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The Small Business Administration

A look under the hood at SBA, however, reveals a small but important agency. In fact, the SBA is perhaps the perfect prototype for a Trump administration agency: a public-private partnership driving valuable outcomes to a critical (but often neglected) part of the economy, all at a low cost to taxpayers.

Gallup and other surveys show high support for small businesses. However, programs that support small businesses are not popular for superficial reasons. Instead it’s because small businesses touch the lives of every American in ways that are not only tangible, but also, in fact, consequential.

Half of the people who work in America either own or work for a small business. And small businesses have created 60 percent of all net new jobs since 1995. Four million Main Street businesses—including neighborhood restaurants, dry cleaners, and local grocery stores—form the backbone of communities across America and they are responsible for about 40 million jobs. And, as Mercedes Delgado and I show inresearch released earlier this year, small business suppliers—locally and across the country—contribute importantly to American innovation and growth.

Small businesses are actually the foundation for economic growth and, with that, critical to policy that purports to care about the average American. In fact, if we consider what Americans expect from their government, small business should have a voice in all of the key decisions facing the next president’s administration, from Dodd-Frank reform to the anticipated overhaul of the Affordable Care Act.

If you ask small business owners what they need to grow and thrive, they will talk about lower taxes, less burdensome regulation, and—what I spent four years working on as the head of the SBA and what I continue to write about today—access to capital.

SBA’s flagship loan programs are made through more than 3,000 banks, where the private sector picks “winners and losers” and the government provides a guarantee in areas where the bank wants to make a loan but needs some credit support. This allows women-owned small businesses, minority-owned small businesses, and others in underserved geographies to get credit even if the private sector market is not fully providing access.

As my co-author Brayden McCarthy and I detail in research released last month, the credit gap in small-dollar loans—those under $250,000, which is the size that 76 percent of small businesses say they need—is very real. While new private sector players like online lenders can help in this segment, they will certainly not replace the SBA. A well-functioning, low-cost agency—that expands access to credit to small businesses across America with an overall loss rate under 5 percent—should be viewed as a huge asset, as it most certainly was when I joined the agency in 2009 at the height of the credit crisis.

SBA’s loan guarantee programs were actually a mechanism that helped unlock capital to small businesses at a time when most banks had stopped lending to small businesses altogether. In fact, SBA’s guarantee brought many banks back to small business lending, helping resuscitate this critical sector of our economy right where it was needed, on our nation’s Main Streets.

The effectiveness of SBA programs also explains why during my time at the SBA, we hosted more than 150 delegations a year from countries around the world who wanted to use the agency’s programs for small business assistance in their own country. The Chinese visited nine times. And, David Cameron’s U.K. government borrowed from the SBA’s contracting efforts, setting an even higher small business contracting goal than ours here in the United States (25 percent versus our 23 percent) and achieving it in less than two years