Finance

Sequester Countdown: What's in Store for the SBA

Sequester Countdown: What's in Store for the SBA
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Senior Entrepreneurship Writer at CNBC
3 min read

The sequester was once an "if." It's now a "when." And that "when" is tomorrow. The U.S. government's plan to cut $85 billion in the next seven months begins Friday. Here is a look at how the Small Business Administration is going to be knocked.

1. Fewer loans will be guaranteed.
Sequestration will chop $16.68 million from the SBA's loan-guarantee fund, according to a recent letter sent by outgoing SBA head Karen Mills to the Chair of the Committee on Appropriations Sen. Barbara A. Mikulski (D, Md.). Each dollar that the SBA uses in its loan program guarantees an average of $51 of capital for small businesses. The sequestration is expected to result in 1,928 fewer loans totaling $902 million in capital in the hands of entrepreneurs.

2. Fewer small-business jobs created.
Capital
is the lifeblood of business. With reduced access to loans, fewer small businesses will be able to grow. The SBA estimates that the nearly 2,000 loans it expected to make would have supported about 22,600 jobs, Mills's letter says.

Related: Trying to Win a Government Contract? Avoid These 3 Mistakes

3. Fewer small-business government contracts.
One of the primary tasks of the SBA is to ensure that 23 percent of the contracts that federal agencies spend goes to small businesses. With $85 billion in federal spending being eliminated in the coming months, there will be fewer government contracts to be won. Also, the SBA says that an expected cut to its budget will result in less technical assistance to small-business owners who need help learning how to compete for federal contracts. Taken together, the SBA estimates the sequestration will result in $4 billion less revenue for small-business contractors.

4. Less fraud prevention.
Mills has made it a priority in her four years at the helm of the SBA to reduce fraud, abuse and waste in the agency's programs. With the sequester, the SBA expects to do 350 fewer 8(a) business-development reviews and 40 fewer reviews within the HUBZone program, both programs designed to help small businesses in underserved communities.

Related: Karen Mills on the SBA: Successor Needs to Get the Word Out

5. Tens of thousands fewer small businesses would get mentoring.
The SBA has a network of mentors across the U.S., and the budget cut means they'll be expected to cut back in their outreach to small businesses. The 110 Women's Business Centers would be serving 12,000 fewer small businesses than 2012, the 900 Small Business Development Centers would take on 2,000 fewer long-term counseling clients than in 2012, and the 350 chapters of the SCORE business-mentoring network across the U.S. would mentor 19,000 fewer small businesses than last year.

6. Entrepreneur communities would get less support.
One of Mills's personal favorite projects is the SBA's investment in and commitment to developing regional economic clusters across the U.S. While the SBA will continue to fund the seven regional clusters that it has committed to already, the agency would fund them at a "significantly reduced" level, the letter says. Also, the SBA would not contribute to new cluster projects.

Related: Youngstown, Ohio, a Leader in 3-D Printing and Manufacturing Innovation, Says Obama

Are you changing any of your business plans because of the impending sequester? Leave a note below and let us know.

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