History of the SBA Part 1

What role did the Federal Government take in promoting the interests of Small Businesses before the creation of the SBA?

In 1932, as one of several top-down measures intended to combat the Great Depression, Congress established the Reconstruction Finance Corporation. The stated purpose of the RFC was initially to provide loans for agricultural, financial, and industrial concerns in order to maintain hiring and productivity during a time of limited demand.

Soon after the RFC’s establishment came the first election of Franklin Delano Roosevelt, running on a “New Deal” and promises to take more Federal action against the Depression. As part of a wave of sweeping legislation in Roosevelt’s famous 100 first days in office, he expanded the RFC by increasing funding and its scope for lending, including assisting in disaster relief, still a focus of the SBA today!

During WWII, Congress created the Smaller War Plants Corporation in order to help small manufacturers compete with large firms. The SWPC assisted small manufacturing businesses in securing loans and Government contracts. A similar organization, the Small Defense Plants Administration, operating under the authority of the RFC, worked with small businesses during the Korean War.

In 1953, an act of Congress ended the operations of the RFC amidst charges of political favoritism and corruption within the agency. The same Congress established the Small Business Administration in 1953 to take over many of the RFC’s roles while renewing a focus on lending and guaranteed loans for small businesses.

In Part II, we will take a look at the founding of the SBA and its achievements and priorities over the years.