THE BLOG
01/03/2009 05:12 am ET Updated May 25, 2011

Forbes: Let the Small Business Administration work

The following article is a commentary from Congressman Michael P. Forbes ( 1995-2001), which ran in the Austin American Statesman on December 1, 2008. In the article, Forbes lays out a series of suggestions, which if implemented would allow existing programs at the U.S. Small Business Administration to provide our nation's economy with a much needed boost. On October 10, the American Small Business League (ASBL) dropped a press release titled, "Obama Middle Class Bailout Bill Passed 55-Years Ago." In the release, the ASBL stated that restoring the SBA's budget, and staffing would reinvigorate existing federal programs designed to assist the backbone of our nation's economy, it's small businesses, and infuse billions of tax dollars back into the firms where most Americans work. Please click here to read the release: http://www.asbl.com/showmedia.php?id=1168

Let the Small Business Administration work

By Michael P. Forbes
Austin American Statesman
December 1, 2008

As President-elect Barack Obama hunkers down with the brightest minds in the country to craft a plan to restore market stability, economic growth and national confidence, federal programs already exist that, with renewed interest and only a modest investment, could help lead us out of our worst recession in 80 years.

The U.S. Small Business Administration is a proven federal enterprise whose programs are fully capable of stimulating local economies around the country. Unfortunately, disdain for the SBA by the Bush administration -- compounded by the diversion of funds to finance the Iraq war -- siphoned off discretionary dollars in the federal budget. As a result, many SBA programs are on life support.

Tried and true incentives have been among the hardest hit during the past eight years. They include SBA loan guarantees, access to federal contracts for small businesses and business development assistance.

Small businesses are the source of half of all the nation's private sector employees and contribute more than 50 percent of U.S. non-farm gross domestic product. Yet, at $463 million this year, the SBA budget is less than half that of what it was during the last year of the Clinton administration ($1.1 billion in 2000).

The SBA reports a 30 percent drop over the past year in the number of loans it has issued, and a 13 percent decline -- from $20.6 billion to $17.96 billion -- in dollars borrowed. This continues a trend of annual declines under the Bush administration, the likes of which were last seen in the early 1970s.

As the premier advocate for mom-and-pop businesses, the SBA can provide the biggest bang for our buck in jobs preserved and jobs created.

Here's what we need to do:

\• Breathe new life into SBA-guaranteed, private-sector lending. Federal help to financial institutions under the $700 billion bailout package should be tied to an ironclad pledge by banks to dedicate a sizable percentage -- say, a minimum 25 percent of their loan capacity -- to small businesses. If lending institutions use the SBA guarantee program, they will have minimal risk as these loans will be secured by the full faith and credit of the U.S. government.

\• Transfer $5 billion of the $700 billion for other SBA investments: infrastructure, local brick-and-mortar initiatives, and support for veterans, women and minority-owned small businesses. These chronically underserved sectors of the economy are disproportionately impacted in a downturn.

\• Invoke an "emergency powers" approach to the crisis, as is done in the event of natural disasters, and immediately roll back the punishing increases in SBA lending fees. Eliminate deleterious auditing assessments and other disincentives imposed on lenders and borrowers. In addition, the byzantine application process must be streamlined. Finally, extended payback terms should be allowed during this period of economic uncertainty.

\• Facilitate sales by small businesses to the largest purchaser of goods and services -- the United States government. The SBA needs tough enforcement mechanisms to reverse the big-business bias at government agencies -- the departments of Defense and Justice are big offenders -- that systematically ignore goals to reserve more than 23 percent of federal purchases for small firms. Loopholes must be closed on large businesses that acquire small firms holding multiyear contracts designated for small businesses. All federal dollars linked to contracts issued to small enterprises should be re-bid if those firms are acquired.

\• New emphasis must be placed on the SBA's Small Business Investment Company (SBIC) program, its nationwide network of 1,100 Small Business Development Centers (SBDCs) and the Service Corps of Retired Executives (SCORE) mentor program. SBICs route private venture capital to worthy small enterprises. SCORE, with its retired business professionals and university-based SBDCs provide one-on-one counseling to those with the raw talent but not necessarily the acumen needed to navigate the challenges that start-ups inevitably face.

A reinvestment in the neglected Small Business Administration and an expansion of its already viable programs will yield positive results sooner rather than later, restore confidence on Main Street and underscore for the nation's last pioneers -- job-creating entrepreneurs - that the incoming administration understands that a robust small business community advances the promise that is America.

Forbes, who lives in Round Rock, is a former New York congressman and a past senior official at the U.S. Small Business Administration.

Source: http://www.statesman.com/opinion/content/editorial/