Sequester’s SBA Loan Reduction Threatens Businesses

closed sign in front of a business
The White House has released a list of documents highlighting how each state would be affected by the upcoming sequester.

Due to Congress’s inability to reach a consensus in 2011, the sequester—a series of automatic budget cuts—is scheduled to take effect this year. The sequester’s cuts will total almost $1 trillion if it is allowed to occur.

According to the White House’s blog, President Obama said in a statement last week that the sequester would “jeopardize our military readiness; it will eviscerate job-creating investments in education and energy and medical research. It won’t consider whether we’re cutting some bloated program that has outlived its usefulness, or a vital service that Americans depend on every single day. It doesn’t make those distinctions.”

The President’s statements were echoed in a letter from the former Administrator of the SBA, Karen Mills, to the Senate Appropriations Committee concerning how the sequester would impact business loan lending. In her letter, she said that the “sequestration would take away SBA’s ability to make 1,928 small businesses loans—loans that could have helped small businesses access more than $902 million of capital.”

She continued to say that those funds would have supported 22,600 jobs in the manufacturing, food services and hospitality industries.

“Under sequestration, there would be both fewer federal contracts for small businesses to win, and less technical assistance to help small businesses compete for those opportunities. This would put an additional burden on small business contractors who would see a decline in revenue of over $4 billion,” she said.

Mills highlighted that nearly 900 Small Business Development Centers, 110 Women’s Business Centers, and 68 District Offices would lose significant amounts of funding. Her warning continued by highlighting that this shortening of funding would result in many Women’s Business Centers being unable to serve thousands of small businesses. As a result, 100 to 200 fewer women-owned businesses would be launched in comparison to 2012’s business launches.

Mills also warned that the manufacturing industries—damaged by the recession—would be hurt by the inability to continue funding the Advanced Manufacturing Clusters. Should sequestration cuts be implemented, the SBA would only be able to assist SBA Regional Innovation Clusters at a reduced level.

Additional information concerning the sequestration’s impact on each state is available at the bottom of the White House’s blog post.