Small Business Administration

Independent federal agency chartered in 1953 to provide financial assistance to small businesses. The SBA makes direct loans to borrowers who are unable to obtain conventional financing, participates in loans originated by financial institutions, and also guarantees loans made by banks and other financial institutions. The SBA preferred lender program, allows businesses to get SBA-guaranteed loans by filing loan applications directly with designated financial institutions, significantly reducing the time needed to obtain SBA funding. Typically, the SBA guarantees 85% of a small business loan. The agency also provides disaster assistance to small businesses and financial counseling to minority-owned businesses. The SBA also licenses, regulates, and provides venture capital assistance to a Small Business Investment Company . The SBA guarantees bank-originated business loans up to $750,000 in loan principal.

A federal government agency in Washington, D.C., that encourages small business.
Example: The SBA offers low-interest-rate loans to qualified businessmen and businesswomen.

Address:

Small Business Administration 409 3rd Street SW Washington, DC 20416 202-205-6740 www.sbaonline.sba.gov

Today, small businesses generate more than one-third of the gross national product, create the majority of new jobs, and provide arenas for technological innovation. During the early 1950s, the value of small businesses in providing stability for the American economy was realized.

Prior to that time, big business/industry promises of career success too often proved to be empty, and many disillusioned American workers began to embrace the concept of self-employment. As the number of business entrepreneurs increased, it quickly became apparent that such entrepreneurial endeavors needed a protective umbrella if they were to survive normal start-up difficulties common to small business, not to mention competitive pressures generated by larger organizations. In 1953, to address the problem, Congress approved the Small Business Administration Act, which created the Small Business Administration (SBA).

The SBA's administrator directs the delivery of a comprehensive set of financial and business development programs that provide financing worth about $11 billion a year to small businesses across the nation. SBA has 70 district offices across the country and program offices in every state, as well as the District of Columbia, the Virgin Islands, and Puerto Rico.

As an independent federal agency, the SBA aids, counsels, assists, and protects small-business interests based on two principles: quality-focused management and customer-driven out-reach.

The SBA provides financial assistance in the form of loan guarantees, rather than direct loans, through 14 specialized programs to help entrepreneurs attain the appropriate financial position to initiate their business and overcome the first few lean years of infancy. It also provides counseling and training assistance to female, minority, veteran, and socially and/or economically disadvantaged business owners. For instance, the Office of Women's Business Ownership has established a women's business owner representative network in every district office, an Online Women's Business Center accessible through the Internet, and nearly 70 women's business centers in 40 states; and the Minority Prequalification Loan Program assists qualified minority-owned, for-profit companies to obtain pre-approval for a 7(a) loan guaranty. The 7(a) Loan Guaranty Program assists small businesses unable to secure reasonable funding terms through normal lending channels to obtain funding through private-sector lenders on loans guaranteed by the SBA.

While the SBA does not provide grants to start or expand a business, it does coordinate and disseminate information about resources to facilitate awareness of business initiatives, about consulting or mentoring opportunities for managerial novices, and about entrepreneurial success strategies. Further, it provides disaster assistance and has established a unit to coordinate and facilitate technology transfer conferences for small businesses. In an effort to centralize access to a full range of technical and financial assistance for small business owners located in empowerment zones and enterprise communities, in 1994 the SBA developed One-Stop Capital Shops. These partnerships between the SBA and a local community offer comprehensive small-business assistance from a unique, easy-to-access, retail site located in a distressed area, and they generally target underserved communities or the SBA's new markets.

More information is available from the U.S. Small Business Administration Office of Marketing and Customer Service, 409 Third Street SW, Suite 600, Washington, D.C. 20414; (202) 205-6744 or 1-800-8ASK-SBA; or http://www.sba.gov.

Bibliography

Small Business Administration (SBA). "Mission." Archived at: http://www.sba.gov/intro.html. 1999.

SBA. "SBA Profile." Archived at: http://www.sba.gov/aboutsba/indexprofile.html. 1999.

SBA. "SBA Office of Women's Business Ownership." Archived at: http://www.sbaonline.sba.gov/womeninbusiness/. 1999.

SBA. "SBA Online." Archived at: http://www.sbaonline.sba.gov. 1999.

[Article by: MARY JEAN LUSH; VAL HINTON]

The Small Business Administration (SBA) was founded in 1953 to assist small companies, particularly those serving military interests. It traces its roots to 1932, when President Herbert Hoover established the Reconstruction Finance Corporation to provide loans for small businesses during the Great Depression. Ten years later President Franklin D. Roosevelt created the Smaller War Plants Corporation to bolster the ability of small companies to secure military contracts during World War II. The corporation was disbanded in 1946 but reinstated as the Small Defense Plants Administration during the Korean War. President Dwight D. Eisenhower and Congress then consolidated the Small Defense Plants Administration and the Reconstruction Finance Corporation into the SBA, which also took on responsibilities of the Office of Small Business in the Department of Commerce.

The SBA's initial role called for keeping an inventory of businesses that could serve a military purpose in peacetime, providing disaster relief and offering loans and technical assistance. The SBA oversaw a lending program for veterans who wanted to start or expand small businesses. The Equal Opportunity Act of 1964 expanded the SBA's role. The 1964 Equal Opportunity Loan Program allowed applicants living below the poverty line who had sound business proposals to meet credit and collateral requirements. The SBA also began including programs to assist minority-owned businesses. Members of minority races, particularly immigrants, women of all races, individuals with disabilities, and veterans have usually had more difficulty securing loans and credit to further business growth. In response to these problems and to growing pressure from advocates of civil rights, President Richard M. Nixon added a minority set-aside program known as the Philadelphia Plan, which allocated a share of federal procurement contracts for minority-owned small businesses.

Enterprises owned by women, the disabled, and Vietnam veterans benefited from Set-Asides that were designed to overcome past discrimination. But in 1989, in City of Richmond v. J. A. Croson Company, the Supreme Court struck down such a program and ruled that public officials would have to offer evidence of past discrimination to justify such policies. In 1995 the Court limited set-asides further when it concluded that the federal government must be subject to the same "strict scrutiny" as state and local governments when attempting to remedy discrimination. In Adarand Constructors, Inc. v. Pena, the Supreme Court rejected a federal set-aside program established in the Small Business Act to aid "socially disadvantaged individuals."

In the 1990s, the SBA assisted businesses specializing in high technology, environmental resources, and exports. Its constituency is made up of 21.5 million companies with fewer than five hundred employees, or 99 percent of all businesses in the United States, but directly serves only 1 percent of such businesses. Small businesses accounted for all of the job growth in the nation from 1987 to 1992 and are considered the engine for the national economy. Employing 54 percent of the workforce, they account for half the gross national product.

Bibliography

Bates, Timothy Mason. Financing Black Enterprise. Madison: Institute for Research on Poverty, University of Wisconsin, 1972.

Bean, Jonathan J. Beyond the Broker State: Federal Policies toward Small Business, 1936–1961. Chapel Hill: University of North Carolina Press, 1996.

Butler, Stuart. Enterprise Zones: Greenlining the Inner Cities. New York: Universe Books, 1981.

Parris, Addison. The Small Business Administration. New York: F. A. Prager, 1968.

The Small Business Administration (SBA) is a federal agency that seeks to aid, counsel, assist, and protect the interests of small business. The SBA ensures that small business concerns receive a fair portion of federal government purchases, contracts, and subcontracts, as well as of the sales of government property. The agency is best known for its loans to small business concerns, state and local development companies, and the victims of floods or other catastrophes.

The SBA was created by the Small Business Act of 1953 (67 Stat. 232 [15 U.S.C.A. § 631 et seq.]) and derives its present authority from this act and the Small Business Investment Act of 1958 (15 U.S.C.A. § 661).

Financial Assistance

The SBA provides guaranteed loans to small businesses to help them finance plant construction, conversion, or expansion and acquire equipment, facilities, machinery, supplies, or materials. It also provides them with working capital. Since 1976 farms have been considered to be small business concerns.

The SBA also provides loan guarantees to finance residential or commercial construction. The administration may finance small firms that manufacture, sell, install, service, or develop specific energy measures. In an effort to reach more businesses, the SBA provides loans and grants to private, nonprofit organizations that, in turn, make small loans and provide technical assistance to small businesses.

Through its Surety Bond Guarantee Program, the SBA helps to make the contract bonding process accessible to small and emerging contractors who find bonding unavailable. A bond is posted as a guarantee that the contracted work will be performed. If the work is not performed, the money pledged in the bond will be used to cover the contractor's default. The SBA program guarantees to reimburse the issuer of the bond up to 90 percent of losses incurred under bid, payment, or performance bonds issued to small contractors on contracts valued up to $1.25 million.

Disaster Assistance

The SBA lends money to help the victims of floods, riots, or other catastrophes repair or replace most disaster-damaged property. Direct loans with subsidized interest rates are made to assist individuals, homeowners, businesses, and small agricultural cooperatives without credit elsewhere that have sustained substantial economic injury resulting from natural disasters.

Investment Assistance

The administration licenses, regulates, and provides financial assistance to small business investment companies and section 301(d) licensees (formerly minority enterprise small business investment companies). The sole function of these investment companies is to provide venture capital in the form of equity financing, long-term loan funds, and management services to small business concerns.

Government Contracting

The SBA works closely with the purchasing agencies of the federal government and with the leading U.S. contractors in developing policies and procedures that will increase the number of contracts awarded to small businesses.

The administration has a number of services that help small firms obtain and fulfill government contracts. It sets aside suitable government purchases for competitive award to small business concerns and provides an appeal procedure for a low-bidding small firm whose ability to perform a contract is questioned by the contracting officer. The SBA maintains close ties with prime contractors and refers qualified small firms to them. In addition, it works with federal agencies in setting goals for procuring prime contracts and subcontracts for small businesses, especially those owned by women and members of disadvantaged groups.

Business Initiatives

The SBA is recognized for its longtime effort to provide education, counseling, and information to small business owners and prospective owners. It has increasingly relied on forging partnerships with nongovernment groups to deliver business education and training programs at low cost. For example, the Service Corps of Retired Executives (SCORE) provides one-on-one counseling free of charge.

The Business Information Center (BIC) program is an innovative approach to providing a one-stop location for information, education, and training. Components of BIC include the latest computer hardware and software, an extensive small business reference library, and a collection of current management videotapes.

The SBA also produces many pamphlets and publications about a variety of business and management topics. It has also established SBA Online, a toll-free electronic bulletin board for small businesses.

Minority Enterprise Development

Sections 7(j) and 8(a) of the Small Business Act provide for the Minority Enterprise Development Program, designed to promote business ownership by socially and economically disadvantaged persons. Participation is available to small businesses that are at least 51 percent unconditionally owned, controlled, and managed by one or more individuals determined by the SBA to be socially and economically disadvantaged. Program participants receive a wide variety of services, including management and technical assistance, loans, and federal contracts.

Advocacy

The Office of Advocacy serves as a leading advocate within public policy councils for the more than twenty-two million small businesses in the United States. The office, which is headed by the chief counsel for advocacy, lobbies Congress, the executive branch, and state agencies concerning the interests and needs of small business. The office also is a leading source of information about the state of small business and the issues that affect small business success and growth.

Women's Business Ownership

The Office of Women's Business Ownership (OWBO) provides assistance to the increasing number of women business owners and acts as their advocate in the public and private sector. It is the only office in the federal government specifically targeted to women business owners, assisting them through technical, financial, and management information and business training, skills counseling, and research.

The OWBO has established fifty-four training centers in twenty-eight states and the District of Columbia, which provide community-based training for women at every stage of their entrepreneurial careers. In addition, the office created the Women's Network for Entrepreneurial Training, a one-year mentoring program linking experienced entrepreneurs with women whose businesses are poised for growth. This program is designed to help women avoid the common mistakes of new business owners.

Small Business Development Centers

Small Business Development Centers provide counseling and training to existing and prospective small business owners. The 950 centers operate in every state, as well as in Puerto Rico, the U.S. Virgin Islands, and Guam. Each center is a partner with state government in economic development activities to support and assist small businesses.

Administration

The SBA has its headquarters in Washington, D.C. It maintains ten regional offices and has field offices in most major U.S. cities.

This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (March 2009)

Small Business Administration
Seal of the SBA
Logo of the SBA
Agency overview
Formed	July 30, 1953
Preceding agency	Reconstruction Finance Corporation
Jurisdiction	Federal government of the United States
Headquarters	409 Third Street, SW, Washington, D.C.
Employees	2,147 (2006)[1]
Annual budget	$569 million USD (2008)[2]
Agency executive	Karen Mills, Administrator
Website
www.sba.gov

The Small Business Administration (SBA) is a United States government agency that provides support to small businesses.

The mission of the Small Business Administration is "to maintain and strengthen the nation's economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters."

The SBA makes loans directly to businesses and acts as a guarantor on bank loans. In some circumstances it also makes loans to victims of natural disasters, works to get government procurement contracts for small businesses, and assists businesses with management, technical and training issues.

The SBA has directly or indirectly helped nearly 20 million businesses and currently holds a portfolio of roughly 219,000 loans worth more than $45 billion making it the largest single financial backer of businesses in the United States.^[3]

Contents 1 History 2 Organizational structure 3 SBA loan programs 4 SBA loan industry 5 Small Business Investment Companies (SBICs) 6 See also 7 References 8 External links

History

The SBA was established on July 30, 1953, by the United States Congress with the passage of the Small Business Act. Its function was to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." Also stipulated was that the SBA should ensure a "fair proportion" of government contracts and sales of surplus property to small business. This was accomplished primarily through the Small Business Innovative Research program and government "set-asides."^[3][4]

The SBA has survived a number of threats to its existence. In 1996 the then newly Republican-controlled House of Representatives planned to eliminate the agency.^[5] It survived and went on to receive a record high budget in 2000.^[6] Renewed efforts by the Bush Administration to end the SBA loan program have met congressional resistance, although the SBA's budget has been repeatedly cut, and in 2004 certain expenditures were frozen.

Organizational structure

The SBA has an associate administrator for the following offices:

• Communications and Public Liaison
• Congressional and Legislative Affairs
• Disaster Assistance
• Entrepreneurial Development
• Equal Employment Opportunity and Civil Rights Compliance
• Field Operations
• Government Contracting and Business Development
• Hearings and Appeals

• Inspector General
• International Trade
• Investment
• Management and Administration
• Minority Enterprise Development
• Native American Affairs
• Size Standards
• Small Business Development Centers
• Surety Guarantees
• Technology
• Veterans Affairs
• Women's Business Ownership

SBA loan programs

The most visible elements of the SBA are the loan programs it administers. The SBA itself does not grant loans with the exception of Disaster Relief Loans. Instead, the SBA guarantees against default certain portions of business loans made by banks and other lenders that conform to its guidelines. Disaster Relief Loans are issued directly from the SBA.

Contrary to popular belief, these programs are not generally for persons with bad credit who can't get bank loans, nor are they primarily used for startup funding; rather, the primary use of the programs is to make loans for longer repayment periods and with looser affordability requirements than normal commercial business loans. Also, a business can qualify for the loan even if the yearly payment would be the same as the previous year's profit, whereas most banks would want payment for a loan to be no more than two-thirds (2/3) of the prior year's profits for a business. The lower payments, longer terms and looser affordability calculations allow some businesses to borrow more money than they could otherwise.

One of the most popular uses of SBA loans is for commercial mortgages on buildings occupied by a small business. These programs are chosen because most bank programs, while having similar payments and rates, require borrowers to refinance every five years.

Types of Guaranteed Business Loans through banking institutions include:

• Loan Guarantee Program: The 7(a) Loan Guarantee Program is designed to help small entrepreneurs start or expand their businesses. The program makes capital available to small businesses through bank and non-bank lending institutions.

• 504 Fixed Asset Financing Program: The 504 Fixed Asset Financing Program is administered through non-profit Certified Development Companies throughout the country. This program provides funding for purchasing land or construction. Of the total project costs, a lender must provide 50% of the financing, a Certified Development Company provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides approximately 10% of the financing. Aggressive vetting of any property purchased through this program is required. Specific SBA Phase I Environmental Site Assessment guidelines apply as all properties are treated as "high risk."

• MicroLoan Program: Available for up to $35,000 through non-profit, micro loan intermediaries, to small businesses considered unbankable in the traditional banking industry.

• Economic Development Program: SBA partners such as SCORE and the Small Business Development Centers (SBDCs), operating in each state, provide free and confidential counseling and low-cost training to small businesses.

• 8(a) Business Development Program: Assists in the development of small businesses owned and operated by individuals who are socially and economically disadvantaged.

Homeowners are eligible for long-term, low-interest loans to rebuild or repair a damaged property to pre-disaster condition. Before making a loan, the SBA must establish the cost of repairing or rebuilding the structure (which is determined by SBA's Field Inspectors who visit the property), the applicant's repayment ability (determined by applicant's creditworthiness and income) and whether the applicant can obtain credit in the commercial market (called the credit elsewhere test). Applicants who do not qualify for disaster assistance loans may be referred to the Federal Emergency Management Agency (FEMA) for grants. Although SBA won’t decline a loan for lack of collateral, the agency is statutorily required to ask for whatever collateral is available including the damaged property, a second home or other real estate.

Businesses are also eligible for long-term, low-interest loans to recover from declared disasters. Similar to the homeowner's loan program mentioned above, a small business owner must pledge any available assets and acquire a similar pledge from a spouse or partner in the case of any shared assets. If defaulted on the loan, the spouse or partner must surrender their value in the assets. The total value of an applicant’s assets is not considered by the SBA; therefore, a company may be approved for a loan regardless of whether that person has little or great net worth.

Once an SBA loan is approved, the SBA mails closing documents to the applicant for signature. Disbursements include an initial unsecured amount of $14,000, and subsequent disbursements depending upon construction progress and continued insurance coverage. After final disbursement, the loan is transferred to one of the SBA's servicing offices for management, or to its collections office in the case of default.

Disaster Relief Loans are often approved within 21 days.

If a business which has a current Disaster Relief Loan defaults on the loan and the business is closed, the SBA will pursue the business owner to liquidate all personal assets. The IRS will withhold any tax refund expected by the former business owner and apply the amount toward the loan balance.

SBA loan industry

The SBA loan industry can be divided into distinct categories:

• The largest United States Banks, such as Bank of America and Wells Fargo, generate the bulk of their SBA loan volume by the loans, especially the express loan and line of credit, being offered to those who would be declined for a normal bank loan due to factors such as length of time in business or slightly stricter affordability factors. These banks have sophisticated computer systems that generally makes this process seamless, and are quite different from other financial institutions who utilize SBA lending for separate and distinct purposes

• SBA loans are used heavily by banks of all sizes to finance the purchase or construction of business owner occupied real estate (ie. real estate purchased by a business). Many banks only offer SBA loans for this purpose. In particular, they are using to finance properties that the bank would consider too risky to finance on their own, due to them being of a special or environmentally risky nature that can make their resale value limited; these properties include Motels, Gas Stations, and Car Washes.

• SBA loans are also used to allow individuals to buy existing businesses. Since, unlike in real estate transactions, commercial lenders are allowed to pay a referral fee to business brokers who help people buy and sell businesses, this segment of the industry is dominated by smaller banks and standalone finance companies who engage in this practice.

Small Business Investment Companies (SBICs)

One of the first steps toward a professionally-managed private equity and venture capital industry was the passage of the Small Business Investment Act of 1958. The 1958 Act officially allowed the SBA to license private "Small Business Investment Companies" (SBICs) to help the financing and management of the small entrepreneurial businesses in the United States. Passage of the Act addressed concerns raised in a Federal Reserve Board report to Congress that concluded that a major gap existed in the capital markets for long-term funding for growth-oriented small businesses. Additionally, it was thought that fostering entrepreneurial companies would spur technological advances to compete against the Soviet Union. Facilitating the flow of capital through the economy up to the pioneering small concerns in order to stimulate the U.S. economy was and still is the main goal of the SBIC program today.^[7] The passage of the Small Business Investment Act of 1958 by the federal government was an important incentive for would-be venture capital organizations. The act provided venture capital firms structured either as SBICs or Minority Enterprise Small Business Investment Companies (MESBICs) access to federal funds which could be leveraged at a ratio of up to 4:1 against privately raised investment funds. The success of the Small Business Administrations efforts are viewed primarily in terms of the pool of professional private equity investors that the program developed. In 2005, the SBA significantly reduced its SBIC program and although SBICs continue to make private equity investments, the rigid regulatory limitations minimize the role of SBICs.

See also

• Community Development Financial Institutions Fund
• Federal grant
• HUB Zone
• SBA 504 Loan
• Service-Disabled Veteran-Owned Small Business
• United States House Committee on Small Business
• United States Senate Committee on Small Business and Entrepreneurship
• New York State Small Business Development Center
• Wyoming Small Business Development Center SBDC
• Small Business Development Center at the University of South Florida

References

1. ^ "Performance Stats for the SBA". http://www.inc.com/magazine/20070501/features-does-the-sba-still-matter-sidebar-2.html. 
2. ^ "PSenate Votes to Increase SBA Budget by $100 million in 2009". http://www.reuters.com/article/pressRelease/idUS127899+18-Mar-2008+PRN20080318. 
3. ^ ^{a b} "Overview and History of the SBA". http://www.sba.gov/aboutsba/history/index.html. 
4. ^ "Overview of the SBA's SBIR program". http://www.sba.gov/aboutsba/sbaprograms/sbir/. 
5. ^ "Reducing the Deficit: Spending and Revenue Options, Section 9". Congressional Budget Office. March 1997. http://www.cbo.gov/showdoc.cfm?index=6&sequence=8. 
6. ^ "Small Business: Expectations of Firms in SBA's 8(a) Program Are Not Being Met". Government Accountability Office. July 20, 2000. http://www.gao.gov/docsearch/abstract.php?rptno=T-RCED-00-261. 
7. ^ Small Business Administration Investment Division (SBIC)

External links

• Official site
• SBA History
• Small Business Resources
• Dynamic Small Business Search
• Search for Small Business Grants and Loans
• TECH-Net Search for SBIR/STTR awards
• Trade Mission Online Search for US small businesses that export

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