Linda McMahon, head of the Small Business Administration, made a pit stop at Appalachian Brewing Co. on Tuesday to promote the federal agency’s assistance programs for small companies and entrepreneurs.
“We don’t want to be the best-kept secret for small businesses, we want to let everyone know how we can help,” McMahon said.
Appalachian Brewing’s location on the Carlisle Pike in Silver Spring Township, which McMahon and SBA officials toured Tuesday afternoon, was financed in part by federally backed loans made through the SBA’s 7(a) program.
“The SBA is a great way to get around some of the hurdles and access capital you wouldn’t otherwise,” said Artie Tafoya, partner and manager of operations at Appalachian Brewing. Tafoya said SBA-supported loans helped reduce the cost of Appalachian Brewing’s roughly $4.5 million expansion in Silver Spring Township, which opened in 2014.
The SBA’s most popular loan program, authorized under federal title 7(a), allows the administration to guarantee loans made by certain private banks who participate in the SBA’s program.
Federal backing means less risk for the lender, which allows them to offer more favorable terms, providing small businesses access to capital at favorable rates that would otherwise only be available to larger, more established corporations.
The SBA approved $25.8 billion worth of 7(a) loans in the 2017 fiscal year, according to the agency’s annual report.
Locally, Centric Bank, which financed Appalachian Brewing, is the largest originator of 7(a) loans, lending to 77 Midstate businesses last year and creating a projected 2,500 new jobs, the bank announced recently.
McMahon said that the SBA seeks to expand its core programs by attracting more lending partners willing to invest in small business expansion.
“Most small businesses fail because they are undercapitalized,” McMahon said. “What we’re doing now is helping to grow our lender base.”
McMahon was appointed to head the SBA last year by President Donald Trump. She is well-known as the founder of World Wrestling Entertainment along with her husband, professional wrestling guru Vince McMahon.
Over the past year, McMahon has also promoted the potential benefits to small business of the Republican tax plan, which passed Congress in December.
McMahon has continued to press Congress to make the individual tax cuts, not just the corporate reduction, permanent. While corporate relief is permanent under the new tax code, the GOP placed a sunset on personal rate reductions in order to stay within the $1.5 trillion 10-year deficit rule needed to pass the Republican tax plan via reconciliation.
This is of particular concern for small business owners who are not organized as corporations, but have their businesses set up as pass-through entities and report profits as personal income.
“The businesses I’ve spoken with have talked about the anticipation of the tax cuts and the optimism we’re seeing since they passed,” McMahon said. “I would really like to see the tax cuts for individuals made permanent.”
Although the 7(a) program is the largest, the SBA also administers other loan programs, such as the 504 capital loan program, disaster relief loans, and others. It also offers training and guidance to entrepreneurs on a variety of issues.
While Trump’s budget proposals have sought cuts to the SBA, the funding resolutions that have passed Congress have featured less significant reductions. Congressional funding resolutions have the agency funded at $881 million on an annualized basis, compared to $887 million in the 2017 fiscal year.
“We’re getting strong congressional support,” McMahon said. “We have seen a little bit of [budget] reduction, but we didn’t have to cut our programs.”
With the demand for 7(a) loans growing, Congress is considering a bill that would authorize the SBA to raise the cap on the value of assets it backs, although McMahon said the agency is unlikely to hit that cap in the short term.