Hot Topic Tuesday: Ike was Right in Founding SBA

April 14, 2026

Bob Coleman
Founder & Publisher

Hot Topic Tuesday: Ike was Right in Founding SBA

Chris Allen of LiftFund CDC out of Dallas and I led a pre-conference training session yesterday at the Mid-America Lenders Conference in San Antonio on SBA Lending A to Z. Chris covered the 504 program. I covered 7(a). Our goal was simple. Give a clear overview of SBA lending to people new to the industry.

I started with history. The President who created the SBA in 1953 was Dwight Eisenhower.

Support for small business, America’s Main Street, was central to how he saw the world.

Eisenhower was the Allied Supreme Commander in World War II. He was also a Main Street thinker. His philosophy was straightforward. Strong local small businesses are the foundation of a stable democracy.

He was a logistics expert, not a battlefield tactician. His job during World War II was to ensure we had the materials to win. He understood the role of large corporations like Ford. At Willow Run in Michigan, Ford operated a mile-long plant with more than 30 entrances. Raw materials came in, and an hour later, a B-24 bomber came out the other end.

That is one reason the United States won the war. We overwhelmed Germany and Japan with supply and logistics.

But Eisenhower also understood something just as important. Ford could not build those bombers alone. The raw materials and components came from small manufacturers. The companies make rivets, tire rims, wiring, and thousands of other parts. Those small businesses fed the assembly line.

It was an ecosystem.

Eisenhower believed that local economies made up of merchants, farmers, small workshops, tradespeople who could fix and build anything, and bankers who tied it all together created strength. He believed that local strength created a stronger national economy.

Today, we talk about wealth inequality. Eisenhower believed a strong Main Street addressed those problems. When local economies are strong, wealth is created and distributed within the community.

He also understood that small businesses operate on thin margins. They need support.

His view was that you cannot separate business from community. The grocer, the banker, the mechanic, the farmer, the shop owner, they are all part of the same system. They know each other. They rely on each other. Trust matters. Reputation matters.

The local banker knew who worked hard and whose word meant something. Lending decisions were based on character, relationships, and firsthand knowledge of the borrower.

That is how Main Street was financed.

Eisenhower is often associated with the term military-industrial complex. Many interpret that as opposition to the military. That is not accurate. He understood the importance of large corporations. You need railroads. You need manufacturers like Ford.

What concerned him was the concentration of power. And large corporations have access to capital. Small businesses do not.

And capital is the key to the entire Main Street ecosystem.

But bankers are conservative. Financing a large government contract was risky for the local banker. Could the borrower produce these new parts? Would the large corporation pay on time? One bad loan could jeopardize the bank.

That is why Eisenhower supported government loan guarantees for small businesses. SBA’s founding was based on its successful predecessor, the Reconstruction Finance Corporation, which guaranteed loans through the Small War Plants Corporation loan-guarantee program.

During World War II, approximately 300,000 small businesses received government-guaranteed loans to produce parts for the war effort. Those loans put people to work. They injected money into local communities. They strengthened Main Street.

The concept was simple. The government would not lend directly. Local banks would make the loans. The federal government would guarantee them.

Why? Because the local banker knows the borrower. The federal government does not.

Eisenhower trusted local bankers to make the right credit decisions based on character and community knowledge.

His core belief never changed. A strong Main Street economy is necessary for a stable democracy.

And that brings it full circle.

Federal government support of Main Street works best when it does not lend directly. It works when it trusts the local banker who knows the applicant, understands the business, and can judge character to make the right credit decision.

That is the model Eisenhower put in place.

This is the definition of a public-private partnership. The government provides the loan guaranty. The local lender provides the judgment, discipline, and relationship. Each does what it does best.

And the results speak for themselves.

The SBA 7(a) and 504 loan programs are sustained by borrower and lender fees. They operate at zero subsidy. No ongoing taxpayer support is required.

Seventy-three years later, the system is still working exactly as designed.

Ike was right.