What we did was look at what was happening in Minnesota.
We worked through the holidays from Thanksgiving up to New Year's on about 20,000 different files, found about 8,000 instances of fraudulent loans.
In this episode, I'm sitting down with Kelly Loffler, head of the Small Business Administration, SBA.
I wanted to understand how exactly she's cracking down on fraud and bolstering domestic manufacturing.
And when I talk to small businesses, particularly manufacturing, their number one concern is a skilled workforce.
So as far as they're concerned, the sky's the limit.
We can build it, but we need the workers to do it.
Small business is the beating heart of America.
What can small businesses expect from the SBA in 2026?
This is American Thought Leaders, and I'm Yanye Kellek.
SBA Administrator Kelly Loffler, such a pleasure to have you on American Thought Leaders.
Jan, it's an honor to be with you.
Thank you.
So let's start with the thing that seems to be in the news all the time.
There were over 6,000, almost 7,000 borrowers that have been suspended in Minnesota.
You're saying it's about $400 million worth of fraudulent loans.
That seems like a hard move or a strong move to a lot of people.
What happened exactly?
Well, when I came in from day one about a year ago, I said it was a new day at the SBA.
And why is that?
Because first of all, during the Biden administration, they had never cracked down on fraud.
And what is fraud?
It's crime.
So what we did was look at what was happening in Minnesota, and we said, this is a great place to investigate deeply immediately.
And we did that.
We worked through the holidays from Thanksgiving up to New Year's on about 20,000 different files, found about 8,000 instances of fraudulent loans, and moved quickly to make sure that those borrowers, there were about 7,000 of them, some of them had two loans, could never access the services of the SBA again.
That includes everything from small business lending, on which we provide a government guarantee, to a disaster loan.
So we are now, because of this blueprint we have, we're going to be able to go state by state and see where people have defrauded the federal government, which means taxpayers, to ensure that they are investigated, that we're turning those files over to federal law enforcement, and that they can't receive federal support.
You know, some of the criticism around this issue, around this move, I guess, right, we learned about Minnesota and very quickly, I mean, within days, you know, almost 7,000 borrowers are suspended.
It almost felt like a blanket thing.
But you're kind of suggesting that there's, you know, sort of deliberate looking at every one of these files.
Can you just kind of unpack that a little bit for me?
Absolutely.
So this was very much driven during COVID.
We saw that $1.2 trillion in federal funds went out through the SBA.
That was in the form of the Paycheck Protection Program and the Economic Injury Disaster Loan Program.
Tell me that number again.
$1.2 trillion.
That's a lot.
Now, it was a lot of money, but what the federal government had asked the country to do was to shut down their businesses to stay home and small businesses, which make up 99% of all businesses in this country that employ nearly half our workforce.
There's 36 million of them now, a record number under President Trump.
But these businesses were told to cease operations.
It was devastating and would have been even more devastating had that federal assistance not come out.
And most small businesses were legitimate and used it for good, kept their employees on the payroll.
It made a huge difference locally.
And those businesses are back on their feet.
But there's a certain group of actors that saw opportunity and disaster and defrauded the government.
And that's where we saw under the Biden administration, they quickly started forgiving fraudulent actors, loans that were already fraud flagged.
So there was a set of thousands and thousands of loans that have been frauded, marked as fraud.
They were not ever further investigated.
Those cases were closed.
Those loans were being forgiven.
That's where we're going back now and just saying these files are now closed.
They've been marked as fraud.
We're sending them to federal investigators because no more sweeping this under the rug.
We're going to hold people accountable.
So it's retroactive.
I mean, so it's more, is that included in these 7,000 or is that beyond that 7,000?
It's included.
Yes.
Yeah.
And that's the lion's share of it.
That's where we see a lot of the fraudulent actors.
But what we know now is they come back to the trough.
When there's a disaster, they see opportunity to profit from it.
We see that in all the other federal programs, which is what's so great about the Minnesota response is it's all of government.
So you've got USDA, HUD, Treasury, Education, DHS, HHS, everyone looking and saying, okay, this is the roadmap for looking at how people are defrauding the federal government systemically and at scale.
Okay, so aside from giving loans when there's an emergency, which wow, $1.2 trillion, I'm still trying to fathom that number.
What exactly does the SBA do?
I think some people don't even know it exists for that matter.
Yeah, you're right.
Well, particularly the last four years, the SBA was dormant.
Under President Biden, 90% of the employees worked from home for four years.
So sadly, our Main Street job creators saw a complete absence of the SBA.
But the SBA was formed over 70 years ago when veterans returned from World War II.
The country recognized that these veterans were so capable that they could build businesses, that they were job creators, and we needed that industrial base to continue to grow.
So the SBA was created.
What it does, quite simply, is provide private sector banks, commercial banks, of which we have about 5,000 signed up within our agency.
We give them a substantial government guarantee to make that loan to a small business where they may take a risk that they wouldn't normally take because there's about a 75%, 85% government guarantee.
Not unlike some of the housing guarantees of the past or other types of federal loan programs, HUD, first-time homebuyers.
And that gives small businesses, lenders, the confidence to lend.
And our program performs really well normally.
We have a low default rate, maybe less than 2% on a good day.
And so what that provides is massive capital.
Capital is the lifeblood of small businesses.
Once they have that loan, they can hire.
Small businesses create two out of every three new jobs.
They can sign a lease or purchase property, plant, and equipment.
Most manufacturers in America are small businesses.
So the economic engine, the flywheel, starts from there.
And the small business is right there at the start.
Well, and actually, you know, tell me a little bit about your background too, because I think, you know, actually, even before I really looked into you, I kind of had this sense the whole time that you came from big money.
I don't know why that is.
Maybe this is maybe this is the liberal media.
Yeah, it's possible, right?
But I found out something different.
But just tell me about your background.
Yeah.
Well, thank you for asking, Jan.
First of all, I'm so humbled to be in this role because of my background.
I could have never imagined that growing up on a small family farm, fourth generation, we now have our fifth generation, which I'm so proud of, farming the land back in Illinois.
I grew up on a family farm.
My father was a veteran.
And because of what he learned in the Air National Guard, he learned how to haul jet fuel.
And he thought, wow, I can translate that to starting a small trucking company in our agriculture community.
So we had the farm and the trucking company.
I started working in the fields when I was eight.
I got my first job busing tables when I was 15, waitress for the next six years through high school and college.
First in my family to graduate from college.
What a blessing because I went off to build a business career, inspired by what I saw my parents running a small business where my dad was in the field driving a truck.
My mom was dispatching trucks, hiring, dealing with massive red tape that is involved in farming and trucking.
And I was so inspired by my parents.
I thought, I want to be in business, either have my own business or work in business.
I went on to do both and then got involved in politics because of what I saw.
Well, and there's a little part where it worked out, your business attempts, right?
Yeah.
Yeah.
Look, like most business people, you make some steps forward, you have some steps back.
Had many over my 30-year career in financial services, many setbacks, but did have success.
And apologize for the train.
Honk if you like small business.
But I was part of taking not one company public, but two.
Was blessed to be part of a private company that went public.
It's now part of Fortune 500 company.
I also started a company that is now a public company in the crypto space.
When I served in the Senate, I was the only chartered financial analyst to ever serve in Congress.
And so I felt like, based on my financial acumen, I wanted to bring that to Washington because I saw it completely absent when I was in the private sector and being regulated and being told what we could and couldn't do by people who didn't know our business, didn't understand free enterprise or fair markets or transparency or reporting or accountability.
So that's what I went to Washington to do because I knew that as a farm kid, I owed it to every other young person who didn't believe that the federal government understood them, that they had someone up there fighting for them.
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You know, while I have you here, I have to ask this, okay?
I have this theory about a way that we could teach our young people, and it has to do with the idea of prosperity.
It took me until probably I was 45, okay, before I actually learned where prosperity came from.
And I spent years in university, okay?
Clearly, maybe not even business.
I don't know what they teach in business school exactly.
But there's this, I think, the socialist and communist sort of approach to the world, that the sell is that the rich people take it from the poor.
That's the prosperity, right?
But prosperity actually comes from somewhere else.
If we taught that, I mean, I think a five-year-old could understand the basics.
Well, I'm living proof of it.
I'm someone that had no connections.
I had no, I went to public school, state university, and worked hard.
And I think that's what socialism and communism doesn't teach is kind of that self-reliance, that individualism that you should be proud of and to discover your talents and your gifts and your interests and pursue them and take calculated risks.
That's all the stuff that socialism and communism discourages.
It's why it's shocking to see it taking hold in New York City of all places.
Well, and just that you assume the pie, and this is as a biology, my background is in biology, you just, because that's how it works, that the pie is finite, right?
Like you can't expand the pie, so you have to take it, right?
If you're gonna, if you're gonna have a piece of it, you need to take it from someone else, but that's not how it works.
There's innovation, there's division of labor.
I mean, there's different theories about prosperity, right?
But we don't, I don't think a lot of people know them.
No, it's cynical and false to say that the pie is this big because that means life is a zero-sum game.
And the only way I can get ahead is if you fall behind.
And that is not the story of America.
And the story of America is one that the world wants to replicate.
That's why they're coming across our borders and trying to live the American dream.
In some cases, other cases, it's drugs and thugs coming across, but they're trying to exploit the American dream.
But hard work and the American principles of freedom and opportunity and faith and the ability to believe in something better in yourself, that you can be part of something bigger is so beautiful.
And that's the story of small business.
And that's why I get out of bed every day.
And I can't believe I'm blessed by this job to work for President Trump, to serve our job creators.
They may never touch the small business administration, but they should know that they have a fighter up here for them for policy, for advocacy within this administration, not just in me, but in President Trump.
So I know one of the things that you're interested in is that over the last, I guess it's four years, five years, I'm not sure the exact timeframe, but a number of these small businesses that were building like you were describing were debanked for no ostensibly good reason.
And this is something you're looking into seriously.
Can you give me a, I don't know, like a progress report or something like this?
Absolutely.
So thanks to President Trump's leadership and sadly his own personal experience and that of his family, we understand that debanking is a real thing in this country.
And because of his leadership, we now have the executive order that the SBA was charged with being part of the regulatory group, the OCC, the FDIC, and the Fed to investigate debanking.
And so we led the charge in sending out 5,000 letters.
That's our network of banks.
You think about the SBA, we're really like the private sector side of the government.
We have the connection to the small businesses, to the banks.
So we were honored to lead that charge.
But we know that under Obama, it really started with Operation Choke Point 1.0, where they started defunding, debanking, disfavored people.
And they even went as far under the Biden administration to put it into the regulatory apparatus so that you'd be penalized as a regulated entity if you provided banking services to everything from Christians to pro-life to 2A, you name it.
It could be considered a reputational risk for which the OCC or the Fed might downgrade you and require more capital, putting real costs into the banking system and discouraging customers from being banked.
It's completely unfair.
President Trump, it happened to him and his family.
It's happened to me on my political campaign.
And so I know firsthand this is going on.
So we sent out letters, got a very good response, continue to go through those responses in collaboration with the regulatory agencies to ensure it doesn't happen again and that those problems are fixed and people are held accountable.
Can a bank just for, I mean, this is an interesting question, right?
I have my business.
It's private.
It's a private bank and I just don't like this person.
So I'm not going to, I'm not going to have them as a client.
Am I not allowed to do that?
Well, look, there's banking is about risk management.
And I come out of the risk management business.
I understand it inherently as well as the child of a farmer working on a farm.
That's what farmers do.
They manage risks constantly.
And in the banking world, you want to make sure your loan is going to get repaid and that you're doing it consistent with regulatory guidelines so that you're not having money laundering and you know your customer.
So the KYC operations within a bank are very important.
And we're not going funding nefarious operations that are undermining the country or the banking sector writ large.
But look, there's discriminatory actions that are being taken.
And we're in a country, the country, the exceptional country in the world that upholds freedom and liberty and opportunity.
And to use the banking system to be a choke point for disfavored political people is abjectly wrong.
And the president is reversing that.
And I mean, I know that the civil rights division at DOJ is looking at these questions.
So I guess you're working together, Harmeet, Dylan.
Harmet's doing fantastic work and appreciate her leadership so much.
So the DOJ will be probably part of the broader response once we have all the responses.
Right now we're going through the reporting, the regulatory evaluation, and then we'll determine what level of federal law enforcement.
And that won't be up to us.
That would certainly be up to the regulatory agencies, the direct bank regulators.
So something that I know that you're very excited about, it's something that I find incredibly important personally.
And that is, I mean, I call it in my head remanufacturing.
You call it reindustrialization, I think.
But basically, it's my own belief that there is no future.
You can't have a successful country unless you have your own manufacturing base.
It's like the beating heart of the country.
And of course, the small business is a central piece of this.
What's happening with that?
There's so much happening.
And it's so exciting.
And it's interesting.
In 2010, Andy Grove foreshadowed President Trump's important tariff and national security policy in a piece he wrote about how manufacturing underpins national security.
And if we lose basic commodity manufacturing, we're going to lose the ability to protect ourselves, to be secure, to feed ourselves.
And so, you know, fast forward to today, 15 years later, the president has brought in hundreds of billions of dollars in tariffs, trillions in commitments to build in this country, which is incredibly exciting to have a president who believes in American industry in the American worker.
We know that thousands of factories, maybe 50,000, 70,000 factories were scraped from America and millions of jobs were lost.
I grew up in the industrial heartland.
I saw communities hollowed out, what it did to families, and what it did to opportunity.
So we know that the industrial base is important to make things, but it also builds communities, families, and opportunity.
And we have to get back to that skilled workforce of making things and building things because we have an administration like no other point in history that believes that that can be done again.
A case in point is that our rare earth and critical minerals ability to process them is virtually not, it's not entirely non-existent, but it's close.
And that said, actually, I'll mention this.
There's all sorts of innovation happening in this space.
There's a company now in Houston, a factory that just got commissioned last month.
It's coming out that's basically pulling this stuff from electronic waste.
And it's actually a thousand times more concentrated.
I'm always astonished at the ingenuity.
So maybe there is a solution.
Maybe there is a solution to that problem.
Maybe this is, maybe there'll be hundreds of these factories that are popping up.
And that's why small business is so important in the manufacturing pipeline, because most manufacturers are small businesses.
So they meet the statutory requirement of fewer than 500 employees and the net worth standard.
So small businesses are really refueling our onshoring renaissance along with President Trump's policies.
I mean, the working families tax cut was so important because you have 100% expensing of Made in America factories.
You have incentives for workers to work more, no tax on overtime.
I've walked factory floors in more than half the states of this country.
I've had many factory workers tell me that they're going to work more hours because their overtime is not going to be taxed away now.
And when I talk to small businesses, particularly manufacturing, their number one concern is a skilled workforce.
So as far as they're concerned, the sky's the limit.
We can build it.
We've got a backlog of work to do, but we need the workers to do it.
And small businesses are the innovation engine around training the workers because they have the apprentice programs, the connections to community colleges and trade schools.
So this is all coming up from small business, though it's the big factories that we think about in history.
I've talked to many large Fortune 500 companies and they say they can't build in America without small business because it's the contractors and the builders and the small businesses that get it done for them.
Do you have a particular focus on manufacturing related small businesses or these programs across the board?
Well, certainly we do have a focus on manufacturing.
So in my first month, I announced our Made in America manufacturing tour and all the programs that go with it.
An onshoring database that helps manufacturers determine if products that they need are already onshore.
It's a directory of a million suppliers in this country.
We do build things in the country.
The liberal media doesn't want us to think it's possible.
They don't think that the value that factories provide is meaningful.
But that's completely opposite when you go out in the heartland and you see it getting done or on Long Island in New York or even in California where some people bravely continue to operate their businesses.
So it is getting done and I'm just raising the visibility and then advancing things in Congress.
So we've thrown our support behind the Made in America Manufacturing Act, which raises our loan limits to $10 million from $5 million because the AI, the advanced manufacturing, robotics, robotic welding that I've seen in factories, we're actively reshoring industries in real time.
So they need that capital.
You know, another area that I'm kind of aware of where there's, I guess, issues is specifically from a national security perspective is basically medical ingredients or medicines, even antibiotics.
From what I'm aware of, there's only one American company left that makes penicillin or amoxicillin specifically.
But the problems companies like this have is that they're being basically undercut and in many cases deliberately.
You know, I don't know if it's officially dumping, but it's effectively dumping and they're kind of unable to compete with these kind of generics coming from mainly China, some of it through India and so forth.
And we know that China has this strategy, right, of basically taking over entire markets for particular products.
Well, and when I was in the Senate, I introduced the Beat China Act, which was to bring manufacturing back onshore because we saw, as you mentioned, the APIs weren't being made here.
We're dependent on them for every piece of manufacturing.
But we also know that we've over-regulated our manufacturing sector.
So even manufacturing in pharma can be very hard in this country.
And the SBA has been tasked with leading a strike force, a deregulatory strike force.
As an agency, under statute, we have the ability to work across every federal agency to help deregulate and get out of the way of those that want to build and grow in this country.
So sometimes we've driven it overseas ourselves.
So we have to look at that.
And I'm excited.
And I'm worried about this piece because I think I'm aware, of course, I'm aware of this legislation, but I, you know, and there was, since Trump 45, there's been a lot of thinking about this.
Even during the Biden administration, there was thinking about this.
But it really hasn't happened much, from what I can tell, right?
Yeah, people forget Biden put additional tariffs on China even after President Trump did.
So the Biden administration doubled down on that.
But no, it is, it's an issue that the administration now is actively working on.
We're working with them on it on a number of fronts.
And I'm thrilled that great entrepreneurs are.
This is what it's about.
It's about not government solving every problem.
We're here to empower the private sector and make sure that we're getting out of the way, but yet making sure that they have the capital and the regulatory environment to build.
So another piece that I know that you're working on is contracts having been awarded based on immutable characteristics.
That maybe would be the simplest way to put it and not necessarily based on skills.
I want to understand how you're looking at this because probably in some cases the correct contracts were worded to the correct people, even though there was a DEI initiative associated.
In other cases, perhaps that wasn't the case.
How are you kind of, I know you're trying to dig into this and basically root it out, I guess?
Yeah.
Yeah.
So federal contracting and the fraud that happens within it in Washington, D.C. around these programs are probably the worst kept secret in Washington.
And from day one, I said, we're going to root out DEI and we're going to root out waste, fraud, and abuse.
And unfortunately, both of those are represented in federal contracting, specifically in the 8-A program.
And so that's what we've been focused on.
And there's been some very high-profile DOJ actions last year that highlighted the wrongs of the 8-A program.
So essentially, a big company or a non-qualified company will act as a pass-through and then have a small business use that person to say, I'm a small business, but then they charge more to give to that person to pay them off.
And then they charge more for their services.
So it costs the taxpayer, the federal government's a trillion-dollar spender.
So this is every year.
So it's a huge cost to the American people when these programs are defrauded.
So we have a whole path.
We're cracking down on that.
We have an investigation, a 15-year look back audit going on.
And then we have right now, we've requested three years' worth of information because in that program's 45-year history, it's never been audited.
And so I called for an audit, not just of this agency on day one, but of that program.
And so you recently sent out a letter about this.
Yeah.
So now this federal contracting happens at every single agency in the federal government.
So this isn't just an SBA issue.
This is at Department of War, Department of Treasury, Department of Education.
So these socially and economically disadvantaged contracts are awarded right now to about 4,300 firms.
Well, we know, based on the preliminary audit we've done, is that there's a lot of fraud in those programs.
So we send a letter to every single person.
Those letters are due back this month in January.
And if they don't respond to the letters with the requested financial information, which again has not been ever audited in 45 years of the program, which came into effect under Jimmy Carter, we are going to remove them from the program.
And we are not going to operate programs that traffic in abuse, waste, and fraud.
And we're not going to traffic in DEI.
We're going to give it to deserving small business people.
And you'll see more to come on that.
Out of curiosity, did the Doge efforts from some time ago sort of play into this at all?
Doge has been an incredible tailwind to really kick things off.
Because the wonderful thing about Doge that I think is completely underappreciated is this was really a data-driven effort.
It provided leaders like me that came in after going through a confirmation process, we were able to hit the ground running with data and assess the health of our organizations, which for four years had been completely neglected.
You know, no agency worked from home more than the SBA.
I mentioned 90% were working from home for four years.
No small businesses work from home.
I mean, these are the hardest working people you meet in your life.
But what we're doing now is saying this Doge data was very helpful in kicking it off and it gave us the frameworks to be able to navigate through.
So that was a good start.
But within our agency, we've now built that capability.
So it's happening every single day.
Well, this has been a wonderful conversation.
Perhaps a final thought as we finish?
Well, 2026 is going to be a year for the record books.
I mean, it's not just our 250th anniversary as the world's exceptional country, but it's also going to be a great one for the American people because we have an administration that is fighting every day for the people back home.
And I think that's what you see in our cabinet.
We're all working together like never before for the best president in American history.
So more to come, and we will not stop working every day to get it done.
Well, Kelly Loffler, it's such a pleasure to have had you on.
Thank you, Jan.
Thank you all for joining SBA Administrator Kelly Loeffler and me on this episode of American Thought Leaders.