The Importance of the Small Business Administration

Despite being overworked and underfunded, the Small Business Administration (SBA) is taking body shots from all sides. And it just isn’t fair. How many people can truthfully say to a small business owner, “I am from the government and I’m here to help?”

Leading the way in disbursing federal subsidies and other help is the SBA, whose mission statement says that its role is to “maintain and strengthen the nation’s economy by aiding, counseling, assisting and protecting the interests of small businesses.”

In the wake of 9/11, the SBA issued $1.2 billion in disaster loans. In just 90 days since the wrath of Hurricane Katrina, the SBA has already dispersed $1.3 billion to thousands of small business owners under the regulatory guidelines established via federal legislation on Capitol Hill.

But USA Today recently reported that SBA workers are reporting low morale, high stress. Swamped by disaster loan applications from victims of the Gulf Coast hurricanes, the SBA ranked last in a recent study of employee morale at 30 federal departments and agencies. The agency’s low job satisfaction score is a drop from its 24th-place ranking in a similar survey of 28 agencies and 150,000 federal workers two years earlier.

Meanwhile, the left is comparing SBA to FEMA. reported that SBA Administrator Hector Barreto recently addressed Capitol Hill for yet another attempt to “spin away the SBA’s failure to help small businesses in the Gulf Coast” devastated by Hurricane Katrina. Reminiscent of former FEMA director Mike Brown’s attacks, opined the magazine’s Web site, officials are publicly speaking out against Barreto. Sen. John Kerry, top Democrat on the Senate Committee on Small Business and Entrepreneurship, issued the following statement:

“This administration should be ashamed of the SBA’s response to Katrina. Hector Barreto is not doing a heck of a job. Out of more than 300,000 applications, they’ve only approved 20,251. Small business owners throughout the Gulf Coast are still hurting months after Katrina, but the Small Business Administration’s leadership is offering them only hurricane force spin.”

While the Democrats attacked, the Libertarians followed suit. According to one Libertarian scholar, there is no factual reason to base policies on the idea that small businesses are more deserving of government favor than big companies. Preferential policies hurt, not help, economic growth.

“Wasteful spending is wasteful spending. The Republicans need to return to their message that being compassionate is doing what it takes to implement a system that works,” said Veronique de Rugy, economist for the conservative American Enterprise Institute.

When du Rugy began looking at the long-held notion among entrepreneurs and policymakers that small businesses were the “fountainhead of job creation” and an important economic driver, she came to a radically different conclusion.

“For nearly 20 years, political leaders of all stripes have taken as gospel truth that small companies are the chief drivers of economic growth and are responsible for about two-thirds of all new jobs created in the United States,” says du Rugy. “But is this conventional wisdom true? Do the facts justify the many government spending programs, tax incentives, and regulatory policies that favor the small business sector?”

Ouch. Ouch. Ouch. Oversight is one thing, but it is no fun being a political football.

As someone who for 23 years has helped owners of privately owned businesses sell their companies, let me speak up in defense of the SBA. Small business is the engine of the U.S. economy. Without small businesses, where would today’s big businesses come from? Microsoft, Wal-Mart, Marriott and countless other examples started out as a small business.

Although in its bureaucratic past this wasn’t always the case, today the SBA is a preferred lender when small privately owned businesses decide to either sell their business or want to borrow additional capital to expand their business. Business expansion clearly creates additional capital spending and new jobs. In addition, the transfer of ownership is both good for the economy and also good for employees.

When a business is sold, the fact of the matter is that virtually all employees fare better in the future because a high percentage of new owners come in with additional capital and a desire to grow their new business. This growth typically spells opportunity for employees who want to grow their careers and who welcome working with a new owner. Meanwhile, the former owner of a business typically either buys and grows a new business or invests for retirement and those invested funds and savings are recycled into to new loans and additional capital expansion through the banks, savings and loans and other investment vehicles typically used by retirees.

There always are political opportunists who will take either side of any argument. The fact of the matter is that the SBA fulfills a vital function in the U.S. economy. Even with reduced staff levels due to earlier budget cuts, the SBA gets assigned the massive 9/11, Katrina and other tasks and is unreasonably expected to perform those additional tasks perfectly.

SBA, thank you for being there.

Written by Steven Fitzgerald, president of Acquisition Services Group, who has a professional team of California business brokers. He has extensive experience representing business owners who want to sell manufacturing, service, and distribution firms.


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