Small Business Administration

The Small Business Administration[1]

 

“The U.S. Small Business Administration (SBA) is an independent agency of the federal government created to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. The creation of the SBA recognizes that small business is critical to our economic recovery and strength, to building America’s future, and to helping the United States compete in today’s global marketplace. Although SBA has grown and evolved in the years, the bottom line mission remains the same. The SBA helps Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam.”

 

History of the SBA.

While the SBA was founded on July 30th, 1963, the concept of government provided small business development took shape many years earlier in response to pressure from The Great Depression and WWII.

Since its founding on July 30, 1953, the U.S. Small Business Administration has delivered about 20 million loans, loan guarantees, contracts, counseling sessions and other forms of assistance to small businesses.  The SBA’s first carnation was the Reconstruction Finance Corporation (RFC)  as part of  President Hoover’s minimal response to the financial pressure of the Great Depression.  The RFC was essentially a government sponsored lending program for all types of businesses hurt by the depression. Fortunately for the program, the RFC was adopted by Hoover’s more effective successor, Franklin D Roosevelt . FDR appointed some of his best workers to the agency and this special attention would prove critical to the establishment and preparation of the agency for the rough waters that lied ahead for US business.

 

During WWII, large industries began to mass produce  low cost war products and this left small business with little resources to compete. In order to level the playing field, Congress created a new agency called the Smaller War Plants Corporation (SWPC) in 1942. This agency encouraged credit availability for small business, advocated contract procurement for small business, and provided direct loans to entrepreneurs.  After WWII, the SWPC was integrated into the RFC and two new agencies called the Office of Small Business (OSB) and the Department of Commerce. These two new agencies focused on education and operated under the assumption that lack of expertise and information is the main source of small business collapse.  As history progressed, new wars created new issues for small business. During the Korean war the Small Defense Plants Administration (SDPA) that certified small businesses to the RFC for loans when it had determine the small business could be profitable and competent enough for procurement aid.

 

In 1952, the RFC was abolished and President Dwight Eisenhower created a new agency to continue essential small business aid. This was done on July 30, 1953 when Congress approved the Small Business Act, therefore creating the Small Business Administration (SBA).  According to the text of the act, the SBA’s function was to “ aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns,” and ensure small business their fair share of procurement and   sales of excess property. By 1954, the SBA was in full swing and was providing loans, securing government contracts, and providing technical assistance and business training to entrepreneurs. Not too long after, as a result of the discovery that small business could not acquire loans fast or large enough to keep pace with technology, the Investment Company Act of 1958 established the Small Business Investment Company (SBIC) under the SBA umbrella in order to provide funds for venture capitalists investment firms. In 1964, the SBA turned toward poverty eradication by erecting the Equal Opportunity Loan Program (EOL) to relax credit requirements for American’s living under the poverty line. The objective of this program is to encourage business creation that has solid commercial value but would traditionally be unable to receive funding.

 

Since 1960, the SBA has grown in terms of services rendered and customization available. They now include outreach to women, minority, and veteran owned business as well as loans to loans and advice to victims of a natural disaster and those involved in international trade. Nearly twenty million businesses received aid from the SBA since inception and the agency currently has 219,000 loans outstanding with in excess of $45 billion.  Over the part ten years the SBA has given out $94.6 million in loans, which is more than the entire history of the agency prior to 1991. No money lender in the country, and perhaps the world, can claim responsibility for such mass small business and venture capitalist financing.

 

The SBA continues to create new services and increase customization. It has become obvious through the history of the SBA that, although big business has the upper hand in production and efficiency, small business is where the “American dream” is kept alive. Being more flexible and innovatively equipped our small business keeps America moving forward, and the SBA is holding their hand every step of the way.

 

SBA: Services Offered

 

The SBA offers a wide variety of services to every small business owner.  Services including financial assistance, contract opportunities, disaster assistance, online training, counseling & assistance, special audiences, laws/regulations, and compliance offer small business owners a vast array of resources to help them in their business endeavors.

 

FINANCIAL ASSISTANCE

The SBA offers a variety of financial assistance services for small business owners and focuses primarily on a business’s “key financing needs including the need for debt financing (loans), equity financing, and surety bonds.”   Listed below several financial resources:

1.     The SBA assists small business owner’s finance their debt by collaborating with thousands of lenders.  For the reason that the SBA does not hand out loans itself, it uses its relationship with these outside lenders and intermediaries to guarantee them that the loans will be paid.

2.     In addition, the SBA regulates SBIC (Small Business Investment Company) financing.  This type of investment fund’s ultimate goal is to generate high returns for their investors.  However, the SBA requires that each small business meet the specific requirements and regulations before granted this fund.

3.     The SBA also describes Certified Development Companies as “The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community or region. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. There are about 290 CDCs nationwide. Each CDC covers a specific area.”  The SBA also has a program, which allows for micro-loans, which can range from under 100 dollars, with a maximum of 25,000 dollars.  On average, these micro-loans amount to around 10,000 dollars, and can be processed in less than a week.

4.     The SBA also establishes the Surety Bond Guarantee (SBG) Program which provides assistance to small and minority contractors.  This program allows these small contractors to potentially acquire bids that they would not normally apply for.  A surety bond is “a three-party instrument between a surety, the contractor, and the project owner.”  If the contractor is unable to successfully complete his contract, the surety is then held liable to perform and complete the contract. Therefore, the SBG program gives sureties an “incentive to provide bonding for eligible contractors, and thereby strengthens a contractor’s ability to obtain bonding and greater access to contracting opportunities.”  There are four types of bonds backed by the SBA:

 

A. Bid – Bond which guarantees that the bidder on a contract will enter into the contract and furnish the required payment and performance bonds.

B. Payment – Bond which guarantees payment from the contractor of money to persons who furnish labor, materials equipment and/or supplies for use in the performance of the contract.

C. Performance – Bond which guarantees that the contractor will perform the contract in accordance with its terms.

D. Ancillary – Bonds which are incidental and essential to the performance of the contract.

 

Tools Available

There is a litany of tools and resources available to the small business entrepreneur.  On the Small Business Association’s (SBA) website local resources can be found regionally for every state in the United States.  In Texas there are six district offices, which can assist people in starting and running their own companies.  The closest SBA office to Bryan/ College Station is the Houston branch.  Each district office has a variety of different services that they provide.  The Houston branch has local news for entrepreneurs, an events calendar, counseling and training resources, a startup kit, financing, local laws and regulations, disaster management help, online business cards, and a local resources guide. The following are some examples of the tools available to small business through SBA.org:

Contracting Opportunities

The SBA also assists small businesses in the process of selling goods and services to the Federal Government.  Small businesses, however, must meet certain guidelines in order to be considered to sell to the Federal Government.  The SBA provides information and valuable resources for small businesses that help them learn more about government contracting opportunities and its benefits.  For example, the SBA educates small business owners on the process and skills required for obtaining government contracts through various online training courses.

 

Disaster Assistance

The SBA also provides assistance to small business owners in times of hardships.  For example, the “SBA provides low interest disaster loans to homeowners, renters, businesses of all sizes and private, non-profit organizations…”  This loan will help cover expenses “to repair or replace real estate, personal property, machinery & equipment, inventory and business assets that have been damaged or destroyed in a declared disaster.’

 

Online Training

The SBA has created the Small Business Training Network (SBTN) in order to provide supplemental information to small business owners.   This online training method consists of a variety of business courses to allow small business owners to operate more effectively and efficiently. Another Online resource is that Small business owners may also post online business cards to the SBA website as a form of advertisement for new businesses.  This allows for private consumers to look up small businesses in the online directory.  Once, a business has been found through a search, the website provides the address and contact information for the business in question.

 

 

Counseling and Assistance

The SBA offers a variety of programs to help train and counsel small businesses.

 

1.     The SCORE Association (Service Corps of Retired Executives) is “dedicated to entrepreneur education and the formation, growth and success of small business.”

2.     The Small Business Development Centers (SBDCs) provides management advice to existing small business owners.

3.     The Women’s Business Centers (WBCs) assists women in the start and growth of their small businesses.  It acts to “level the playing field” in the business environment.

4.     The SBA District Offices are located in every state of the country in order to offer its services to as many small businesses as possible.

 

Special Audiences

“The SBA is a strong advocate of minority and special audiences.”  It supplies information on programs and services for a wide variety of audiences, including “women entrepreneurs, veteran’s business development, Native Americans, special minority programs including HUBZone, Small Disadvantaged Business Certification and business development.”

 

Laws and Regulations

The SBA notifies and updates small business owners on “issues concerning legislation, regulation and disputes.”  This virtual law library gives small business owners access to information such as SBA reports and up to date news on the latest laws and regulations affecting small businesses.  Organizations such as the Small Business Advocacy, National Ombudsman, and Hearings & Appeals address issues of concern for small businesses. furthermore, the SBA provides assistance which “allows users to easily find compliance information from all major U.S. federal agencies regulating or serving small businesses.

 

Current Events

In the news for entrepreneurs’ section, news is broken down locally and nationally.  Currently, the local news is given through a contact person from each office in the region.  This includes a main contact person through the SBA, and two backup people that can also answer questions about public information and news.  On the national news website there is a variety of information about the ever changing programs offered by the SBA.  It also lists national events for entrepreneurs. In addition, the online events calendar breaks down every event available through every branch of the SBA.  These include weekly workshops and informationals about financing, human resources, and several more factors concerning small business. The local resources link on the SBA website has individual sections which have their own links to pertinent local information for each section.  These sections include Texas government, city information, community services, job opportunities, business resources, miscellaneous services, real estate, legal information, library services, Texas schools, newspapers, magazines, television, radio, and tourism.

 

Startup Assistance

The startup guide online is the single biggest resource of information for starting a new business.  The startup guide includes self-assessments, financing information, regulations, SBA assistance programs, and local assistance programs.  If an entrepreneur is trying to startup, this information will prove to be invaluable, and a constant resource into the future.

 

Additional Tools

The SBA also has a tools section of the website, which can be accessed through the homepage.  These tools include an online library of resources, audio and video mediums for small business instruction, an archived monthly web chat, and necessary forms that may be helpful to starting entrepreneurs.

 

Featured Tool: SBA Business Planner

One of the services the SBA provides is a detailed guide of a small business planner, which helps the small business entrepreneur successfully start and maintain their business.  There are detailed descriptions on how to plan your business, start your business, maintain your business, and how to implement an exit strategy.  Once a small business plan is established the entrepreneur will have all the necessary tools to manage their business effectively.

 

Write a Business Plan

Writing as business plan is essential and is the starting point for each small business entrepreneur.  It serves as a guide on how to successfully run your business and defines the goals of the organization.  But, before you write your business plan you should establish what you will be selling and how you will be able to reach the customer with the product or service.  Once you have answered these questions you will be able to further conduct an analysis of the business plan.  The business plan includes the company description, financial statements, marketing analysis, organizational and ownership information, products and services offered, and an executive summary explaining the desired goals.

Start Your Business

After you have written a business plan, you will need to take the necessary steps to get your business up and running.  You should first seek advice from anyone who has any business experience because of the valuable knowledge that can be passed down.  Then, you will need to examine how you will raise sufficient capital in order for your business to attain start up costs.  The business can be either a new venture or an acquired business.  Once a location is obtained you are ready to manage your business.

 

Manage Your Business

Decisions regarding managing you business include the day-to-day operations of the business and how you will successfully implement them into your organizational culture.  One of the most important aspects of a business is how well you are able to manage your employees.  Human capital is a precious resource with each employee adding a unique set of values that make up the companies culture.  Managing your marketing and pricing strategies is a key component and each decision can affect how well the consumer enjoys you product or service.  There also needs to be useful forecasting methods to predict financial growth for the future.  Once these key components are managed then the company will have to develop an exit strategy.

Exit Strategy

Planning your exit is an important aspect because it gives your small business the time and money involved in the process.  After your exit is planned you will need to be able to sell the business and have a good succession plan in order for transfer of ownership to occur as efficient as possible.  Know how to liquidate the company’s assets well because this approach may give the best value return depending on the size of the organization.  Filing bankruptcy is a difficult approach but an option that is needed to be made aware.  The last step is to officially close the business down.

Recent News:

The President’s Budget Overview and Stimulus Bill is

Good News for Small Business Administration

President Barack Obama’s FY 2010 Budget Overview is in full support for the U.S. Small Business Administration’s (“SBA”) credit programs, authorizing SBA to support loan guarantees of $28 billion to small businesses.  This is extremely good news for small businesses in today’s economy.  The bill outlines maximum authorization levels for Small Business Administration credit programs well above the current demand for those programs. It allows for a maximum of $17.5 billion for SBA’s 7(a) General Business Loan Guarantee program, $7.5 billion for the 504 Certified Development Company Loan program, $3 billion for the Small Business Investment Company debenture program and $25 million for the Microloan program.

The bill will also provide for $1.1 billion in direct disaster loans and will provide for the launch of a pilot program to test the use of SBA-guaranteed loans as part of the agency’s response to disaster declarations.

The American Recovery and Reinvestment Act (“Recovery Act”) contains incentives for the small business sector to begin economic recovery.  The Recovery Act contains a package of loan fee reductions, higher guarantees, secondary market incentives, new SBA programs, and enhancements to current SBA programs that will help unlock credit markets.

“The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities,” said SBA Administrator Darryl K. Hairston.

The Stimulus Bill authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms, and expands leverage capability for Small Business Investment Companies. The bill attacks several problems facing small businesses and takes a comprehensive approach by reducing fees, guaranteeing a greater share of certain loans, by providing new loans to help small businesses keep their doors open through economic hardship, expanding capacity in the Microloan program (which provides small loans up to $35,000), as well as new mechanisms to help unfreeze the secondary markets for SBA-backed loans.

The Budget Overview includes the Obama Administration’s Small Business and Community Bank Lending Initiative which will expand small business credit affordability and availability by unfreezing secondary markets for small business loans as part of the larger plan to revive the flow of credit in the economy.

The SBA is very pleased with the Stimulus Bill and the President’s Budget Overview because in today’s economy small businesses are going to need all the help they can get.  The Stimulus Bill is going to be a part of the solution and will provide specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more loans, and to help restore healthy SBA secondary markets to boost liquidity.

SBA.gov provides an incredibly user friendly platform for small business assistance. All the tools and resources aforementioned are easily accessible from the home page. A small business owner interested in putting together a business plan, use SBA tools and services, or search for local business resources could simply click on the appropriately labeled tab in order to access a plethora of easy to use applications. On the left side of the home page are several tabs that allow a visitor to learn about the SBA, how it was founded, and the best way to get in touch for a representative. The most interesting and dynamic section of the website can be found below the four main services offered. Here one can find many current issues and applicable warnings for small business owners. For example, there is currently scam warnings, stimulus package updates, new loan programs, and much more that are easily accessible from the “Spotlight” Section of SBA.gov. Lastly, a confused user can use the search box at leisure to help them on their quest for small business champion.


[1]All the information for this paper was extracted from http://www.SBA.gov


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