Phillip and Arleen Huddleston, co-founders of Exercise Equipment Inc., launched their Reno, Nevada-based business nine years ago. Neither had experience in retailing, wholesaling or as fitness pros. Phillip, an engineer, had discovered a knack for repairing fitness machines; when he saw the demand for his repair services, he was eager to start selling the equipment, too.
The Huddlestons had a vague idea the SBA could help them get money to buy their first inventory. All they needed was $25,000. As it turned out, though, the SBA helped them in an unexpected way-through the advice they got from the SBDC at the University of Nevada in Reno. They researched the market, wrote their business plan and boned up on financial terminology, but got nothing but rejections from banks that wouldn't even consider their application under the SBA's 7(a) program. "I was a white male with no equity," explains Huddleston. "I was totally shot down by the banks. Finally, a new bank opened up in town, and they loaned me the money [through a non-SBA loan]."
Hauge says he isn't surprised to hear about experiences like the Huddlestons'. Somehow, the SBA has let itself be defined by its financial assistance programs-possibly because getting money to start or expand a business is a big problem for business owners. Yet far more people are helped by the SBA's "technical assistance"-programs that aid entrepreneurs with all sorts of nuts-and-bolts aspects of running their companies, from setting up Web sites to learning how to bid for government contracts. An overwhelming majority of the people served by the SBA receive this type of assistance, Hauge reports. "It's Business 101 on a need-to-know basis," he says. About half the businesses served by SBDCs are start-ups, even though, Hauge says, the centers' official mission is to primarily serve ongoing businesses.
Even leaders of special interest groups say they rely on the SBA to promote their members' concerns. "The SBA keeps an eye on the rest of the government to make sure certain [federal] purchasing programs include small businesses," says Susan Bari of the Women's Business Enterprise National Council. "There are supposed to be set-asides for small businesses, but I don't think a lot of government agencies would pay attention to these if the SBA wasn't looking over their shoulders."
Some experts believe that if the SBA would take a hard look at what it does, compared to what other federal agencies and nonprofits do, it could probably hand off numerous programs and free up resources for the programs it's determined only it can do. The SBA could greatly help itself by simply analyzing which programs serve the most people the most cost-effectively and deliver the greatest return on investment, says Charles Fitzpatrick, a former SBDC director and current director of the LaBelle Entrepreneurial Center at Central Michigan University in Mt. Pleasant, Michigan.
"A lot of [membership] organizations are all about advocacy and don't provide business plan and start-up help like the SBDCs," Fitzpatrick explains. "Really, other than the SBDCs, there is no place to go for that, save for the occasional [local] economic development office. But even [they] won't sit there and walk someone through filling out forms."
SBA-watchers say the agency needs to do a better job of stripping out functions that are redundant with advocacy groups and those that are becoming irrelevant. "The SBA doesn't [advertise its] performance data," says Ward. "It's too broad-brush. There's a need to restructure and retrench the SBA and reallocate its resources."
For instance, as a result of the SBA's efforts to streamline the guaranteed loan program, its requirements have become virtually synonymous with traditional bank lending practices. The two are so close that it might make sense for the SBA to eliminate the guaranteed loan program-which, in most regions, has a default rate only slightly higher than that of commercial lenders anyway, says Mike Kiser, a retired SBA district director who now is president of the Milwaukee branch of Wisconsin Business Bank, an SBA lender. Banks already have requirements to invest in economically disadvantaged neighborhoods, which could resolve the need for many of the SBA's specialized loan programs.
Hauge says he's "always hopeful that changes will happen." The confirmation of Barreto as SBA administrator is a positive sign: He's at least a small-business owner with experience at spearheading small-business issues. Says Hauge, "That's a step forward from the past."