The SBA Chief Comes Out Swinging

Stung by charges that his agency is hampering U.S. entrepreneurs, Administrator Hector Barreto tackles the criticism point-by-point

by Stacy Perman

Administrator Hector Barreto says his organization and the Bush Administration have increased loans, guarantees, and training for small businesses

Following BusinessWeek Online's interview with Lloyd Chapman, founder and president of small-business policy watchdog group the American Small Business League (ASBL), in which he discussed a number of criticisms against the Small Business Administration (SBA), we heard from the SBA (see BW Online, 1/27/06, "Is the SBA Hurting Small Business?").

Not surprisingly, the group disagreed with Chapman and took issue with his assertion that the Bush Administration has helped create an anti-small business atmosphere.

Hence, BusinessWeek Online gave SBA Administrator Hector Barreto the opportunity to respond. BusinessWeek Online staff writer Stacy Perman asked Barreto many of the same questions she asked Chapman. Edited excerpts of their conversation follow:

In your estimation, what role does small business play in the U.S. economy?

I like to say there is nothing small about small business. There are 25 million of them. Look at some of the key metrics: The [SBA's] Office of Advocacy estimates that small business produces 52% of the gross output of the economy, so 52% of all products and services come from small business. The number of jobs created is nothing short of incredible.

My boss [President Bush] likes to say that small business is the engine that fuels the economy. We believe that will continue to be true and the SBA's mission is more critical than ever.

Chapman said that one of the main challenges facing small business today is what he termed an anti-small business environment propelled by the Bush Administration. Do you agree?

First of all, I like to say that the numbers don't lie, and since the [beginning] of the Bush Administration the things that the SBA is doing are at historic levels.

When this Administration started, the SBA was doing $9.5 billion in loan guarantees, and we did 50,000 loans. Last year, the SBA did over 100,000 loans and over $20 billion in loan guarantees. And the best part is that they went to every community. One-third went to the fastest-growing areas of women and minorities.

When we started four and a half years ago, the SBA was training 1.4 million businesses; last year 2.6 million got access to technology and educational assistance. Lastly, four and a half years ago the federal government bought $50 billion worth of goods and services from small businesses; last year they bought $69 billion. That is almost a 40% increase.

All of these numbers given to you are all-time highs. And we plan on breaking all of those numbers this year. Facts are a stubborn thing. The bottom line is that with this President we've helped [the most] small businesses in more tangible ways in the 53-year history of the SBA.

However, Chapman says that Bush has done more to harm small business, for instance cutting its budget and cutting back or cutting out programs altogether. How do you respond?

I've been in small business my whole life. What we like to talk about is the bottom line.... And the bottom line is that the SBA is doing more loans, loan guarantees, and training to small businesses over the past four and a half years.

What is happening is that the SBA is operating more efficiently than before. We have made major changes in the way our budget operates [and] in the way we develop loan programs. We have saved the taxpayer $100 million a year...so we are a much stronger program.

One of the issues that Chapman brought up is that many of the SBA's policies are hostile -- particularly when it comes to women and minorities -- rather than helpful. How do respond?

A third of SBA loans go to minority businesses, and minority businesses represent 15% of all businesses. The trend we see happening is [that] last year 30% of African and Hispanic and Asian community businesses were up, and women-owned businesses were [also] up 30%.

One thing we did was that we created a business-matchmaking program.