Moreover, the industries that receive the most SBA loans are characterized by a large number of firms and robust competition. That means that the vast majority of restaurants, beauty salons, gas stations, and other businesses meet their credit needs in the market without SBA subsidies.
The SBA's loan guarantees benefit a small number of favored businesses for no good economic reason. But politically, SBA programs benefit a powerful special interest group: the banking industry.
Indeed, the top 10 lenders out of 2,600 total lenders accounted for close to one-quarter of the SBA's loan volume in 2009. Included in the top 10 are large banks like Wells Fargo, J.P. Morgan Chase, and U.S. Bancorp.
Although lawmakers portray the SBA loans as a boost for small businesses, they're actually a form of corporate welfare for some of America's largest banks. The banks reap profits from the program, but taxpayers are liable for the losses.
Alas, the SBA retains political support because it is a tool for policymakers to signal their support of small businesses, even though its lending programs benefit a relatively tiny number of businesses at the expense of taxpayers.
At the same time, SBA supporters have cultivated a myth that being against the agency is equivalent to being against small businesses. In reality, the great majority of American small businesses have thrived without government subsidies. It's time to ax the SBA.
This article appeared in the DC Examiner