The Trump administration and Elon Musk’s Department of Government Efficiency (DOGE) have taken a chainsaw to the federal government, haphazardly cutting benefits and services to retirees, veterans, and consumers. DOGE will also harm small businesses by reducing public service quality and access to important resources. These cuts could not come at a worse time: Small businesses are reeling from the Trump administration’s across-the-board tariffs on nearly all countries—taking full effect this month—alongside an escalating trade war with China.
The administration’s policies are generating much anxiety about the direction of the economy, with 58 percent of small businesses citing inflation as their number one concern in a survey. A separate, closely watched survey of small businesses has shown a consistent decline in optimism since the president’s inauguration, with uncertainty at elevated levels and a growing number of these firms planning price hikes. The Trump administration’s recently announced tariffsthreaten to hit small business owners in two ways: raising input prices for retailers, restaurants, manufacturers, and more while also inviting reprisals that will hurt small business exporters, who account for one-third of overall exports. This is why small business owners listed tariffs as a significant to the U.S. economy in a poll from Small Business Majority, conducted from December 2024 to January 2025.
Generally defined as businesses with 500 or less employees, small businesses account for roughly half of private sector jobs and generate 44 percent of the U.S. gross domestic product. Small businesses play an outsized role in rural communities, employing more than 54 percent of rural workers. And small businesses drive innovation, with the smallest businesses outpacing the largest firms at receiving more patents per employee.
The DOGE cuts come amid a post-pandemic entrepreneurship boom, with Americans filing an unprecedented 21 million new business applications from 2021 through 2024. The Trump administration’s reckless actions now threaten to reverse this boom.
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Slashing services and increasing wait times
The Trump administration has announced a series of staffing cuts to federal agencies and contractors that will reduce the quality of services that small business owners receive.
Small Business Administration programs
DOGE has targeted the Small Business Administration (SBA) for eye-popping cuts, planning for the elimination of 2,700 employees representing 43 percent of agency staff. As punishment for city government policies of noncooperation with federal immigration authorities, SBA Administrator Kelly Loeffler announced the closure of regional offices in Atlanta, Boston, Chicago, Denver, New York City, and Seattle in favor of opening offices in lower-cost areas in these regions.
While the SBA claims that cuts will have no effect on services, the reality is more concerning. DOGE is pushing massive cuts for an agency that experienced an increase in its loan portfolio—driven by hundreds of billions in COVID-19 pandemic relief—by more than a factor of three, from more than $144 billion in 2019 to more than $450 billion in 2024. Worse still, DOGE is driving these cuts as the Trump administration seeks to move responsibility for the $1.6 trillion student loan portfolio from the U.S. Department of Education to the SBA.
What will be the consequences of these cuts be? By eliminating employees hired to work on pandemic programs that use disaster loan authorities, millions of borrowers with outstanding COVID-19 Economic Injury Disaster Loans—including more than 1.3 million in default—will have more trouble reaching an SBA employee for assistance. These cuts could also impact the disaster loan program—which has made an average of 40,000 loans annually over the past 10 years to small businesses and homeowners affected by natural disasters such as fires and hurricanes—and make it harder for residents in disaster areas to access SBA programs that can help them get back on their feet. The challenges experienced at the Social Security Administration, which has experienced website failures and a doubling of phone wait times compared to late 2024, are a cautionary tale of DOGE cuts.
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Small business contractors
DOGE cuts also are likely to hurt small businesses that seek to compete for federal contracts. The cancelled contracts that DOGE has touted so far have disproportionately hit minority- and women-owned small businesses. Additionally, DOGE cuts could threaten programs that help small businesses navigate the contracting process, which is complex and often cumbersome. This complexity has already contributed to the 50 percent decline in the number of small businesses that received federal contracts annually since 2010. Moreover, the Trump administration’s war on equity-focused programs will almost certainly result in the weakening of programs focused on providing small businesses with hands-on support and training in accessing contracting opportunities, such as the SBA’s 8a and Empower to Grow programs. This means that doors will close to small businesses hoping to bid for and win federal contracts.
This disruption comes following years of record federal contract awards to small businesses under the Biden administration. In fiscal year 2024 alone, the federal government awarded $183 billion to small businesses, representing nearly 29 percent of federal contract dollars in fiscal year 2024. The federal government also launched initiatives to reverse the decline in overall small vendors by establishing new goals for increasing new entrants into the federal marketplace. This is all now at risk thanks to DOGE cuts.
Internal Revenue Service
DOGE’s proposed cuts to the Internal Revenue Service (IRS)—reported to be at around 18,200—would not only reduce government revenue but also threaten the IRS’ ability to provide tax filing assistance and timely service to millions of small businesses and entrepreneurs. These reductions include a more than 20 percent cut to the Taxpayer Advocate Service, an internal watchdog that recommends improvements and helps individual taxpayers with complaints. Especially concerning is the fact that the IRS laid off thousands of employees this year from its Small Business/Self-Employed division, which serves 57 million self-employed individuals and small businesses. These changes could result in longer wait times or reduced service hours, leaving small businesses with less assistance in navigating the tax code.
Reducing resources for small businesses
DOGE cuts to critical agencies are also likely to reduce available resources for small businesses.
Treasury-funded state capital access programs
With reports that the U.S. Treasury Department is seeking to make “substantial” staffing cuts, the State Small Business Credit Initiative (SSBCI) is at risk. This nearly $10 billion program—reauthorized and expanded under the American Rescue Plan—supports small business loan and venture capital programs run by states, territories, and Tribal governments. From August 2022 through the end of 2023, the program spurred $3.1 billion in capital for small businesses, including $1.2 billion in venture capital. By the end of the decade, the program is expected to catalyze up to$10 in private capital for every $1 in public funding, meaning the program could bring up to $100 billion in private capital support for small businesses. Treasury releases these funds to receiving jurisdictions in waves, with each tranche of money disbursed as those jurisdictions use funds to support small businesses, and roughly $4.66 billion remains to be disbursed. Cutting Treasury staff resources dedicated to the SSBCI program means that, as jurisdictions draw down the funds they have on hand, they will have a harder time getting Treasury approval for their next batch of funds, reducing access to capital for small businesses.
Support for mission-driven lenders
In a March 14, executive order, President Donald Trump ordered Treasury to reduce the size and functions of the Community Development Financial Institutions (CDFI) Fund office. The CDFI Fund supports economic development across the country by supporting CDFIs through a blend of tax credits, grants, and bonds, to the tune of billions each year. CDFIs are an important resource for minority- and rural-owned small businesses, collectively managing $304 billion in loans that capitalize 4.3 million small businesses while supporting affordable housing, child care, and more.Cutting staff at CDFI Fund will make it harder for these lenders to continue supporting the capital needs of small businesses at scale. The administration’s cuts to CDFI Fund have garnered bipartisan opposition.
Cuts that hurt rural small businesses and small farmers
Rural small businesses and small farmers stand to lose following cuts and a freeze on grants and loans at the U.S. Department of Agriculture (USDA). One example of this is the Rural Energy for America Program, which offered matching grants—now in doubt—to thousands of small businesses and farms to cover the costs of installing solar panels; wind turbines; electric irrigation pumps to replace diesel ones; and more. Another example is USDA’s Rural Development agency, which invests billions annually to support economic development in rural communities and has been targeted for hundreds of layoffs by DOGE. These cuts and funding interruptions will disrupt the services and support that small farms and rural small businesses need.
Conclusion
The opportunity to own your own small business is part of the American dream. Entrepreneurship boomed after the pandemic recession. In just a few short months, the Trump administration has put this boom and the financial security of millions of small businesses at risk by taking a chainsaw to small business services and programs—all while imposing a set of sweeping new tariffs that will raise costs and slow consumer spending.