The Small Business Administration (SBA), which was created in 1953, is an independent federal agency charged with aiding, counseling, and protecting the interests of American small businesses. The agency maintains a wide range of programs designed to address various aspects of this mandate. These programs, each of which seeks to assist small business owners in one or more areas of their enterprise, are maintained in the following areas: lending and investment; surety bonds; international expansion and development; disaster assistance; federal procurement contracts; minority small business assistance; veterans' assistance; research and development; business and training; and business information and counseling. The SBA also serves as an advocate for American small businesses in government.
STRUCTURE OF THE SBA
Most SBA programs and services are implemented through Small Business Administration district offices. District offices are maintained in all 50 states, as well as Washington, D.C., and Puerto Rico (some larger states, such as California, New York, and Texas, have as many as half a dozen offices). Personnel in these offices work directly with small business owners and various cooperating institutions to implement SBA programs.
These field offices report to regional offices of the SBA. In addition to their supervisory responsibilities, the regional headquarters are charged with educating small business owners, lending institutions, and others on issues that affect them; fostering regional economic development; and providing the Office of Field Operations (OFO) with information on SBA programs and small business developments at the district level. OFO is responsible for all aspects of the SBA's field operations, including communications, policy formation, and general performance. It reports directly to the SBA's chief administrator.
Collateral offices maintained by the Small Business Administration include administration; comptroller; personnel; external affairs; marketing and customer service; public communications, congressional and legislative affairs; Hearings and Appeals; Inspector General; Office of Information Resources Management (OIRM); Equal Employment Opportunity and Civil Rights Compliance; and Office of General Counsel.
Finally, the SBA maintains several departments devoted to providing advocacy services on behalf of American small business owners. The Office of Interagency Affairs oversees enforcement of the Regulatory Flexibility Act, analyzes small business issues, develops governmental policy options, and prepares testimony for use before various legislative and regulatory bodies. The Office of Economic Research oversees the SBA's research contracting program, and compiles and interprets various economic data on small businesses. The Office of Information publishes books and economic reports on small business issues, and serves as a distributor of advocacy publications and other materials. Finally, the Office of Advocacy attempts to evaluate the effect of proposed legislation and other policy issues on small businesses. The chief counsel for advocacy acts as the primary spokesperson for America's small business community and represents its views before Congress, local governments, and other agencies. The Office of Advocacy also utilizes regional advocates who work directly with local communities and small businesses, gathering information on policies and regulations that are helping and hurting small businesses and the communities in which they operate.
SMALL BUSINESS ADMINISTRATION PROGRAMS
LENDING PROGRAMS The SBA provides a number of lending options to small business owners. The best known of these is the 7(a) Loan Guaranty, but there are many others that are widely used as well. In all of these cases, the loan is actually delivered through commercial lending institutions and other intermediaries. The SBA helps secure the loans, though, by consenting to cover the cost of the loan should the borrower be unable to pay. Lending institutions value this added protection very highly.
The 7(a) Loan Guaranty Program, which was authorized by the passage of the Small Business Act, is primarily designed to address the long-term funding needs of small businesses by guaranteeing loans to qualified enterprises. These loans can be used for all sorts of purposes, including inventory, working capital, equipment, and real estate. Maturities are up to 10 years for working capital and up to 25 years for fixed assets. The SBA can guarantee 80 percent of loans of $100,000 or less, and 75 percent of loans between $100,000 and $750,000. There are several other loan programs available through the 7(a) Loan Guaranty plan as well.
The Low Documentation Loan (LowDoc) program is a streamlined version of the 7(a) loan for businesses seeking less than $150,000. Limited to applicants with a strong credit history, LowDoc loans can be secured with a one-page application (in cases where the loan request is for $50,000 or less). The SBA has made a strong effort to improve response time under this plan, in large measure because it had long been criticized for the bureaucratic red tape associated with even the smallest of its loan programs.
The CAPLines program is an option designed to meet the short-term and cyclical working capital needs of small businesses. There are several different loan options available under this program, which replaced the SBA's earlier Green Line program. Loans under CAPLines are generally limited to $750,000.
The SBAExpress program is shaped to increase the capital available to small businesses seeking loans up to $150,000; it is currently offered as a pilot program, with a limited number of participating lenders.
SBA Micro Loans, meanwhile, are short-term loans of up to $25,000. Disseminated through nonprofit groups, Micro Loans are intended for the purchase of machinery and other equipment, office furniture, inventory, supplies, and working capital.
The SBA also offers several targeted lending programs for small businesses. These include the Defense Loan and Technical Assistance (DELTA) program, which provides financial assistance to defense-dependent small businesses impacted by defense cuts (maximum loan amount under the DELTA plan through the 7(a) Program is $1.25 million, usable for working capital, acquisition of assets, raw materials or inventory, capital improvements, or refinancing of current debt); prequalification pilot loan programs for women and minorities; the Export Working Capital Program (EWCP), which guarantees loans for qualified small businesses engaged in export transactions; the International Trade Loan (ITL), which provides long-term financing assistance to small businesses engaged in international trade and/or hurt by imports; and the Pollution Control Program, which gives loan guarantees to eligible small businesses proposing to design and install pollution control facilities.
The SBA also maintains a loan program known as the 504 CDC (Certified Development Companies), which makes available up to $1 million to qualified applicants. Under this system, long-term, fixed-rate financing is made available to small businesses interested in expanding or modernizing their operations through the purchase of new machinery, equipment, and/or real estate. DELTA loans are available through this program as well.
Another SBA loan program is the U.S. Community Adjustment and Investment Program (CAIP), created to help communities that suffered economic and workforce losses due to changing trade patterns following implementation of the North American Free Trade Agreement (NAFTA). According to the SBA, this program utilizes both the SBA 7(a) Program and the SBA 504 Program to "promote economic implementation of the adjustment [to NAFTA] by increasing the availability and flow of credit and [encourage] business development and expansion in impacted areas. Through the CAIP, credit is available to businesses in eligible communities to create new, sustainable jobs or to preserve existing jobs." Small companies interested in pursuing CAIP assistance should contact their local CDC for more information.
The Small Business Administration relies on lending institutions and other intermediaries (such as non-profit organizations, in the case of Micro Loans). But the SBA is careful about the banks and savings and loans companies with which it does business. The most reliable of these lending institutions are eventually designated as "preferred lenders." This status gives them increased powers of loan approval and processing (although the SBA still conducts a final review of loan applications). To become a preferred lender, an institution needs to have established a reputation for solid community lending (to small businesses and minority- and women-owned firms) and a strong history of being repaid by loan applicants.
INVESTMENT The SBA also maintains investment programs for small businesses. The Main Street Investment Program, for example, is described by the SBA as "a public/private partnership between the SBA and state governments to make capital more available to lenders who, in turn, make loans to small businesses. Participating states invest tax revenues in community banks that agree to make LowDoc loans." Small Business Investment Companies (SBICs), meanwhile, are SBA-licensed investment firms who—armed with U.S. government-guaranteed debentures or participating securities—make investments and loans to small businesses. Indeed, SBICs exist for the express purpose of funding start-up companies. They operate under extremely stringent guidelines, however, and turn down many applicants. Similar to SBICs are Minority Enterprise Small Business Investment Companies (MESBICs), which provide funding to businesses owned or operated by minorities.
SURETY BONDS In recognition of the fact that contractors to construction projects must post surety bonds on federal construction projects valued at $25,000 or more, the SBA established a program wherein they guarantee bid, performance, and payment bonds for contracts up to $1.25 million for eligible small firms unable to secure surety bonds through commercial lenders. Under this program, bonds may be obtained either via prior approval, in which contractors apply through a surety bonding agent; or preferred sureties, authorized by the SBA to issue, monitor, and service bonds without prior SBA approval.
INTERNATIONAL TRADE The SBA's International Trade Loan Program is designed for small companies engaged or preparing to engage in international commerce. Under this program, the SBA guarantees up to $1.25 million for a combination of fixed asset financing and Export Working Capital Program (EWCP) assistance. The fixed-asset portion of the loan may not exceed $1 million, while the EWCP segment may not exceed $750,000. In order to qualify, the small business applicant must, according to the SBA, "establish that the loan will significantly expand or develop an export market, is currently adversely affected by import competition, will upgrade equipment or facilities to improve competitive position, or must be able to provide a business plan that reasonably projects export sales sufficient to cover the loan."
In addition to maintaining loan programs for small businesses engaged in international commerce, the Small Business Administration provides a number of other services to these enterprises. The Export Legal Assistance Network (ELAN), for instance, is the product of an agreement between the SBA, the Federal Bar Association, and the U.S. Department of Commerce. Under this program, trade attorneys provide free legal consultations to small business exporters.
The SBA also operates information centers called U.S. Export Assistance Centers (USEACs). As with ELAN, the USEACs are the product of an alliance between the SBA and other organizations (in USEACs' case, the Department of Commerce and the Export-Import Bank). These centers are designed to disseminate trade promotion and export financing information to small businesses engaged in international trade. In addition, the SBA maintains a computer database known as the Small Business Automated Trade Locator Assistance System (SBAtlas), which includes market data of interest to exporters.
ASSISTANCE PROGRAMS The SBA makes available Physical Disaster Business Loans to businesses of any size that need to repair or replace business property to "pre-disaster" conditions. These loans, which can be used for equipment, fixtures, and inventory, are limited to $1.5 million and are not available to businesses who were insured for their losses. Economic Injury Disaster Loans (EIDLs), meanwhile, are targeted at businesses that have "sustained economic injury as a direct result of a disaster," said the SBA. "These working capital loans are made to help businesses pay ordinary and necessary operating expenses which would have been payable barring disaster." The maximum amount of an EIDL loan is $1.5 million, but small business experts note that businesses can receive no more than $1.5 million in combined EIDL and physical disaster business loans. An exception to this stipulation is made, however, for those places of business that qualify as major sources of employment. Under the SBA's Major Source of Employment (MSE) program, the $1.5 million loan limit is waived for those businesses that employ 250 or more people in an affected area.
FEDERAL PROCUREMENT The Small Business Administration maintains several programs designed to help small businesses secure government contracts. These include:
* Breakout Procurement Program—promotes the breakout of historically sole-source contracts for open competition with the aim of aiding small businesses and effecting government savings.
* Prime Contracting Program—designed to help small businesses interested in securing federal contracts; services include support for small business set-asides, counseling, identification of new small business sources, and "assessment of compliance with the Small Business Act through surveillance reviews."
* Subcontracting Program—designed to aid small businesses in their efforts to secure federal contracts as suppliers and subcontractors.
* Certificates of Competency—appeal process that can be used by small businesses that have been denied government contracts because of alleged lack of ability to fulfill job requirements.
The most recent program in this area introduced by the SBA is the HUBzone Empowerment Contracting Program. This initiative, unveiled in 1997, provides federal contracting opportunities for qualified small businesses located in economically distressed areas.
MINORITY ASSISTANCE The SBA has several programs intended to provide support to small businesses owned and operated by minorities. Programs maintained by the SBA's Minority Enterprise Development office include 8(a) Small Disadvantaged Business Development, which arranges federal procurement opportunities for minority- and disadvantaged-owned firms, and initiatives which provide management and technical assistance to those firms. The SBA also operates an Office of Native American Affairs (ONAA), which works to provide Native American communities with business development and job creation opportunities.
BUSINESS TRAINING AND COUNSELING SBA-sponsored training and counseling services are available through the following programs:
* Small Business Development Centers—provides management and technical assistance to both current and prospective small business owners through an alliance of educators, the private sector, and federal, state, and local governments. All areas of business are covered, from market research and accounting systems to inventory control and cost-benefit analysis.
* Business Information Centers (BICs)—specializes in providing technology information to small businesses. Subjects covered include advances in telecommunications, software, and computers.
* Service Corps of Retired Executives (SCORE)—matches retired business executives with small businesses seeking advice on business issues. SCORE includes more than 12,300 members in hundreds of chapters around the country.
WOMEN'S BUSINESS OWNERSHIP SBA programs specifically directed at women small business owners include the Women's Demonstration Program, which provides women with training and advice on all aspects of business ownership and management, and the Women's Network for Entrepreneurial Training (WNET), wherein established women business owners serve as mentors to other women entrepreneurs.
VETERANS' AFFAIRS The SBA maintains several programs intended to provide information and training to veterans. These include the VET (Veterans' Entrepreneurial Training) Program, the Transition Assistance Program (TAP), and "business opportunity conferences," which helps veteran-owned companies previously reliant on the defense industry to secure other clients.
RESEARCH AND DEVELOPMENT The two principal programs administered by the SBA in this area are the Small Business Innovation Research (SBIR) Program and the Small Business Technology Transfer (STTR) Program. STTR is a program that seeks to form research and development partnerships between small firms and nonprofit research institutions. It provides up to $100,000 to companies for the first phase of research, though there are stipulations attached to that figure. SBIR, meanwhile, provides financial rewards to small businesses who propose innovative ideas to problems faced by participating federal agencies. Initially established in the early 1980s, as a result of the 1982 Small Business Innovation Development Act, SBIR has been warmly received by many small companies with expertise in science and high-technology areas.
ONE-STOP CAPITAL SHOP (OSCS) The SBA expects to contribute to the Empowerment Zone/Enterprise Communities Program initiative headed by the Department of Housing and Urban Development and the Department of Agriculture through its "One-Stop Capital Shops." These centers, located in federally designated empowerment zones and enterprise communities, are expected to be headed up by local nonprofit organizations, but they are intended to include access to complete information on various SBA programs and offerings. "A One Stop Capital Shop is a partnership between SBA and a local community designed to offer small business assistance from an easy to access, retail location, all under one roof," explained the SBA. "Small business clients require a wide range of assistance, from the simple: accessing the Internet or gathering basic information on writing a business plan, to the complex: learning how to compete for a federal contract or applying for a city permit. Whether a small business needs information or has to complete a transaction, requires training or counseling, is applying for a loan or seeking a government contract, a One Stop Capital Shop is designed to make all those services available in one location…. No other SBA program or federal agency plays a more prominent role in generating economic revitalization in distressed communities than the One Stop Capital Shop Initiative."
BUSINESS INFORMATION SERVICES A comprehensive range of business development booklets is published by and made available from the SBA. A diverse range of topics are covered in these brochures; sample titles include Strategic Planning for Growing Businesses, Budgeting in a Small Service Firm, Inventory Management, and Evaluating Franchise Opportunities. SBA also maintains SBA Online, a computerbased electronic bulletin board of small business information, and a toll-free answer desk for small business owners with questions about aspects of their operation. The Small Business Administration maintains a page on the World Wide Web at http://www.sba.gov.