Linda McMahon, the leader of the U.S. Small Business Administration, wants more. More SBA-backed loans reaching more diverse entrepreneurs. More founders using the agency's counseling services. More investment firms signing on with SBA to provide equity financing.
McMahon, also the co-founder with her husband, Vince McMahon, of World Wrestling Entertainment, likes to call the SBA "the best-kept secret in Washington." It's a secret she wants revealed. So a few months after her confirmation as administrator, McMahon hit the road on a tour of all SBA district offices (34 down, 34 to go). She has used the opportunity to meet with hundreds of small-business owners around the country, soliciting pain points and raising the agency's profile in the process. She has also been an ambassador for President Trump's tax-cut and deregulation agenda, which has been well received by most of her constituency.
Last week McMahon spoke with Inc. at SBA's Washington, D.C. headquarters on a wide range of subjects. The following has been edited for length and clarity.
Inc: The House Committee on Small Business just approved SBA's 2019 budget estimate. Considering the highly partisan environment, Republicans and Democrats seem remarkably aligned on most of it, with a few exceptions such as regulation, where Democrats want more oversight. Is small business the one subject on which both sides come together?
Linda McMahon: I don't know if it's the only issue. I certainly hope not. But I have had great support from both sides of the aisle. Everybody wants small businesses to succeed. More often than not, a lot of representatives' and senators' constituents are small-business operators and owners. So to the extent we are helping small businesses start up and transition to become medium-size businesses, as well as providing them counseling, all the representatives and senators are very welcoming.
The SBA's 7(a) loan program last year supported record lending in terms of dollar figures but a decrease in the actual number of loans. What can be done to help more small-business owners?
We have gone through a yearlong process of aligning our field offices with our headquarters, talking about is what is working, what is not, how can we interact with our lenders to make sure that they have the tools they need. We have developed a program called Lender Match, which is very helpful for entrepreneurs trying to figure out where to go and whom to talk to. They plug in where they live and what their needs are. Then the lenders who are participating can contact them, and it's a match. When I visit district offices, I have been doing local media and talking about the services we offer. Not just access to capital but also using our resource partners like Score, and Women's Business Centers, and our veterans outreach to help entrepreneurs develop business and marketing plans.
Many growth companies are looking for equity financing rather than bank loans. How can SBA help with that?
We have another program called SBIC, the Small Business Investment Companies. They are more the venture capital side. We have $4 billion a year that is appropriated for that. But we have not utilized that over the past few years because we have not had enough applications coming in for the licenses for the SBICs. You have to have those in place to make the investments.
Why have the applications fallen off?
I am not quite sure. We have done more outreach. When we receive them we process them pretty quickly. Hopefully next year we will see growth in the number of applications.
The percentage of loans going to minority- and women-owned businesses has remained flat for the past eight years and is lower than before the recession. What is the SBA doing to improve access to capital for underserved communities?
That's one of the things we're doing through our Women's Business Centers. I find the counseling aspect is almost as important as the access to capital. We are encouraging more women to come forward to help develop their businesses in economically underdeveloped areas. We help women and minorities at the same time in those areas, by helping them develop the right kind of business to get that capital. We are also looking to have further outreach into rural areas and to minorities through digital platforms.
The response to the new tax law among small-business owners and entrepreneurs has been largely positive. But there are some concerns, such as the 2025 expiration of tax cuts for pass-through companies. Going forward, what changes would you like to see that would benefit small businesses?
I like very much the aspects of the tax bill that did get passed. I do want to see them taken beyond the eight-year period. We would like to see them be permanent. There is always an opportunity to revisit. Maybe to make the reduction even bigger. But I am really happy we have taken these first steps. President Trump is about a growth economy. I think this rising tide is going to lift all boats.
The administration is making significant reductions in regulations, but many seem to be big-business-centric. What is being done to make sure that deregulation specifically targets small businesses?
We are attacking that on two fronts. We have our Office of Advocacy. Even though it is separate and independent from SBA, it is housed here. It meets with all the different agencies when rules and regulations are being promulgated to make sure small business has a seat at the table before they are passed. We also talk to the entrepreneurs themselves. I've been holding local roundtables as part of my Ignite Tour and taking back what I've been hearing to Washington so we can enact real change.
Many entrepreneurs are anticipating high growth this year but are worried they won't have enough able bodies or world-class minds to meet demand. Immigration is consistently the issue on which I hear the most discontent from these folks. How can government help?
One of the biggest issues relative to small and large businesses is labor force. We want to really be helpful in that regard. What I hear the most is how can we change the educational paradigm, so it's not just college and graduation with a four-year degree. That our trade schools and our vocational programs go back into effect. A lot of the small businesses that I meet with are manufacturing companies. They are in retail. They are in the service industries. What they are trying to do is work with local community colleges, high schools etc., to help develop the curriculum so those students can get their carpentry skills. They can be electricians. They can be plumbers. They can also be more involved in STEM and write code. So I think we have to have more of that collaboration between the private sector and what we are training people for.
Many companies, particularly fast-growth companies, want to see an increase in the number of H-1B visas.
That is true. I am hoping we are going to get good immigration reform passed.
The president's budget outline proposes a 5.9 percent decrease for SBA. If that happens, would it result in a reduction in loan guarantees or an increase in fees?
We are going to be able to absorb most of those cuts through consolidation of some of our programs, without primary reductions.
I assume that much of your bandwidth in 2017 was consumed by disaster relief?
This was an agency that came together over that. We were pretty creative about it. We ran ads in publications and online for loan processors and customer service reps. Eventually in our service centers around the country, we geared up to about 5,200 people. That surge was from outsiders we hired on a temporary basis. For those three storms we made the same dollar amount of loans as earlier big storms in half the time. It was something that had never been done in the agency. I was very proud.
Did it have an impact on your more ordinary small-business related activities?
I don't think we missed a beat in terms of our day-to-day activities.
Is there a message you'd like to send to entrepreneurs and aspiring entrepreneurs?
Now is one of the best times to start a business in the United States. The access to capital is there. The optimism for business. The new tax program. We can help you.
Do you think the Rock will run for president in 2020?
You will have to ask the Rock.