"Paying The Piper" (Winter 2006) created the highly negative impression that the Small Business Administration's 7(a) loan program is not doing well and may even be facing a shutdown at some point this year. Nothing could be further from the truth. In fact, the SBA's guaranteed loan program for small businesses has never been healthier. In each of the last two fiscal years, the program has set loan volume records that dwarf the volume of loans it has made in any prior year.
The reason it can do this is because its funding comes entirely from the borrowers and lenders who participate in and benefit from the program. The fees collected from those participants are quite sufficient to operate the program, even at historically low fee levels—we're asking the vast majority of borrowers to pay the same 2% fee we were asking them to pay in 1985, 22 years ago. Those fees are keeping the program moving toward ever greater loan volume and have freed it from the volume constraints of limited, finite appropriations from Congress. It has been those limits that were the cause of the periodic loan caps and shutdowns that plagued the program in past years. That is not a problem in 2007.
The idea that the SBA needs the authority to make larger loans in order to boost its fee revenue is not a new one, and I can understand how lenders themselves might want to make larger loans under the program. The SBA is interested in the idea; it's just not ready to go there yet.
Mike Stamler
Director
SBA Office of Public Communications
Washington, D.C.
In Praise Of Nonviolent Video Games…
Finally, a company that makes video games that are amusing without being violent! ("No Shoot-'Em-Ups," Winter 2006). It is about time that the video game developers started focusing on more than one segment of players. I would much rather support a smaller company, like Skunk Studios, that sells nonviolent games than a larger company that sells violence. This would be an even more important factor in purchasing a toy if I had children.
I also appreciate that Skunk's games are inexpensive. Now that I know about Skunk Studios, I will definitely be purchasing its games—and recommending them to all of my friends as well.
Evanne Center
San Diego
…And They're Not Only For Kids
"No Shoot-'em-Ups" (Winter, 2006) was an eye-opener. I love that electronic games are not just for teenage boys anymore. I wasn't aware that there were so many games out there that appeal to the broader population and can serve as alternatives to the violent games we're all so familiar with. It is nice even for an adult to let loose and escape their reality for a little while. And although some of the shoot-'em-up games can be fun, eventually you get sick of the violence.
Being a woman, I find it interesting that a majority of those who play Skunk's games are women. Having a woman CEO has let this company expand to appeal to a group of customers the gaming industry often ignores.
Kelly Barton
Encinitas, Calif.
Bigger's Not Better At Customer Service
"True Believers" (Winter 2006) was full of great ideas and relevant information. However, in that story, Edward Reilly, the CEO of the American Management Assn., asserts that "big companies are coming after you with better customer service, so you better be paying attention." I disagree. Most large companies can easily be beaten in the customer service department. Offer superior service and their customers will "come after you." Remember David and that Goliath guy.
Powercurve
via e-mail
Penalize Companies Masquerading As Small
"How Big Is Small?" (Winter 2006) illustrated yet again the inadequacy of the Small Business Administration. Small businesses are supposed to outgrow their status as "small" as they succeed and become more able to compete with larger companies for government contracts. Critics are right to be complaining about the SBA's certification procedures, which let small businesses keep government contracts even after they've outgrown their small status or have been acquired by large companies.
The change in the rules requiring SBA recertification after five years is a start. But the change still doesn't go far enough, because companies that don't get recertified as small won't have to give up their government contracts. Consequently, the companies that abuse the process, either by outgrowing the definition of small or by claiming subsidiaries of major corporations as small, don't suffer any economic penalty.
Once a company grows beyond small or is acquired by a large business, it should move aside and let other aspiring small businesses have a chance to compete for those highly coveted government contracts.
Steven Ludsin
East Hampton, N.Y.
My Kind Of Town, Chicago Is
The story "Boom Town" (Winter 2006) was great. It shows the great ambition in the black community. When they're supported and given opportunities, these businesses can thrive.
Today's Drum
via e-mail
Media Should Wise Up On Big-Box Stores
I've been waiting for a major news publication to start writing about the fact that big-box retailers don't actually contribute much to their local communities, though they claim they are doing so. You touched on this topic in your book review, "Chains That Choke" (Winter 2006). Now, BusinessWeek and others need to carry and expand this story and hopefully, the TV networks will eventually spread the story to an even wider audience.
Matthew vicario
Co-owner, EventSetter.com
Lake Worth, Fla.
Small Businesses, Small-Minded Banks
The "Trouble at the Teller Window" (Winter 2006) starts with how banks refer to certain of their clients as "small businesses," which doesn't exactly have the ring of success. Most independent businesses describe themselves by what they do, not by their size. Only the bank considers them "small."
Most independent businesses succeed by doing business based on positive relationships with customers and suppliers. But banks don't encourage that—and often go so far as to switch contact staff to keep a banking relationship from becoming too cozy. No wonder businesses vote with their feet.
Our business considers our banking relationships to be on a five-year string. The banks promise a lot to get our business—promises they've all but forgotten by the third year. By the fifth year, we're ready to move on.
Cacique
via e-mail
Pricing Too Low Can Kill A Startup
The biggest pricing mistake small businesses make is to assume that buying decisions are made primarily on price. Although most businesses advertise low prices and most people tell you they price-shop, almost anything could be bought for less. Just note the prices of the cleaning products under your sink. You'll see how many less-expensive substitutes are available.
Typically, startups come into an established market and price themselves just below the existing businesses, thinking that will give them a wedge into the market. But the established businesses wait them out, and the newcomers are doomed from the start because they have not priced for a profit.
Ralph Blanchard, PhD
Rutledge, Ga.
News You Can Use, Cover To Cover
I subscribe to many different business magazines for new ideas and tips for our business. Usually, I find one or two articles that are directly related to what we do. I must tell you that 80% to 90% of the articles in SmallBiz are very helpful, and offer great tips or concrete examples that help us improve our business.
Thanks, and keep up the good work.
Don Daszkowski
President, BusinesssMart.com
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