For entrepreneurs who want a loan, a government contract or just some advice, the Small Business Administration is generally a first stop. But over the past few months, getting the agency’s help has become more difficult.
Under its administrator, Kelly Loeffler, a corporate executive turned senator from Georgia and vocal supporter of President Trump, the agency has aggressively cut staff. It is rolling back changes made during the Biden administration aimed at easing access to credit for the smallest enterprises, and has lowered targets for how much the federal government should buy from them.
The changes are especially problematic for Black, Hispanic and immigrant entrepreneurs. In the name of eradicating diversity, equity and inclusion practices, the Small Business Administration is shedding programs aimed at helping disadvantaged businesses, including those run by women.
While banks that administer the S.B.A.’s major loan programs have welcomed some of the changes, Democrats and small-business advocates have decried them — especially as the agency is also supposed to inherit a $1.66 trillion student loan portfolio from the largely dismantled Education Department.
“It’s unconscionable that the Trump administration would treat such a vital agency so callously,” said Senator Edward J. Markey of Massachusetts, the ranking Democrat on the Senate Committee on Small Business and Entrepreneurship.
He noted that Ms. Loeffler had ignored his requests for information about the changes. “They’re destroying the areas where they do have expertise and it’s vital to invest, and then moving over areas where the agency is going to wind up overwhelmed,” Mr. Markey said.
Senator Joni Ernst of Iowa, the committee’s Republican chair, did not respond to requests for comment. But she has cheered the new policies in letters and hearings, saying that the agency’s staff was bloated and that its underwriting standards were too lax.
The Small Business Administration, established in 1953, has long been supported by both parties. Its lending arm dispensed $56 billion in 2024, and its flagship loan program is generally supposed to operate without a government subsidy.
The last few years have been chaotic for the agency. Its responsibilities expanded drastically during the pandemic, when it received more than $1 trillion to distribute through emergency relief programs. Staffing temporarily doubled to nearly 10,000 employees in order to administer them. The number of workers fell to about 6,000 by the time President Joseph R. Biden Jr. left office, and was slated to gradually contract a bit more as the pandemic loan portfolio shrank.
The Trump administration decided to fast-forward that culling. In March, it announced a 43 percent staffing reduction, amounting to 2,700 employees. Current and former employees say the cuts have not been carried out in an organized way. Probationary members of the staff were the first to be let go, followed by those who took advantage of the Department of Government Efficiency’s deferred resignation program. After that, workers were fired.
As a result, many district offices have been hollowed out, slowing response times.
An agency spokeswoman, Caitlin O’Dea, did not elaborate on the distribution of the cuts, but wrote in a response to questions that the reorganization would “redirect all resources to support the core mission of empowering small businesses and driving economic growth, instead of supporting the partisan programs that took root under the Biden administration.”
During a Senate hearing on Wednesday with Ms. Loeffler, Senator Jeanne Shaheen, Democrat of New Hampshire, said her state’s district office had been cut to three employees from seven, and she asked whether the positions would be restored. Ms. Loeffler replied that she would rehire some of those workers who had retired, but did not provide a timeline.
One corner of the agency that has been hobbled is the servicing of Covid-era disaster loans. The agency kept the loan operation in-house when it began in 2020, requiring hundreds of agents to handle payments and other issues. As those employees started being pushed out or leaving of their own accord, live assistance on the program’s phone line was shut down. According to Ms. O’Dea, this was a four-day outage while call center infrastructure was upgraded, yet reports of unanswered calls predate that period.
Shelly Haywood took out a disaster loan to keep her vintage furniture store in Orange County, Calif., afloat during the pandemic. Business never quite recovered, and in March she decided to shutter her company. To do that, she needed to talk to the S.B.A. to figure out what to do with her loan, which still carried a balance of $57,000.
“I’m calling and calling, but the phone number no longer gave you an option to talk to someone,” Ms. Haywood said. With nobody available to provide guidance, she is forced to consider closing her business while the agency still has a lien on her remaining inventory. The loan may then be referred to the Treasury Department’s collections office, which could garnish her Social Security payments or tax refunds.
“Every company has to cut. I’m OK with all of that,” Ms. Haywood said. “But if you’re going to do cuts, don’t just leave everybody hanging.”
Staff cuts may also affect the agency’s ability to police fraud in the disaster loan program, which has been plagued with abuse. In March, Ms. Loeffler fired the agency’s chief risk officer and his 11-person team, saying the function would be “elevated” under the chief financial officer.
As the agency loses workers, it’s also tightening requirements for those disaster loans, which were underwritten with little proof that the business would be able to repay. Previously, borrowers had been able to get a series of hardship accommodations that enabled them to make only minimum interest payments. That allowance was terminated in March.
Jason Milleisen, a consultant who advises S.B.A. borrowers on how to navigate loan settlements, said many of his clients were now more likely to just default.
“So many people call me, they want to pay, they don’t want to walk away, but the S.B.A. gives them no choice,” Mr. Milleisen said. “People are in an impossible position here, which is why there’s so much discussion around bankruptcy.”
Ms. Loeffler, while working to expand lending for manufacturers, is returning to stricter standards for the agency’s flagship program for loans of up to $5 million, known as 7(a). The Biden administration loosened credit requirements, granted lending licenses to more types of companies beyond traditional banks and waived fees in order to ease access to credit. As a result, the number of smaller loans to firms owned by women and people of color rose significantly.
Ms. Loeffler reversed course in April, saying the new rules had caused an increase in defaults, dragging the program into a deficit.
Katie Frost, who ran those programs for the Biden administration until January, argued that rising interest rates, not weaker underwriting standards, had driven higher defaults. (An independent analysis by Lumos Data found that both factors were at play.)
“I think it’s just going to tighten up the ability of small businesses to get credit,” Ms. Frost said. “The vast majority of borrowers are in fact able to make these loan payments. The whole point of the program is to encourage lenders to accept a little more risk than they would conventionally.”
Lenders’ views on the reversal vary, but larger banks tended to favor going back to the earlier rules. “I think in the end it’s going to be better,” said Tonya Mazurek, who runs S.B.A. lending in Colorado for Midwest Regional Bank. About loans, she added, “The ones that are harder that aren’t going through probably shouldn’t have.”
While those changes affect all borrowers, many of Ms. Loeffler’s efforts are aimed at specific groups like immigrants. In March, she announced that the agency was relocating six district offices in “sanctuary cities,” which are jurisdictions that limit cooperation with federal immigration officials.
New York City was one of them. Marlene Cintron, who oversaw the New York region for the S.B.A. during the Biden administration, said her New York City operation — which facilitated a billion dollars in loans annually — had lost half its staff. The downtown Manhattan office is set to be consolidated into one on Long Island, she said.
“Small-business owners in New York City are expected to take the Long Island Rail Road or drive or take buses to Long Island in order to be serviced,” Ms. Cintron said. “That is a major adverse impact.”
Ms. O’Dea said that none of the six offices had yet closed and that their replacements had not been announced, but that they would be in “safer and more accessible communities that comply with federal immigration law.”
The agency also announced that all borrowers must now provide proof of their citizenship status. For some programs, 100 percent of the company must be owned by citizens or legal permanent residents. As a result, anyone who has an investor without a Social Security number does not qualify.
That change has upended an S.B.A. loan for Haley Pavone, who founded and runs a footwear company called Pashion. She spent years preparing her business to qualify for a 7(a) loan, which carries a significantly lower interest rate than many private options. She was close to signing final documents for a $5 million loan when the agency announced an immediate change to its citizenship requirements.
Ms. Pavone scrambled to ask her investors for personal information, including Social Security cards and driver’s licenses. She soon learned that less than 2 percent of Pashion’s equity was owned by Mexican nationals. The loan fell through, and she has been forced to pivot while facing new tariffs on her products, which are imported from China.
“I’m hoping we can find a capital partner, but frankly my level of optimism given the general level of chaos in the space right now is not high,” said Ms. Pavone, who was born and raised in California. “It doesn’t make any sense.”
Ms. Loeffler has also focused on erasing programs that devote special attention to women or people of color, pursuant to a presidential executive order on diversity, equity and inclusion. For example, the Biden administration had started an initiative in California called the Inclusivity Project, teaming up with Wells Fargo to educate and mentor Black-owned businesses.
Jay King, the chief executive of the California Black Chamber of Commerce, said the program was helping his members — and other businesses of all races — become good candidates for loans. A couple of months ago, the local Small Business Development Center told him that the Inclusivity Project was shutting down. Mr. King was disappointed, but not surprised.
“Donald Trump is trying to say, ‘We’re trying to make everybody equal — everybody’s the same,’” Mr. King said. “But we’re not. It’s never been equal.”
The anti-D.E.I. drive also appears likely to claim the agency’s approximately 150 women’s business centers, which were established by statute in 1988 and offer one-on-one counseling to female entrepreneurs. The White House’s proposed budget, which calls for reducing the S.B.A.’s annual funding by a third, would eliminate those centers, along with some 28 offices devoted to serving veterans.
The women’s business centers operate on budgets of $150,000 a year each, and are usually housed within nonprofits. Funding installments have already been coming late, and some center directors have been told that they should expect to receive no more checks after the fiscal year ends this October.
Asked why the centers are being eliminated, Ms. O’Dea said that the agency was “evaluating the performance and efficacy of each of its taxpayer-subsidized resource partners to ensure they are delivering measurable results for small business owners and taxpayers,” but that it “fully supports the White House’s budget.”
While the Small Business Administration is withdrawing loans and grants, it’s also easing up on efforts to channel federal procurement toward small businesses, especially those in historically disadvantaged categories.
The Biden administration had raised the share of federal spending to those businesses to 15 percent. That goal was supported by offices across agencies devoted to purchasing from small enterprises. Mr. Trump lowered it back down to the statutory floor of 5 percent, and many of those offices have been cut back. At the same time, the number of small-business contracts being terminated has skyrocketed, according to a Bloomberg analysis.
Aditi Dussault developed the agency’s equity plan, where she served as associate administrator of the Office of Entrepreneurial Development in the Biden administration. She said abandoning higher contracting goals and pulling back technical assistance for those who needed it most was already deterring small enterprises from going after federal business.
“You have all these different supports for small businesses to guide them along the pathway to economic opportunity,” Ms. Dussault said. “And we are seeing that be eliminated before our very eyes.”
Lydia DePillis reports on the American economy. She has been a journalist since 2009, and can be reached at [email protected].
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