GAO: Increased Coordination Needed to Address Capital Access Gaps for Innovative Manufacturers

While the Department of Commerce’s (DOC) Economic Development Administration (EDA) continues to take steps to implement the Federal Loan Guarantees for Innovative Technologies in Manufacturing (ITM) program, additional steps remain before they can issue loan guarantees according to a new report from the United States Government Accountability Office (GAO). To reduce redundancies across similar programs, GAO recommends that EDA works with the Small Business Administration (SBA) and the National Institute of Standards and Technology (NIST) to identify additional gaps in capital access that the program could fill, and conduct outreach to help target those gaps.

Under the America COMPETES Reauthorization Act of 2010 (COMPETES 2010), the DOC was directed to establish the ITM program, supporting loan guarantees for small and medium-sized manufacturers for the use or production of innovative technologies. Because debate over the ITM program was originally around potential redundancies, COMPETES 2010 tasks the DOC to ensure, to the maximum extent practicable, that the activities carried out under the ITM program are coordinated with, and do not duplicate, the efforts of other federal loan guarantee programs.

Although the EDA has coordinated with other agencies to learn from their experiences and identify practices that could be incorporated into the ITM program, the GAO finds that as it is currently designed, ITM does not clearly differentiate its potential applicants from those of comparable federal loan programs. In a comparison of the ITM program with four similar programs from the SBA, the Department of Agriculture, and the Department of Energy, the GAO indicates that overlap exists across business size, business type, the maximum allowable loan amount, the maximum guaranteed portion of loan, and permitted uses of funds. The report concludes with suggestions for the EDA work closely with federal agencies – and in particular, SBA and NIST – to determine how the ITM program could fill capital access gaps not filled by other federal programs. The EDA could then market the program to target those gaps as a means of helping EDA ensure, as COMPETES 2010 directs, that ITM program activities are not duplicating the efforts of other federal loan guarantee programs.