“Everything is more difficult for small businesses”



“When a disaster strikes, it takes three to four years for a small business to stabilize, and that’s when it’s all going to hit the fan.

This is Janice Jucker, president and co-owner of Three Brothers Bakery in Houston. She is also vice president of Goldman Sachs 10,000 small business voices National Leadership Council, which engages policy makers on issues facing small businesses. She contributed to a recent bipartisan political center report on access to credit. I wanted to tell her more about something she highlighted for this report: the Small Business Administration (SBA) disaster loan subordination process.


Jucker is like many small business owners and entrepreneurs I have met and come to know. She is incredibly proud of her business and thrilled to tell others about it. She is stubbornly determined to fight for her business. And she’s dedicated to her people: “paying our team is the most important thing we do”.

Yet, she is different from many other small business owners and entrepreneurs in at least one respect. Jucker is incredibly attuned to public policy and how it affects her business, and she is deeply involved in public policy. At the present time, both because of his business experience and as part of his work with 10,000 small business voices, she focuses on SBA disaster loans.

Not standing EIDL

The SBA has long-lasting disaster assistance programs through such efforts as Economic Disaster Lending (EIDL). These received a lot of attention during the COVID-19 pandemic, but many small businesses have also benefited in previous years. Jucker and his bakery have had several disaster experiences involving floods and hurricanes. She received a disaster loan from the SBA after Hurricane Ike in 2008 and paid it back over five years.

Hurricane Harvey in 2017 was “a whole different animal.” The bakery closed for 17 days, which means a complete stop in income. Business interruption coverage does not generally cover flooding, so an insurance payment was not available. SBA disaster loans have once again helped fill the void, but they still come with limits. EIDL funds cannot be used for “working capital and normal expenses” and this usually does not include payment to employees. That, Jucker says, “is one thing I think they should change.”

In the years leading up to COVID, the SBA issued an average of around 1,500 EIDLs each year. Before 2020, therefore, there were thousands of small businesses that carried these disaster loans. The pandemic has caused a “dramatic drop in revenues” for Three Brothers Bakery and millions of other small businesses.

The CARES Act, passed by Congress in March 2020, introduced a deferment period for pre-COVID disaster loans. Small businesses like Jucker could withhold reimbursement. Like many politicians, however, it was a double-edged sword.

The deferral, while useful in some ways, “can make it more difficult” because interest continues to accumulate. Additionally, for small businesses seeking credit, such as through a bank loan, the SBA has priority privileges over EIDLs, which means other lenders must apply for agency subordination. For pre-COVID EIDLs, the loan must be repaid less than 50% before such subordination can occur.


It seems to Jucker the exact opposite of what the government should be doing to help small businesses: “Why are you making it difficult for the people who are struggling and wanting to grow?” “

There is currently a bipartite bill to address this immediate challenge identified by Jucker: the Loan Interest Forgiveness for Taxpayers Under a Pandemic Act, the LEVER UP Act. Originally introduced in 2020, it was included in the HEROES Act that was passed by the House, but it didn’t go any further. It was reintroduced last February at the 117th Congress. Pre-COVID EIDLs should be treated the same as COVID EIDLs, that is, they do not require a 50% refund.

“What are they doing to prepare for this assault? “

There’s a bigger picture, the one Jucker wants everyone to see. This is not incompetence or ill will in the SBA. Jucker is quick to praise the agency: “the people who work there really care about you.” It’s more about capacity and the mountain of loans that the agency has to support.

Remember the statistic above: On average, around 1,500 EIDLs were disbursed each year before COVID. What about during COVID? 3.5 million. In other words, the SBA disbursed EIDL at a volume that it would have required more than 2000 years reach its pre-pandemic rate.


EIDL COVIDs do not suffer from the flaw identified by Jucker: the 50% refund requirement for subordination. There is a one-page form that small businesses can fill out. This is a good thing. But it still takes 30 to 60 days to process these forms, and the overloaded agency is inundated with them.

Jucker says someone she spoke to at the SBA told her that this year they’ve already processed three times as many EIDL subordination requests as in a typical year. This means that small businesses seek credit from private sources. This workflow “will grow exponentially” and tax the agency’s resources for years to come.

The real boost is what it means for small businesses: “it will block the recovery for a lot”. Small businesses that have received help from EIDL and are looking for new sources of credit to grow and hire will run into this problem. A 60-day processing period may not seem like a burden, but small businesses “will lose extra capital and that means they won’t hire or pay staff.”


EIDLing through the years

We have all faced personal emergencies large and small. There are immediate actions you take to stop whatever the seizure is. There is cleaning after the end of the crisis. And then, inevitably, there are unintended effects of those actions later on.

It is commendable that Congress has acted with remarkable diligence in implementing the Paycheck Protection Program (P3) and investing more in EIDLs. It was the frantic emergency actions. The process of canceling a loan and subordination of a page is the cleanup. Already, according to Jucker and others, we are experiencing some of the unintended side effects.

This is inherent in shaping policies of all kinds: compromises, not tightly tied solutions. For Jucker and many other small business owners struggling to recover from a disaster, such compromises can be unintentional obstacles to growth.




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