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Hector Barreto on the State of Small Business SBA administrator speaks out on the SBA's response to the war, terrorism, the economy and everything in between

By Steve Cooper

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Terrorism, an economy in quicksand, a war in the MiddleEast--with the current events of late, today's business ownersunderstandably have a lot on their minds. With the SBA, one of the mostprominent government icons of small business, now in its 50th year,we spoke with SBA Administrator Hector Barreto to discuss some ofthe pressing issues on entrepreneurs' minds today--and how theSBA is addressing them.

On Financing
In February, President Bush proposed $20.8 billion forsmall-business financing and $9.3 billion in guaranteed loans. Hasthis funding been affected by the war in Iraq?

Hector Barreto: It's really incredible--we're ontrack to have our most successful year ever. Our loans are runningabout 35 percent over a similar time last year--and we had a verygood year last year.

You mention that the number of loans has increased, and thenumber of loans for minorities and women has increased a littleover 35 percent overall. However, the dollar amount loaned out isdown by 0.3 percent. Is this a strategy?

Barreto: Well, it's not necessarily a strategy. Whenwe 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 loanor 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 onminority loans and 35.5 percent on women loans, so it's even alittle 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'sthe significance of that?

Barreto: That's very important to us--every yearwe're leaving a couple billion dollars on the table, andthat's not our intention. We want to get as much of it out aswe can. We feel very good about the budget that the president gaveus, especially in this environment. We got about a 4 percentincrease, a very good message to small business.

On SBAPrograms
Has the war in Iraq affected any programs?

Barreto: I don't know that it's affected any ofour programs. We are getting a lot of people calling us and comingto our Web site. Many of them are concerned about having keyemployees called up for active duty. Sometimes that key employee isthe business owner. We've reached out to those businesses andlet them know that we are here to provide them with counseling,business education and technical assistance. We can also providethem with disaster injury loans.

Part of President Bush's budget proposal was to make theSBA more customer-centric. What is your plan is for this?

Barreto: This year, we're launching a transformationeffort at the SBA. One of the best things we can do is to take awaya lot of the bureaucracy that [small businesses] get saddled withand wherever we can, bring that back to Washington, DC. Pilot[programs] have already begun, and it's our intention to spreadthat to the rest of the network as the year progresses--anddefinitely complete it next year.

Could you update us on the Business MatchmakingProgram?

Barreto: The matchmaker is going great. We had a greatkickoff event in Florida and scheduled close to 2,500 appointments.There is a lot of awareness and enthusiasm, and this is exactlywhat 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 andU.S. Chamber of Commerce, in partnership with Hewlett-Packard,launched the BusinessMatchmaking Program. Prior to the launch, however, JosephLopez, founder and president of New Era BuildersInc., 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 topresent our firm to this closed audience of buyers," saysLopez. "And when it comes back into Cleveland, we'recertainly going to attend it again."

SBA Administrator Hector Barreto says the government will spendin excess of $230 billion in goods and service this year, and bylaw, at least 23 percent of all federal procurement must go tosmall business, which equates to roughly $46 billion.Traditionally, 80 percent of federal government contracts have beenawarded to businesses within 50 miles of the Washington Beltway.That's changing.

Though Lopez and his 14-year-old Cleveland-based company are nostrangers to government contracts, having been awarded pastcontracts with the Coast Guard, General Services Administration andNASA, 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 withcompanies that they would not normally have the opportunity toapproach. With these exclusive opportunities, Lopez adds: "Youhave to be well-rehearsed, know what you want to say, know whatthey're looking for and be complimentary to what they'retrying to buy. You can be the best service out there, but if theydon't need your services, it's a waste of time."

Looking Ahead

Are you putting together any new programs at the SBA?

Barreto: Well, three areas traditionally have been [themost important to small businesses]. They need access tocapital--we've got to find better ways to streamline it. Thoseyears of having to turn in a telephone book of information to evenget considered for a loan are going away. We have programs now likeSBA Express that simplify the process.

The [second] thing is technical assistance. We want to help themsharpen their saw. One of the best ways to do that is by usingtechnology--we're constantly adding features to our Website.

And last but not least, small businesses want the same thingthat big business wants: They want more business. We've gotgreat programs, but we need to make sure that we'recommunicating them and that we're delivering them in the mostefficient distribution system possible.

On top of all of that, one of the things we've been doing alot more of is being a passionate advocate for smallbusiness--whether it's tax relief or association healthplans.

I'm glad you brought up AHPs. Is there any time framewhere you see them coming to fruition?

Barreto: I think we have one of the best chances to getthat passed this year. The majority of people uninsured orunderinsured either work for a small business or own a smallbusiness. We are very hopeful that with the president advocating sofiercely, and with the Senate and the House behind it as well, thatwe'll be able to get something done this year.

Any concerns regarding AHPs?

Barreto: The thing to remember is that association healthplans are a great first step. Many times, small businessesdon't feel they have any good options for their small business.But if they were part of a large pool, just the same way largecorporations are or unions are, then they would have much moreleverage to negotiate the best rates and the best benefits.

What is your overall assessment on the state of minorities insmall business right now?

Barreto: It's the fastest-growing segment in smallbusiness, and it's very important and it's not small. Ourpresident always tells us that the neighborhood is changing andwe've got to be good neighbors, and one of the smartest thingsthat we can do is reach out to these markets and make sure that wesupport them to be successful.

Are there any overlooked or underpromoted resources of theSBA?

Barreto: Many businesses look at the SBA as just being aloan program, and that's very important, don't get mewrong. In our history we've provided access to capital inexcess of $170 billion. But the place that we touch the most smallbusinesses every day is technical assistance--helping them withtheir business plans, helping them market, teaching them abouttechnology and helping them hire the right employees. One thingthat small businesses need to know is that this is our 50thanniversary, and we'll be traveling all across the countrydoing events.

Helping SmallBusiness
Since taking over as administrator in July 2001, what are youmost proud of?

Barreto: One of the most important things that I wasinvolved with was our response to September 11. Wewere able to be on the scene the day after 9/11, and we've beenthere every since. And since that time, we have done an excess of$1.2 billion in disaster loans for small businesses. But one of thethings that was unprecedented was the fact that we were able to dothese loans all across the country. It was the first time ever thatwe did them outside of a declared disaster area. I will always bethankful to the SBA employees who stepped up to the plate duringsome very tough and trying times--and really in my mind were heroesfor small businesses.

Do you have any advice for entrepreneurs?

Barreto: I always tell small businesses to do theirhomework. They need a very good business plan; they need acontingency plan; they need to make sure that they have the rightrelationships and the right contacts. I'm a big proponent ofthem belonging to organizations. My old saying was "The harderI work, the luckier I get." There's a lot of opportunityfor small business in the future, and we need them to besuccessful, because they already represent 52 percent of the grossoutput in the economy and 75 percent of the new jobs. We can'tafford--as a country--for small businesses not to besuccessful.

What has been your experience with the SBA? Write and share your thoughts.

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