Republicans unveil small business administration reform legislation to tackle agency ‘fraud and mismanagement’

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EXCLUSIVE: The Small Business Administration (SBA) must stamp out fraud, boost private sector lending and help rural entrepreneurs, say Republicans on the House Committee on Small Business.

Republicans introduced New legislation Wednesday that calls for reforms to the Small Business Administration (SBA), the federal agency solely dedicated to helping small businesses.

“To combat fraud, mismanagement, and burdensome regulations and policies, I have introduced the IMPROVE SBA Act,” Rep. Blaine Luetkemeyer, R-Mo., said in a statement to Fox News Digital. “This legislation will provide much-needed oversight over the Small Business Administration, improve private sector lending, empower contractors with guidance, and support small businesses in federal contracts.”

The SBA has played an important role during the coronavirus pandemic in distributing billions of dollars in COVID-19 relief funds to businesses through programs such as the Paycheck Protection Program (PPP), which has been provided to small businesses through private sector lenders, and the SBA. Economic Disaster Lending Program (EIDL), which was a direct lending program through the SBA.

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While these programs have been a vital lifeline for businesses during lockdowns, they have also been marred by fraud, abusive payments and identity theft. according to investigators.

Isabella Casillas Guzman attends a Senate Small Business and Entrepreneurship confirmation hearing regarding her nomination as Administrator of the Small Business Administration, on Capitol Hill in Washington. (Tasos Katopodis/Pool Photo via AP, File/AP Newsroom)

The Republican conclusion of the COVID-19 relief efforts was that the EIDL direct lending program suffered from disparate underwriting controls and a lack of oversight measures compared to the PPP private sector lender program. Many GOP members have concluded that the SBA should not be involved in direct lending.

Under the IMPROVE Act, the SBA would no longer be the direct lender for the Disaster Loan Program or the 7(a) Loan Program, the agency’s most common financial assistance program for small businesses. Private sector banks and credit unions would assume this responsibility.

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“We found the agency’s programs were riddled with fraud, delays and mismanagement,” said Luetkemeyer, the top Republican on the small business committee. “Most alarmingly, despite fraud within the Economic Disaster Lending Direct (EIDL) program, the SBA and the federal government continue to push our lending programs under exclusive government control – eliminating lenders from the sector private.”

Rep. Blaine Luetkemeyer, R-Mo., leaves the House Republican Conference meeting at the Capitol Hill Club in Washington on Wednesday morning, June 13, 2018. (Photo by Bill Clark/CQ Roll Call)

Rep. Blaine Luetkemeyer, R-Mo., leaves the House Republican Conference meeting at the Capitol Hill Club in Washington on Wednesday morning, June 13, 2018. (Bill Clark/CQ Roll Call/Getty Images)

To improve oversight, the proposed legislation would require the SBA administrator to testify more before Congress, and the SBA would be held accountable for implementing recommendations made by auditors and inspectors general to address issues identified in the agency.

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The legislation would prohibit certain companies from accessing SBA funds, including Planned Parenthood, those that are primarily engaged in government lobbying, and those that have a principal place of business in China or are owned by a Chinese entity.

Republicans also want to end special preferences and administer capital and advisory programs on a first-come, first-served basis. They say Democrats are too focused on improving opportunities for only minority-owned businesses. The GOP bill would direct the SBA to make recommendations and evaluate ways to better help rural small businesses.

Representative Blaine Luetkemeyer

Representative Blaine Luetkemeyer (R-MO) (Sarah Silbiger-Pool/Getty Images/Getty Images)

The legislation has little way to go with Democrats in control of the House, but Republicans want to introduce the GOP version of a better SBA if they win back Congress in November. Luetkemeyer says this vision represents “effective and accountable policymaking.”

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All Republican members of the House Small Business Committee have sponsored improvements to the SBA law, including GOP Representatives Roger Williams of Texas, Dan Meuser of Pennsylvania, Young Kim of California, Beth Van Duyne of Texas, Claudia Tenney from New York, Maria Salazar from Florida, Pete Stauber from Minnesota, Andrew Garbarino from New York, Scott Fitzgerald from Wisconsin and Byron Donalds from Florida.

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