Terrorism, an economy in quicksand, a war in the Middle East--with the current events of late, today's business owners understandably have a lot on their minds. With the SBA, one of the most prominent government icons of small business, now in its 50th year, we spoke with SBA Administrator Hector Barreto to discuss some of the pressing issues on entrepreneurs' minds today--and how the SBA is addressing them.
In February, President Bush proposed $20.8 billion for small-business financing and $9.3 billion in guaranteed loans. Has this funding been affected by the war in Iraq?
Hector Barreto: It's really incredible--we're on track to have our most successful year ever. Our loans are running about 35 percent over a similar time last year--and we had a very good year last year.
You mention that the number of loans has increased, and the number of loans for minorities and women has increased a little over 35 percent overall. However, the dollar amount loaned out is down by 0.3 percent. Is this a strategy?
Barreto: Well, it's not necessarily a strategy. When we got here, the average size loan at the SBA was around $225,000. But a lot of small businesses don't need a million-dollar loan or even a quarter-million-dollar loan--they need $50,000; they need $100,000. In fact, our latest numbers show us at 43.1 percent on minority loans and 35.5 percent on women loans, so it's even a little bit better than what you just quoted.
On 504 loans, as opposed to the 7(a) loans just mentioned, the dollar amount loaned out has increased on average. What's the significance of that?
Barreto: That's very important to us--every year we're leaving a couple billion dollars on the table, and that's not our intention. We want to get as much of it out as we can. We feel very good about the budget that the president gave us, especially in this environment. We got about a 4 percent increase, a very good message to small business.
Has the war in Iraq affected any programs?
Barreto: I don't know that it's affected any of our programs. We are getting a lot of people calling us and coming to our Web site. Many of them are concerned about having key employees called up for active duty. Sometimes that key employee is the business owner. We've reached out to those businesses and let them know that we are here to provide them with counseling, business education and technical assistance. We can also provide them with disaster injury loans.
Part of President Bush's budget proposal was to make the SBA more customer-centric. What is your plan is for this?
Barreto: This year, we're launching a transformation effort at the SBA. One of the best things we can do is to take away a lot of the bureaucracy that [small businesses] get saddled with and wherever we can, bring that back to Washington, DC. Pilot [programs] have already begun, and it's our intention to spread that to the rest of the network as the year progresses--and definitely complete it next year.
Could you update us on the Business Matchmaking Program?
Barreto: The matchmaker is going great. We had a great kickoff event in Florida and scheduled close to 2,500 appointments. There is a lot of awareness and enthusiasm, and this is exactly what we were trying to do--take contracts out of Washington, DC, and take them where the small businesses are.
|Taking Advantage of an SBA Program|
|In early March, the SBA and
U.S. Chamber of Commerce, in partnership with Hewlett-Packard,
launched the Business
Matchmaking Program. Prior to the launch, however, Joseph
Lopez, founder and president of New Era Builders
Inc., attended the pilot event held in Cleveland and landed a
$300,000 contract with the U.S. Navy.
"We're extremely excited that we had the opportunity to present our firm to this closed audience of buyers," says Lopez. "And when it comes back into Cleveland, we're certainly going to attend it again."
SBA Administrator Hector Barreto says the government will spend in excess of $230 billion in goods and service this year, and by law, at least 23 percent of all federal procurement must go to small business, which equates to roughly $46 billion. Traditionally, 80 percent of federal government contracts have been awarded to businesses within 50 miles of the Washington Beltway. That's changing.
Though Lopez and his 14-year-old Cleveland-based company are no strangers to government contracts, having been awarded past contracts with the Coast Guard, General Services Administration and NASA, this was his company's first contract with the U.S. Navy.
"Some of these buyers are very difficult to get to," says Lopez, who advises small businesses to make appointments with companies that they would not normally have the opportunity to approach. With these exclusive opportunities, Lopez adds: "You have to be well-rehearsed, know what you want to say, know what they're looking for and be complimentary to what they're trying to buy. You can be the best service out there, but if they don't need your services, it's a waste of time."
Are you putting together any new programs at the SBA?
Barreto: Well, three areas traditionally have been [the most important to small businesses]. They need access to capital--we've got to find better ways to streamline it. Those years of having to turn in a telephone book of information to even get considered for a loan are going away. We have programs now like SBA Express that simplify the process.
The [second] thing is technical assistance. We want to help them sharpen their saw. One of the best ways to do that is by using technology--we're constantly adding features to our Web site.
And last but not least, small businesses want the same thing that big business wants: They want more business. We've got great programs, but we need to make sure that we're communicating them and that we're delivering them in the most efficient distribution system possible.
On top of all of that, one of the things we've been doing a lot more of is being a passionate advocate for small business--whether it's tax relief or association health plans.
I'm glad you brought up AHPs. Is there any time frame where you see them coming to fruition?
Barreto: I think we have one of the best chances to get that passed this year. The majority of people uninsured or underinsured either work for a small business or own a small business. We are very hopeful that with the president advocating so fiercely, and with the Senate and the House behind it as well, that we'll be able to get something done this year.
Any concerns regarding AHPs?
Barreto: The thing to remember is that association health plans are a great first step. Many times, small businesses don't feel they have any good options for their small business. But if they were part of a large pool, just the same way large corporations are or unions are, then they would have much more leverage to negotiate the best rates and the best benefits.
What is your overall assessment on the state of minorities in small business right now?
Barreto: It's the fastest-growing segment in small business, and it's very important and it's not small. Our president always tells us that the neighborhood is changing and we've got to be good neighbors, and one of the smartest things that we can do is reach out to these markets and make sure that we support them to be successful.
Are there any overlooked or underpromoted resources of the SBA?
Barreto: Many businesses look at the SBA as just being a loan program, and that's very important, don't get me wrong. In our history we've provided access to capital in excess of $170 billion. But the place that we touch the most small businesses every day is technical assistance--helping them with their business plans, helping them market, teaching them about technology and helping them hire the right employees. One thing that small businesses need to know is that this is our 50th anniversary, and we'll be traveling all across the country doing events.
Since taking over as administrator in July 2001, what are you most proud of?
Barreto: One of the most important things that I was involved with was our response to September 11. We were able to be on the scene the day after 9/11, and we've been there every since. And since that time, we have done an excess of $1.2 billion in disaster loans for small businesses. But one of the things that was unprecedented was the fact that we were able to do these loans all across the country. It was the first time ever that we did them outside of a declared disaster area. I will always be thankful to the SBA employees who stepped up to the plate during some very tough and trying times--and really in my mind were heroes for small businesses.
Do you have any advice for entrepreneurs?
Barreto: I always tell small businesses to do their homework. They need a very good business plan; they need a contingency plan; they need to make sure that they have the right relationships and the right contacts. I'm a big proponent of them belonging to organizations. My old saying was "The harder I work, the luckier I get." There's a lot of opportunity for small business in the future, and we need them to be successful, because they already represent 52 percent of the gross output in the economy and 75 percent of the new jobs. We can't afford--as a country--for small businesses not to be successful.
What has been your experience with the SBA? Write to email@example.com and share your thoughts.