Isabella Casillas Guzman, President Biden’s decision to head the Small Business Administration, inherited a nearly $ 1 trillion portfolio of emergency aid and a controversial agency when she took office in March. Since then she has sprinted from crisis to crisis.
Some new programs have been mired in delays and mishaps while the SBA’s most famous pandemic aid, Paycheck Protection Program, ran out of cash on its loans this month, confusing lenders and stranding millions of borrowers. Disgruntled business owners have showered the agency with criticism and complaints.
It is now Ms. Guzman’s job to turn the ship around. “It is the largest SBA portfolio we have ever had and of course there will have to be some changes in the way we do business,” she said in a recent interview.
When the coronavirus crisis erupted last year and the economy went into free fall, Congress and the Trump administration brought the small business administration to the fore, blaming it for huge sums of aid and complicated new programs.
It is by far the smallest cabinet-level agency with an annual operating budget that is typically less than half of what the Department of Defense spends per day. It has long been viewed as drowsy backwater within the government.
But when the pandemic shot up unemployment claims, Congress responded with an unprecedented plan: give companies money to keep their workers busy. Just seven days after President Donald J. Trump signed the $ 2.2 trillion CARES bill in late March 2020, the Small Business Administration began accepting applications for the Paycheck Protection Program.
Agency staff describe a hazy month around the clock to manage the start of the program and early days. The agency’s 68 district offices, which typically receive a few hundred inquiries a week, received 12,000 calls daily from desperate business owners. A rotating group of a dozen people camped in an ad hoc war room in the largely empty headquarters to write the rules of the program and revise the technology systems to handle the onslaught of applications.
Despite many fluctuations in speed – including confusing, often revised loan terms and several technical breakdowns – the program was successful. Millions of business owners credit it for helping them survive the pandemic and keep more workers employed.
Economists are skeptical whether the program’s results will justify its enormous cost, but Mr Trump and Mr Biden both took the effort as the centerpiece of their economic bailout plans. As the pandemic spread and the economy plunged into recession, the Paycheck Protection Program turned into the largest corporate rescue package in American history. More than eight million companies received $ 788 billion in total in loans – almost as much as the government spent on their three rounds of direct payments to taxpayers.
But there have been pitfalls that will take some years to resolve. Fraud is a major concern. Thousands of people took advantage of the rushed program’s minimal documentation requirements and, according to prosecutors, searched for illegal loans to fund gambling, Lamborghinis, luxury watches, an alpaca farm and a Medicare fraud program. The Justice Department has accused hundreds of people of stealing more than $ 440 million, and numerous federal investigations are ongoing. (During her verification hearing, Ms. Guzman promised that she would “prioritize reducing fraud, waste, and abuse”.)
There were other problems. Entrepreneurs from minorities were disproportionately excluded from the aid measures. A last minute attempt by Mr. Biden to make the program more generous for sole proprietorships came too late to help many of them. A new emergency surfaced this month: the program ran out of money and was abruptly closed to most new applicants.
“There was no warning,” said Toby Scammell, the executive director of Womply, a company that helps borrowers obtain credit, of the recent debacle. In his company alone there are more than 1.6 million applicants pending.
The Paycheck Protection Program is by no means the agency’s only challenge. It also manages a complex and evolving system of low-interest catastrophe loans of up to $ 500,000 and new grant funds created by Congress for two of the hardest hit industries: the Shuttered Venue Operators Grant for live events businesses and the restaurant Revitalization Fund. (The hotel industry is pushing for its own version.)
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May 25, 2021, 12:48 p.m. ET
Each of them required the agency to create policies and technology systems from scratch. The program of events was particularly rocky. On its planned start day, early April, the application system failed completely. Desperate applicants were updated and relied on social media posts for information and updates.
“I reached out to my assistant director and said, ‘I thought something like this was going to happen,” said Chris Zacher, executive director of Levitt Pavilion, a nonprofit performing arts center in Denver. The Small Business Administration revived the system three weeks later and received 12,200 applications, but does not expect grants to be granted until the end of May.
Lower priority lines, including Mr Zacher, fear that even if their claim is approved, they won’t get a check until June or July – a huge hurdle for venues trying to plan their summer and fall seasons.
“It’s crazy,” said Mr. Zacher. “A program that is supposed to help save indie locations puts us at a disadvantage because of all these delays.”
Ms. Guzman, 51, listens to this criticism relentlessly – the threads of responses to her agency’s social media posts have turned into original screams of pain. (“I can’t take this seriously anymore about SBA” is one of the milder responses.) She said she understood the urgency.
“It’s definitely unprecedented – across the board, across the country – and we’re seeing multiple disasters at once,” she said. “The agency is very focused on still responding to disasters and delivering that aid as quickly as possible.”
This is Ms. Guzman’s second tour of Small Business Administration. When President Barack Obama selected Maria Contreras-Sweet to take over the agency in 2014, Ms. Guzman served as Senior Advisor and Deputy Chief of Staff. The women had met in the mid-1990s. Ms. Guzman, a California native with a bachelor’s degree from the University of Pennsylvania’s Wharton School of Business, was hired by 7Up / RC Bottling by a local executive, Ms. Contreras-Sweet.
“I have always been impressed with her ability to handle jobs with steep learning curves – she has a quick grasp of complex concepts,” said Ms. Contreras-Sweet.
Ms. Guzman spent her early days at the agency, focusing on traditional projects such as the flagship loan program, which typically enables loans of around $ 28 billion per year. The time, the job is radically different.
“We are working closely to identify opportunities to build a strong agency to meet these scale requirements,” she said. “The SBA needs to be as entrepreneurial as the small businesses we serve. What I really, really mean by that is a more customer-centric approach. “
The agency is testing a new Community Navigators program to help local organizations, including nonprofits and government groups, work closely with businesses run by people with disabilities or in underserved rural, minority and immigrant communities. It is an extension of the base efforts of several nonprofits to provide vulnerable businesses with access to Paycheck Protection Program loans.
Ms. Guzman said she was optimistic about these efforts and other priorities for the agency, such as expanding access to capital for blacks and other minority entrepreneurs – but first, the small business administration, like the customers it serves, must face the pandemic survive.
And to do that it has to stop shooting itself in the foot.
The long-awaited second attempt to open the Shuttered Venue Operators Grant Fund was preceded by a final debacle: the agency canceled – and then, less than a day before the date, abandoned a plan to open the first-come-first Served to funds on a Saturday. For those seeking help that hasn’t arrived yet, the incident felt like another kick in the teeth.
Ms. Guzman said she recognized the need for her agency to push beyond its limits and rebuild its checkered reputation.
“This is a crucial moment in time when we can capitalize on the interest in small businesses to truly bring them a remarkable agency,” she said. “I appreciate being the voice of the 30 million small and innovative start-ups across the country. What I always tell my employees is that I want these companies to feel like the giants they are in our economy. “
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