They weren’t Happy Days for everyone: the U.S. Small Business Administration was formed by Congress in the 1950s because, even though it was the post-WWII “Decade of Prosperity,” commercial banks offered little for small businesses at the time. No wonder Fonzie never opened his own auto shop.
SBA-backed loans were created to give corner shops the same access to much-needed capital that banks were already making readily available to large institutions with collateral, assets, cash flows, and established business track records. The SBA presented an alternative to the old “it takes money to make money” approach for small businesses just starting up (though the phrase “startup” wouldn’t come into play until a few decades later).
Note that the literal term isn’t “SBA loans” but “SBA-backed loans.” The SBA doesn’t make loans directly. Rather, it creates guarantee-assurance guidelines with the input of banks, offline and online lenders, economic development organizations, micro-enterprise lenders, and other financial-industry partners. With that guarantee in place, SBA-approved banks and lenders are more confident that the small-business loan will be repaid and are therefore more motivated to take a chance on a borrower rather than turn them down outright. As a bonus, SBA-backed loans usually come with lower interest rates.