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Senators to Small Business: Get Lost

A Senate bill would fold the SBA together with the departments of Commerce and Labor, and advocates fear small businesses will get lost in the shuffle.
President Barack Obama delivers his State of the Union address before a joint session of Congress at the U.S. Capitol, February 12, 2013, in Washington, D,C.

Would anyone notice if the Small Business Administration shut down?

At least three senators are betting the answer is no. Last month, Senators Richard Burr (R., N.C.), Dan Coats (R., Ind.) and James Inhofe (R., Okla.) introduced a bill that would fold the SBA into a newly consolidated federal agency that would also combine the current departments of Commerce and Labor.

The bill offers a plan to streamline government, save money and eliminate agency overlap, Burr claims. But threatening to close down the SBA is a tactic almost as old as the agency itself, which was founded by President Dwight Eisenhower in 1953. 

That doesn't soften the anxiety among some observers. Small business advocates worry that lumping the agency into a much bigger one would disenfranchise small business owners, scuttle their ability to lobby and possibly damage their access to critical financing and other programs important for their survival.

The SBA advantage

"There's a big advantage to having one agency dedicated to small business," Todd McCracken, president of the National Small Business Association says.

Among those benefits, McCracken says, is having an agency head familiar with the needs of small business owners exclusively, who can speak clearly on behalf of their interests, and who has a clear understanding of their unique financing needs.

NSBA has 65,000 small business members, about five percent to ten percent of which have used the SBA for its guaranteed loans, which include 7(a) loans for operations, and 504 loans for commercial property purchases.

Cumulatively, these loans represent billions of dollars worth of small business financing annually.

Risks of merging

If the SBA were folded into Commerce and Labor, small business might get drowned out by more powerful and louder larger business, McCracken says.

The National Federation of Independent Business, which says it has taken no position on the SBA consolidation bill, acknowledges the SBA is extremely important for advocacy.

"Our main concern is that the [SBA's] Office of Advocacy remains intact, vibrant and robust," Jean Card, an SBA spokeswoman says. "It is a critical piece to us to make sure in the regulatory process that small business is not being left out or ignored."

Failed attempts

Ronald Reagan suggested eliminating the agency altogether when he was president in the 1980s. His budget director at the time, David Stockman, called the agency "a rat hole" that only wasted taxpayer money.

George W. Bush also let the agency languish by cutting its budget and dramatically reducing its staffing in the 2000s.

In 2012, President Obama petitioned Congress to give him the power to streamline the executive branch and consolidate six agencies dealing with commerce and trade. At that time, he suggested folding the SBA into Commerce, in addition to four other agencies and offices.

But Obama also elevated the SBA Administrator to a cabinet-level position.

And in the SBA's former Administrator Karen Mills, Obama appointed someone who threw herself fervently into agency activity during the Great Recession, when small businesses foundered and closed  after banks stopped lending. Mills drew up an emergency loan plan, which included bridge loans, speedier approval times and getting hundreds of community banks to start lending to small businesses again, among other things.

Since Mills departed the agency in August, however, the Obama administration has failed to name a successor, which has caused some speculation about the fate of the agency.

A representative from the Small Business Administration said the agency does not comment on pending legislation, following a request for comment.

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Last updated: Jan 10, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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