougher financing could stall it.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 8 |
Small Manufacturing Business Owner (Nebraska)
Age: 52 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 1.0 years
Commonness: 15/20
Statement of Opinion:
- My business needs stability to survive market shifts.
- Increasing loan amounts needing collateral might deter expansion.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Cost Estimates
Year 1: $200000000 (Low: $150000000, High: $250000000)
Year 2: $210000000 (Low: $160000000, High: $260000000)
Year 3: $220000000 (Low: $170000000, High: $270000000)
Year 5: $240000000 (Low: $190000000, High: $290000000)
Year 10: $280000000 (Low: $230000000, High: $330000000)
Year 100: $1000000000 (Low: $900000000, High: $1100000000)
Key Considerations
- The policy will be indefinite in duration, making its fiscal impact long-term.
- Potential default rates on unsecured loans could lead to higher federal financial exposures.
- The policy will impact the SBA's operational and administrative costs, potentially requiring additional resources.
- Accessibility for small businesses to capital without collateral is a significant benefit but comes with increased financial risks.