Time to Fix the SBA

Tweet

There's just one problem: Congress never gave the Office of Advocacy a budget. Instead, the $10 million the office will spend in 2003 comes out of the SBA's budget. We think that the Office of Advocacy's work warrants a line-item budget. One reason: excessive regulation. The Office of Advocacy intervenes in about 100 different new rule-making procedures each year and has helped table onerous regulations and resolve some long-simmering problems. Last year, for example, the advocate's intervention led the Environmental Protection Agency to back off new rules governing storm-water runoff -- otherwise known as rain -- by pointing out that state, local, and regional authorities already had sufficient permitting requirements in place. The advocate has also fought to get muscle behind small-business protections. Earlier this year, at the suggestion of the Office of Advocacy and others, the White House ordered federal departments to report progress on meeting the statutory requirement that 23% of the more than $200 billion yearly in federal contracts be awarded to small businesses. The new steps are designed to prevent agencies from bundling smaller contracts together and awarding them as one large contract, thereby shutting out smaller contractors.

Do some data-mining

The SBA has a $797 million annual budget, and the authority to back $21 billion in financial assistance. What it doesn't have is a way to track whether any of its programs are actually working. The agency needs to find a way to demonstrate the efficacy of its loan guaranties, VC money, and assistance programs. Its managers have come under fire from Congress for failing to review the portfolios of its lenders. While it operates a program to help minority-owned businesses compete for government contracts, it doesn't keep stats on what becomes of the companies once they graduate and compete on the open market.

We need better documentation, and not just to justify the SBA's budget. Aggregated data on performance of SBA loans could be used to show private sector lenders that small-business loans, or loans to women and minority business owners, are not too risky. "If we had good data on small-business loans," says Betsy Zeidman, of the Milken Institute, a think tank based in Santa Monica, Calif., "there could be more private capital in the market, especially in tight financial times." Indeed, good data could send a ripple effect through the private sector -- particularly if the data showed that these SBA-backed companies went on to success. Instead, the failure of the SBA to provide clear and consistent measurements just serves to bolster critics of the agency.

Rename it the U.S. Department of Small Business

The SBA has baggage -- lots of it. The failed Whitewater land deal was financed by a $300,000 loan from an SBIC. The agency also has been accused of funding con artists and companies linked to the Mob. Its bureaucracy is legendary, with some loans still taking months and months to process. Is it any wonder that only 5% of NFIB members surveyed said they had received any assistance from the government in the past three years?

It doesn't take a marketing expert to see that the agency needs to make new efforts to get its message out and attract more entrepreneurs to the fold. Let's start with changing the name -- the U.S. Department of Small Business sounds good to us. Next, the SBA needs to begin reaching out to the very entrepreneurs who shun the agency, marketing itself as a resource for high-growth companies. We suggest a public-sector version of the highly effective "Intel Inside" campaign, one that associates the agency with such success stories as Nike, Ben & Jerry's, Federal Express, and, yes, Intel -- all of which got early help from SBA programs. Tom Stemberg, founder and chairman of the office superstore chain Staples, would be a good spokesman. In 1985, an SBIC coughed up $2.5 million to lead his second round of VC financing, helping the start-up compete against giants like Kmart and International Paper. Testimony from Stemberg and other heavy hitters would go a long way toward bolstering the SBA's credibility among entrepreneurs skeptical of the agency. "It was a race for real estate and money, and 20 horses were coming out of the paddock," Stemberg recalls. "Having U.S. government money invested in your business at a time when the market was becoming extremely competitive helped validate us."

 PREV  1 | 2 | 3 | 4 | 5 | 6  NEXT 

Elizabeth Wasserman

Elizabeth Wasserman is editor of Inc.'s technology website, IncTechnology.com. Based in the Washington, D.C. area, she has more than 15 years experience writing about business, technology, and politics for newspapers, magazines and websites. Her work has appeared in such publications as Congressional Quarterly, Business Week, Portfolio and Slate.