Does the SBA Still Matter?

Still, pride in work is one thing; job satisfaction is quite another, and at the SBA a chasm has opened between the two. In the past 10 years, the agency has been radically transformed, spinning off many district functions to lenders and central offices. Banks sign off on most 7(a) loans now, and other loans are approved by SBA national centers. It's unclear whether this is good or bad for borrowers--national banks, especially, support the consolidation; some local lenders and SBA staff say jettisoning the personal relationships makes it tougher to negotiate deals and workouts. What it does mean is that fewer SBA employees work in the Richmond federal building, and the underwriters who remain find themselves with a different job description.

This alone, however, does not explain why almost half of the 30 positions that existed in Richmond five years ago have disappeared, or why, according to various surveys, SBA employees have just about the lowest morale in the federal bureaucracy. No agency has had its operating budget shredded as mercilessly as the SBA's (most agencies have gotten more money), and the cuts of the past six years have struck at all aspects of the agency. "The infrastructure is decaying," says one staffer. "Copiers constantly breaking down, 10- to 15-year-old fax machines."

Particularly hard hit has been the 8(a) program, which targets disadvantaged companies with business counseling and federal contracts. In recent years it has become "harder to keep up with servicing the firms," says Tammy Proffitt, who supervises the program in Richmond. In 2005 two of the four 8(a) business development specialists took early buyouts, leaving just Proffitt and the two remaining specialists to mentor about 260 companies, offering advice and referring them to procurement officers in the government. She wants to be a partner to her clients, "able to really look closely at their businesses and to know them well," she says. "But once you're servicing a hundred firms, that's almost impossible." Proffitt has since hired a third business development specialist, but it's a small improvement. As far back as 1980, when the average counselor in the region managed 17 companies, the General Accounting Office worried that the counselors were spread too thin.

Virginia is a lot of territory to cover, more than one might expect--Richmond is closer to New York City than to the southwestern point of the state. When staffers go out, they often leave before dawn and return long after dark because the office can't afford very many overnight stays. This is especially problematic because the district's biggest marketing challenges lie outside Richmond, as a map of the state hanging in the office makes clear. It's dotted with pushpins to indicate loan production, with the pins concentrated most densely around Richmond, the exurban D.C. counties, and Hampton Roads. A thinner trail follows the Blue Ridge mountains up the spine of the state. Elsewhere, evidence of the SBA is scarce. "The rural areas are harder to market to," Bew concedes. "It's costly, and there's a smaller population."

One day last August, lender relations specialist Ford Scott and business development specialist Bob McLoone signed out an agency car and made the long drive toward the Tennessee border and Abingdon, an old mercantile town in the far southwest part of the state with red-brick buildings and red-brick sidewalks. The next morning, Scott stood before eight local bankers in Abingdon to introduce them to the 7(a), which extends credit to businesses that can't find it on similar terms elsewhere, offering a break not in the interest rate but in the maturity. A 7(a) for working capital normally runs up to seven years, compared with under three for a typical unsecured commercial loan, which can work out to a 40 percent discount on the monthly payment. The loans particularly favor franchisees and restaurants and small retailers.

Scott, though, didn't so much market the 7(a) as explain it--an exegesis on its terms, rules, and procedures, all of which can seem onerous. The bankers listened quietly--maybe too quietly. At one point Scott solicited questions. Someone coughed. Then Scott resumed talking. Lately, the SBA has been offering an alternative version of the flagship 7(a), pushing smaller loans to more businesses under its easy-to-use SBAExpress program. While the traditional 7(a) backs general-purpose credit up to 85 percent, banks that use the Express program get only a 50 percent guaranty--but can follow their own procedures instead of the time-consuming 7(a) rules and approve the loans themselves. It's a tradeoff many banks are happy to make.

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