Senator Olympia Snowe on Change at the SBA

Posted by: Jeremy Quittner on December 02, 2008

olympiasnowe.JPG The Small Business Administration, with its loan programs, coaching, and educational curriculum is vital to the nation’s small businesses. That’s particularly true now, with the U.S. economy in full recession. But under the Bush administration, the agency has languished, and both its budget and staffing have been gutted. It’s flag-ship 7(a) lending to small businesses has also fallen off a cliff. I recently had this email exchange with Senator Olympia Snowe (R-Maine), Ranking Member of the U.S. Senate Committee on Small Business & Entrepreneurship, about what needs to change:

BusinessWeek: What are the things that need to change at the SBA under the new administration?

Senator Snowe: First, I hope that one of the incoming Administration’s initial actions is to elevate the SBA Administrator to Cabinet-level status. This action would send a tremendously positive signal to our nation’s small businesses, which represent 99.7 of all employer firms and will play a leading role in stimulating our economic recovery. I was pleased that President-elect Obama so prominently mentioned in his platform the vital role that small businesses play. The SBA is the only Agency within the Federal government with the responsibility of assisting small businesses. Designating the SBA Administrator with Cabinet-level status — as was the case during previous Administrations — will help to ensure that the voice of small business is heard loud and clear within our Federal government.

I also hope that the Obama Administration will fully fund the SBA. As former Chair and now Ranking Member of the Senate Committee on Small Business and Entrepreneurship, I have been particularly alarmed at the shortchanging of the SBA’s budget over the past eight years. In fact, since Fiscal Year 2001, the SBA has seen its budget fall 27 percent, the largest decrease of any federal agency during that timeframe. When you consider that the SBA budget represents only about 2/100ths of a percent of the total federal budget — yet at the same time small businesses are creating about three-fourths of all new jobs — there is no question that adequately funding the Agency’s small business programs is an investment in America’s economic future.

BusinessWeek: How can the SBA ensure it’s doing its part to include minority and, in particular, women-owned businesses in the federal procurement process?

Senator Snowe: I am hopeful that the incoming Administration, as one of its top small business priorities, will implement a meaningful women's contracting program that will actually help women-owned small businesses. In 2000, Congress established the Women’s Procurement Program to address the underrepresentation of women entrepreneurs in the government marketplace. I find it inexcusable that after wasting nearly eight years, the current Administration has failed to effectively implement this congressionally mandated program, by promulgating a highly deficient final rule that would impose unworkable requirements. For example, the SBA's rule would require each Federal agency to admit to discriminating against women-owned firms before an agency can utilize the program. The rule might also ultimately only apply to a handful of business industries.

Under current law, there is a statutory goal for 5 percent of government-wide contracts to flow to women-owned small businesses. Unfortunately, in Fiscal Year 2007, women-owned businesses were only awarded 3.4 percent of Federal contracting dollars. As Ranking Member of the Senate Small Business Committee, I stand ready and willing to help to do anything I can to assist the new Administration in implementing a meaningful final rule and helping the Federal government to satisfy -- and exceed -- its goaling requirement for women-owned small businesses. For example, in the 110th Congress, I introduced legislation that would help to fix the deficiencies in the SBA’s women's contracting program.

BusinessWeek: How could the 7(a) lending process be streamlined to encourage more bank lending and more small business borrowing?

Senator Snowe: Our current economic downturn is drastically more dangerous than any threat to our financial system in decades. Banks are tightening their lending standards without a similar increase in the volume of SBA guaranteed loans to small businesses, creating a domino effect on the job creation ability of small businesses. According to Federal Reserve data, in the last quarter, 75 percent of banks reported that they have tightened their lending standards for small firms. At the same time, lending in the SBA’s 7(a) and 504 programs have declined dramatically. Over the last year, lending in the 7(a) program has decreased by 55 percent, and loan volume in the 504 program is down 36 percent.

While banks are tightening credit to respond to market conditions, it is noteworthy that lenders consistently tell me that making SBA loans is overly complex, cumbersome, and expensive. This is especially true for smaller and community banks that may only make a few small business loans a year. Many of these banks want to make more SBA loans but lack the resources to train a loan officer in SBA lending procedures if that loan officer may only make four to five small business loans a year. So, I believe that as Congress has tried to restart credit markets, it is just as imperative that we take action to streamline the SBA’s lending programs.

In order to remove barriers to lending, I am planning to introduce legislation that contains ten steps to directly address the credit crunch small firms are currently facing and help them get the capital necessary to finance business growth. My bill includes a number of provisions designed to get credit moving again to small firms. For example, it would stimulate small business access to capital by reducing lending fees by over $500 million -- for both lenders and borrowers. It would also help to train new SBA lenders, as well rural lenders, on how to better use the SBA’s programs, including its flagship 7(a) loan program.

BusinessWeek: Besides lending, how else could the SBA become relevant to small businesses again?

Senator Snowe: While the SBA can obviously do more to assist small businesses, I have no doubt that its current programs are both helpful and relevant to small businesses. For instance, take the Small Business Development Center (SBDC) program, which provided entrepreneurial training to more than 400,000 clients in fiscal year 2007, a tremendous value to the American taxpayer. Although the SBA already offers a tremendous number of valuable resources, the new Administration must work to ensure that the Agency’s programs are properly funded and that small businesses are made aware of what SBA and its resource partners have to offer. If given a funding increase, the Agency will be able to grow successful initiatives, such as the SBDC, SCORE, and Women’s Business Center programs, thereby, ensuring that it reaches out to small businesses that we rely upon to improve our economy. Additionally, I will continue to work to ensure that SBA leadership is more relevant when the Administration is formulating their economy policy. When it comes to international trade, energy independence, manufacturing, and many other industries, small businesses, and their government representatives in the SBA, often have solutions that fall on deaf ears.

Finally, I look forward to working with the new Administration to improve the SBA’s International Trade programs. At this point, I do not believe that the SBA puts sufficient emphasis on aiding small exporters to identify foreign markets. As we head to the next Congress, I plan on working closely with the incoming Administration -- specifically, the SBA and the Department of Commerce -- to promote overseas exporting opportunities for small businesses.


Credit: Getty Images

Reader Comments

Kevin Baron

December 3, 2008 11:08 AM

I applaud Senator Snowe for her work on helping small businesses and I think her comments here are appropriate, although they do echo comments that the American Small Business League and their President Lloyd Chapman has been making for years. One thing I noticed that was missing from her comments however, is any mention of the lack of oversight on federal small business contracting programs that have led to billions of dollars in small business contracts being gobbled up by large firms every year. Last month the Washington Post ran a front page story showing that in 2007, about 40% of small business set-aside contracts went to Fortune 500 companies, yet Senator Snowe, or anyone else on the Senate Small Business Committee, has failed to introduce legislation that would fix this problem.
With the current state of our economy, putting billions of dollars in contracts back into the hands of small businesses will create a large multiplier effect that will do more to stimulate our economy than any bailout package or stimulus bill thus offered by Congress.
While I agree with all of the plans that Senator Snowe has put forth here for the SBA, her complacency on the contracting issue- and her lack of mentioning the Rothe case that could bring down the entire 8(a) program- must be laid at her feet and the feet of Senator Kerry, Chair of the Small Business Committee, for not taking any action on helping and protecting federal small business contracting programs.

James A. Burbank

December 3, 2008 05:42 PM

DEAR SENATOR SNOW.
THANK YOU FOR ALL THE GOOD WORK THAT YOU DO THAT BENEFITS AND/OR PROTECTS THOSE OF US WHO ARE THE COMMON CITIZENS.

YOU REALLY MUST WORK VERY HAD IN ORDER TO SUCH A GOOD JOB.

JAMES A. BURBANK

11 CUMBERLAND STREET
BRUNSWICK, MAINE 04011-1903
11 CUMBERLAND STREET

Prof. Samuel D. Bornstein

December 3, 2008 11:16 PM

Thank you for the article. Senator Snowe has always been a tireless friend of small business. From a recent NASE survey, there is evidence as to the role of small business in our economy. The NASE Survey, which appears on their website www.nase.org highlights the fact that self-employed and micro-business owners hold a major portion of the outstanding "Toxic Mortgages" that is the root-cause of our economic crisis. These small business owners will suffer in the next wave of foreclosures that will follow the restting of their mortgages which is scheduled to begin in 4th Quarter 2008 and continue through 2012. I created the survey which the National Association for the Self-Employed NASE)sent to their national membership. I was joined by my partner Jung I. Song CPA of Bornstein & Song, CPAs and Consultants. We created the survey based upon my 8 years of research on small business and the most recent concentration with the Subprime Mortgage Crisis. Please see the NASE website www.nase.org for my Commentary and the Press Release. In this critical time for our country, the main concerns are focused on Foreclosures and Unemployment. Senator Snowe is right to call upon the SBA to fulfill their role to help these small business owners avoid foreclosure and business failure in this recession. We need a concerted effort to address these small business owners because their failure will cause millions to lose their jobs. President Obama indicated that foreclosure mitigation was crucial. Let us start with these small business owners whose foreclosure and failure will further deepen the recession.

Andy

December 4, 2008 09:42 AM

I applaud Senator Snow. SHe has always been a champion of the nations small business owners and he guidance is critical at this moment. I am a 7a and 504 Lender in California. In addition to the reduced fees, I hope the congress will consider aquisiiton of some loans from the secdondary market. The full faith and credit guaranteed loans are not selling. If a small bank cannot sell its 7a loans it will severly limit its ability to make more loans.

Andy Weaver, Senior Vice President
Premier Commercial Bank
Anaheim, CA

Ruth E Hedges,CEO

December 5, 2008 10:39 AM

Since 2004 when we met with Stephen Galvin,and others at the SBA in Washington DC, we have been trying to work with the SBA to provide Small businesses with our revolutionary SBA compliant Online multiple choice Business plan and Due Diligence reporting system www.fundingroadmap.com
that will make SBA loans, and all forms of investment less complex, cumbersome, and expensive and provide's the kind of transparency and disclosure necessary in today's difficult lending environment.
We are very excited to finally have a new administration who is open to technology, and working with woman owned businesses. We look
forward to working with Senator Snow and others on improving the SBA and leveling the playing field to access to capital for all Americans.

Ruth E. Hedges
Founding CEO
Unismart Capital Software Inc
www.fundingroadmap.com

Alika Kumar

December 9, 2008 01:44 PM

Dear Senator Snowe,

I think your idea about elevating the SBA Administrator to a Cabinet-level position is brilliant. However, the same must be done with the next administrator of the Minority Business Development Agency.

The relevance of these two organizations is critical to the economy, as is the need for these agencies to have visibility, teeth and tools to make a difference in the small business communities.

According to the SBA, in 2002, minorities owned approximately 18
percent of the 23 million U.S. firms. And, per the Minority Business Summit in 2005, minorities own 4.1 million firms, generating nearly $700 billion in yearly revenue and employ over 7 million workers. Furthermore, the report that followed the summit stated that Minorities make up 30 percent of the U.S. population – yet, represent only 15 percent of all firms. The rate of minority business ownership has yet to keep pace with the fast growth of the minority population.

The time to act is now, as our minority populations grow and our economy slips downward. Please make the case for support of the Minority Business Development Agency to help strengthen the weaker small business sectors.

Thank you in advance for your time and consideration.

Sincerely,

Alika Kumar
Director, Arizona Minority Business Enterprise Center.

Alena

December 10, 2008 09:31 AM

I recently came accross your blog and have been reading along. I thought I would leave my

first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will

keep visiting this blog very often.

Alena

http://www.smallbusinessavenues.com

Laurel Delaney, Chicago, IL

December 10, 2008 12:18 PM

Thank you Senator Snowe for your unswerving efforts to keep small businesses, (especially woman-owned) strong and healthy.

Sincerely,
Laurel Delaney
Founder, The Global Small Business Blog
Founder, Women Entrepreneurs GROW Global (WEGG)

www.borderbuster.blogspot.com
www.womenentrepreneursGROWglobal.org

kate

January 11, 2009 07:11 PM

Very good information and to the point

Kate
Entrepreneurs

Carol Cross

February 10, 2009 11:54 AM

I hope that our elected officials will look into FRANCHISING and the lack of effective regulation to protect the buyers of franchises. Franchisees appear to be merely resources for franchisors under Congressional and FTC regulatory policy.

Under the current status quo of the law, the FTC Rule, prospective franchisees are being sold franchises that offer no profits and a high risk of failure before the contract terms are completed.

Home equity loans and 401s and 403s have been the source for the purchase of franchises as well as SBA Loans and this has permitted the franchisors and the banks and lenders to obscure the high rate of failure of first owner-builders of retail franchised businesses.

The SBA Franchise Registry contains many franchises that are eligible for guaranteed loans that are very high risk investments for the franchisees. Yet, The Congress passed the PATRIOT LOAN EXPRESS INITIATIVE for VETS and their families in August of 2007 but didn't make the FTC clean up disclosure for prospective buyers of franchises.

Hopefully, our elected officials will look at MERCATUS ON POLICY, BANKING ON THE SBA, WHERE RESEARCHER VERONIQUE DE RUGY, MERCATUS CENTER, George Mason University, states that BIG banks, not small businesses benefit the most from SBA loan programs.

bignana

February 13, 2009 11:13 AM

Why not ask Senator Snowe to become
Secretary of Commerce. She has been
such a great help to President Obama
in achieving the passage of the
stimulus bill.I am not a Republican,
but Senator Snowe seems to be one of
a very few Republicans not interested
in photo-ops during this debate in
order to get reelected. She will have
no problem in that area, and could
probably be a better presidential
candidate in the future. I for one
would vote for her against Hillary.

Dr Bear

March 11, 2009 02:20 PM

When President Obama was running for President, he said he would help the SBA in a different kind of way. The ability of the SBA to loan to small businesses instead of only guaranteeing the loans of lending institutions. Also, I thought his campaign discussed lowering the 10% capital necessary to expand an existing small business and the 20% capital necessary for start-ups. I would like to know if these changes are still being considered. My spouse and I want to expand our 501c3 to include an S-Corp. I am a disabled combat Marine and My spouse is a Women. Please help. Thank you, Dr. Baker

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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