US SBA Jeopardized by Congress
Various actions recently undertaken by the US House of Representatives and the US Senate seriously jeopardize
the existence of the US Small Business Administration (US SBA).
Congressional Action Against The US Small Business Administration
Proposed Spending Bills Would Cripple America’s Small Businesses
The US SBA has been the target of numerous budgetary reduction actions during the past decade. We have heard
time and time again that "small business is the backbone of the American economy", but Congress continues
to target this agency with unrealistic budget reductions. Recent actions to reduce the budget of the US SBA will most
certainly prove to be the "death knell" of the only US Government agency dedicated towards ensuring the
maintenance and enhancement of small business development in this nation.
The Commerce, Justice, State (CJS) appropriations bills approved by the House and Senate will have a drastic effect
on the US SBA and America’s 24 million small businesses.
House Bill HR 2670 slashes funding for the SBA’s salaries and expenses by $87 million from the amount SBA
requested. If enacted, this level of funding would result in a Reduction-In-Force (RIF of more than 2,400 Federal
employees, or, 75% of SBA’s workforce. This is in addition to a 20% reduction of SBA employees which has already
occurred during the past decade.
- If enacted, HR 2670 would effectively shut down the SBA! SBA would no longer be able to provide
capital and credit, education and training, contracting assistance, and advocacy on behalf of small business.
- Without these employees, SBA would be unable to prudently monitor its $50 billion loan portfolio and its resource
partners, who are responsible for delivering over $18 million in credit annually.
- This bill also under-funds the SBA’s premier 7(a) guaranteed loan program, cutting the program level $900 million from the
level needed to support America’s small business community.
- The bill would cripple the disaster loan program by prohibiting SBA from using any of its disaster loan appropriations to cover
the program’s indirect costs. The Credit Reform Act of 1992 requires that federal loan programs include both their direct
and indirect costs in calculating the funds necessary to support the programs.
Senate Bill S 1217 cuts funding for SBA’s salaries and expenses by $38 million. If enacted, this level of funding
would result in RIF’s of more than 1,000 employees, 38% of SBA’s workforce.
- Neither bill provides funding for the New Market Initiative, which is designed to fill a critical gap in the marketplace through
increased equity investment in America’s historically under-served areas.
- To avoid these results, under the House bill, $87 million must be restored to SBA’s salaries and expense accounts, and the
prohibition against using disaster appropriations for the program’s indirect costs must be removed. Under the the Senate bill, $38
million must be restored for salaries and expenses.
Current Budget, Requested Budget and Senate & House
proposed Budgets for the SBA
Neither the proposed House or Senate budgets for the SBA maintain existing levels of funding for the SBA, or, allow for
increased growth of SBA programs.
Since 1990, Congress has mandated the creation of 33 new programs to be established and administered by
the SBA. Proposed budget cuts do not allow the SBA to do what Congress has told them to do!
The US Small Business Administration
The US Small Business Administration is one of the federal government’s most innovative and cost-effective tools for
fostering economic development, job creation and individual opportunity. SBA’s programs build communities one small
business at a time.
A Flexible and Cost-Effective Tool for Economic Development
SBA’s mission is to facilitate conventional lending to promising, creditworthy entrepreneurs who cannot obtain it from
conventional lenders without SBA assistance. SBA is the leading provider of long-term financing in the small business
- With a total agency appropriation of only $716 million in FY 1998, SBA leveraged more than $18 billion in private
sector financing through its primary lending and venture capital programs.
- The SBA effectively "pays for itself" many times over. Because it provides government guarantees of
private capital, the costs of running the agency are far less than the taxes paid by companies that have been assisted
by the programs of the SBA. Intel is just one company which received assistance from the SBA. Intel alone pays more than
twice as much each year in federal taxes than SBA’s entire budget.
- Every tax dollar in the 7(a) program leverages nearly $72 dollars in loans.
- In FY 1998 the SBA leveraged $182.4 million in tax dollars into $10.8 billion worth of small business loans.
- SBA’s secondary market program made an additional $4.5 billion in capital available for small business loans in FY 1998.
- At a level of $3 billion in loans per year, the 504 Development Company Program is fully self-funded through loan fees.
- Small Business Investment Companies leveraged $24.3 million in tax dollars into $3.2 billion in venture capital investments
in small businesses.
- The SBA’s total loan portfolio now exceeds $45 billion!
- The SBA is very cost-efficient. By one important measure, the ratio of SBA operating expenses to average loans and
guarantees is slightly over 1%, while the same ration for its bank lending partners runs in the 3% - 5% range. This reflects
SBA’s ability to have a greater impact on small businesses even as it has reduced total agency employment by more than
24% since 1990.
SBA Programs Support Small Business
SBA was created to open doors of economic opportunity by filling the gaps inherent in the private marketplace. SBA-backed
lending and equity investments have a solid record of creating opportunities and jobs in communities all of America.
7(a) Program (General Business Loans)
Certified Development Company Loans (504 Program)
- The SBA’s loan guarantee program is the primary source of long-term financing for small businesses. The SBA backed
more than $9 billion in loans extended by private lenders in FY 1998 - another record year.
- By guaranteeing loans from private lenders, 7(a) uses only $1 of appropriations to support $72 of credit.
- To meet the changing needs of borrowers, the SBA has created new lending programs, such as the LowDoc program, the
SBAExpress program, the Y2K Action Loan program, the Pre-Qualification Loan program, the Export Working capital Loan
program and the Defense Loan & Technical Assistance (DELTA) Loan program.
Small Business Investment Companies
- The 504 program is designed to promote economic development and create new jobs by supporting long-term fixed asset
small business investments.
- In FY 1998, the SBA share of 504 Loan program financing to small businesses was almost $1.8 billion.
- The program is fully self-funded through borrower-paid fees, which have been reduced for two consecutive years.
International Trade Loans
- SBIC’s fill the gap between the availability of venture capital and the needs of small businesses in start-up and growth
situations. Because these amounts are small relative to the investment strategies of most private venture capital firms, SBICs
are necessary to provide financing to small businesses.
- The SBIC program has grown substantially both in the number of licensees and the available pool of investment funds
since its reorganization in 1994. Currently, 336 licensed SBICs manage an investment pool of $11 billion.
- SBICs invested $3.2 billion in debt and equity in American small businesses last year, a third more than in the previous
year and triple the average for the previous three years.
- SBIC success stories include Apple, America Online, Compaq, Federal Express, Outback Steakhouse, Sports Authority,
Staples and Intel. Intel alone pays more than twice as much each year in federal taxes than SBA’s entire budget.
- Since a program revision in 1994, the SBA has been permitted to receive a share of the profits from successful equity
investments by SBICs. Since 1996, SBA has collected $22.5 million - which is returned to the US Treasury.
- Exports are critical to maintaining the strength of the nation’s growing economy, accounting for 70% of economic growth
since 1989. Small firms conduct a large portion of US exporting business, but most small firms still do not export, primarily
because of a lack of capital.
- The SBA encourages private lending to small exporters by providing loan guarantees and export counseling. The SBA
has revamped its export loan programs over the last few years to make them more attractive and useful to borrowers and lenders.
- The SBA provided more than $313 million in international trade loans in FY 1998.
- The Surety Bond Guarantee program provides access to bonding (required under the Miller Act for federal construction
projects) for many small business contractors who otherwise could not qualify for private bonds.
- In FY 1998, the SBA guaranteed 10,445 bid bonds, providing contractors the opportunity to bid on contracts with an
estimated value of $2.3 billion, and guaranteed 2,860 final bonds with a contract value of $531 million.
- The Surety Bond Guarantee program is fully financed through a revolving fund that is funded by participant fees and a
$3 million appropriation in FY 1998.
- The SBA’s Office of Women’s Business Ownership is the only federal program addressing the specific needs of women
in starting and expanding their businesses.
- Women own roughly 40% of all businesses and are starting new businesses at twice the rate of men, but they have been
chronically starved for capital. Their businesses are smaller and they get less than 2% of federal contracts.
- The WBO program is aggressively promoting capital access for women and providing technical assistance and training
to women business owners.
- SBA has a network of 80 Women’s Business Centers around the country, with a goal of having at least one in every state.
SBA’s award-winning On-Line Women’s Business Center received more than 2 million hits in 1998.
Small Business Development Centers
- The 12,400 volunteers of the service Corps of Retired executives provided free and confidential counseling to more than
350,000 American in FY 1998, and held more than 5,000 separate specialty workshops.
- SBA’s Business Information Centers provided almost 120,000 small business clients with access to computer technology.
- SBDCs, funded half by the SBA and half by the states, provide a wide range of business management and training services
at more than 950 locations around the country.
- SBA’s Small Business Development centers provided counseling and training to nearly 550,000 clients in FY 1998. With the
help of the SBDCs, these small businesses created 56,000 jobs and generated $5.5 billion in sales, which in turn generated more
than $340 million in tax revenues.
- The SBA’s Disaster program makes low interest, long-term loans available for the recovery from disasters such as floods,
hurricanes, tornadoes, earthquakes and fires.
- In FY 1998, the program provided $728 million worth of disaster loans to help American families and businesses recover
from natural disasters.
8(a) Program (Minority Enterprise Development)
- The SBA’s Government Contracting Program increases small business opportunities in the federal acquisition marketplace
through comprehensive goals for small business and 8(a) contracting, identification of potential small business contractors and
subcontractors and other services.
- In FY 1998, the program had a part in helping small business obtain an estimated 442.5 billion in federal prime contracts and
- The SBA has launched the HUBZones program, and completed certification on the program’s first 120 participants. Thus
far, $10 million in contracts have been awarded.
- The SBA’s Minority Enterprise Development program fosters participation by minority and economically and socially
disadvantaged persons in the federal contracting market, develops their ability to compete successfully in the private
marketplace, and promotes economic growth and employment in their communities.
- In FY 1998, 6,000 small businesses participated in the 8(a) program, and won $5.9 billion in contracts.
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