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Troubled Waters

It's been a year of scandal, criticism and change at the SBA.
July 1, 2006
URL: http://www.entrepreneur.com/article/160130

Recently, the SBA has come under a hailstorm of criticism for everything from its response to the Katrina disaster to the way it helped companies recover from 9/11: The Associated Press reported that some of the loans designated for companies impacted by terrorism went to a perfume firm in the Virgin Islands, a winery in Oregon and other unaffected businesses. One prominent senator even held hearings on whether the SBA should be abolished.

With the SBA on everyone's mind, we put questions about the organization to this month's "Point/Counterpoint" team, New Mexico Democrat Rep. Tom Udall and Arizona Republican Rep. Rick Renzi.

Entrepreneur: Are there better ways for the federal government to help entrepreneurs than the current structures and organizations? If so, what are they?

Rep. Udall: I believe that if the federal government would fully fund the Small Business Administration, it would go a long way toward helping entrepreneurs start their businesses and succeed. When run correctly with the necessary funding, the SBA and its programs can help entrepreneurs.

Rep. Renzi: There are better ways for the federal government to help entrepreneurs, but it doesn't necessarily mean that more programs or more governmental structures have to be created. In this current tight-budget climate, the federal government has to work smarter and faster with limited resources. The best way to accomplish that task is for the federal government to partner with the private sector to leverage limited resources.

Some congresspeople have been critical of the SBA. Do you think criticism is warranted?

Udall: There are obviously problems within the SBA. This issue came to the forefront after Hurricanes Katrina and Rita hit the Gulf Coast. Of the approximately 380,000 disaster loan applications received in the five months after Katrina, the SBA approved 59,398, and an additional 60,000 went unprocessed in those five months. The SBA has shown that it has an insufficient institutional infrastructure and work-force capacity. And it has not properly managed its financial and budgetary obligations. It had to come to Congress to appropriate additional funding numerous times.

Renzi: Obviously, every office can be run more efficiently. Nevertheless, I believe SBA administrator Hector Barreto was a tremendous leader for the Small Business Administration. Under Barreto's leadership, the SBA streamlined many functions and learned to do more with less while facing unparalleled challenges to the SBA's disaster loan program from the 9/11 terrorist attacks and from [the] hurricanes. He also led the charge to save taxpayers nearly $100 million annually by eliminating the federal subsidy that was wreaking havoc on the SBA's 7(a) guaranteed loan program. I think the criticisms of him were mostly political.

One of the invited panelists to a recent Senate hearing on the SBA suggested that the agency should be shut down. Do you agree? Why or why not?

Renzi: I disagree that the SBA should be shut down. There are already very few resources in the federal government dedicated to helping small business.

Udall: Despite its problems, the SBA is still needed. But we need to ensure that this vital agency has the resources it needs, not continue the "doing more with less" falsehood.

Joshua Kurlantzick is a writer in Washington, DC.