Small Business

Big Questions About the Small Business Administration


How will the Small Business Administration (SBA) fare under President George W. Bush? Though the Republican Administration is still settling in, there may well be reason to fear that the agency could be facing a rough road.

So far, while the new President has filled his Cabinet, he has yet to name a new SBA chief -- an ommission that concerns small-business advocates because, in the Clinton Administration, the position was accorded Cabinet-level status, as well as a seat on the National Economic Council. "It concerns me when I hear the President say things like, 'My Cabinet is complete'...and an administrator still hasn't been appointed," says former acting Administrator Fred Hochberg.

EMPTY OFFICE. The Bush Administration asked Hochberg to step down from his post on Feb. 1, 2001. Until a new administrator is named, Kristine Marcy, the SBA's chief operating officer since Feb. 1999, will head the agency. The Clinton Administration didn't confirm its first SBA appointment until May 5, 1992, and many believe President Bush won't name a new administrator for at least a few more weeks.

Some of those rumored to be in the running for the top spot include: James Talent, former Republican chairman of the House Committee on Small Business, Terry Neese of the National Association of Women Business Owners, and Republican Rick Lazio, who was defeated by First Lady Hillary Rodham Clinton in November's New York Senate race.

SBA executives have long been the butt of criticism from congressmen and entrepreneurs for not being in tune with the day-to-day issues small businesses face. So it's likely the new administrator will be someone with small-business experience, a knack for financials, and a strong political network, according to members of President Bush's SBA transition-advisory team. No matter who takes the helm, however, that person shouldn't count on much of a honeymoon.

Why? Start with the fact that the heads of most other government agencies already have been appointed. That doesn't bode well for the new SBA administrator, who may well find that he lacks the clout to go up against other, higher-profile government agencies in the battle to secure his agency's share of the federal budget, says Hochberg.

ABUSE AND FRAUD. Even if the SBA secures the sort of budget it would like, the new administrator's hands will be full. Although the SBA had significant political influence within the Clinton Administration, and significantly boosted lending to minority-owned businesses, it hasn't been immune to budget cuts. Ginny Beauchamp, vice-president of the National Association for the Self Employed and a member of the Bush transition advisory team, is confident the new administrator will maintain current levels of funding for the SBA's Office of Advocacy, which gauges how government regulations impact small business, as well as for the microloan program, which lends up to $35,000 to grass-roots entrepreneurs. The Bush team also plans to step up investigations of abuse and fraud involving SBA loans, and among participating lenders.

Hank Wilfong, another member of President Bush's SBA transition advisory team and president of the National Association of Small Disadvantaged Business, says the SBA's top priority should be to secure funds to help existing small businesses. For instance, many entrepreneurs have a hard time landing contracts that require a lot of money up front. Ten years ago, the SBA's Business Development Expense Fund lent small businesses the cash to cover startup costs so that they could compete for more expensive projects. Today, that fund is largely gone. Wilfong is also urging Republicans to boost the SBA's role in offering technology training to small-business owners. In 1990, there was some $15 million in the SBA Technology Advancement Fund. Today, that figure stands at around a scant $3 million.

CHANGE OF FOCUS. Funding issues aside, small-business advocates -- who finally may have a shot at getting their legislative agenda through Congress -- are counting on the next administrator to zealously represent their interests on Capitol Hill. That's something the National Federation of Independent Business (NFIB) says wasn't done effectively in the past.

The NFIB's beef with the Clinton-era SBA is that it put its primary emphasis on advancing the interests of minority groups. "The challenge for a new administrator is to shift an entire bureaucracy that has been geared toward advancing special interests to an agency that is able to resolve some of the problems small-business owners actually face every day," says NFIB lobbyist Mary Leon, who cites "tax relief, health care, and burdensome regulations" as those areas most in need of attention and reform.

Carving a niche in the Washington D.C hierarchy will be but the start of the new administrator's challenges. Many argue that institutional apathy within the SBA has made it something entrepreneurs and lenders could do without. "The new administrator has to make the SBA's culture reflect the private sector," warns Christopher Wysocki, president of the Small Business Survival Committee. "That's the only way it will be able to gain back the confidence of entrepreneurs."

One way to achieve this goal might well involve updating regulations for government-backed loans. Lenders would like to see better returns, while borrowers want qualification criteria changed to better suit their needs. Problem is, such changes are likely to be time-consuming and expensive. Some 1,500 pages of regulations currently govern the SBA's flagship 7a loan program. And every time the SBA adds to those regulations, it sows further confusion among agency personnel and lenders throughout the country, says Matthew McGee, director of the Business Loan Center in New York. Says McGee: "It slows the game down. A business that could take two to three weeks to finance, now can take months."

VACANT DESKS. Another headache for the incoming administrator: Lending volume at the SBA softened in 2000. Hochberg says the new boss must make sure that any contractions in the banking system don't put a crimp on loans available to small businesses. The new administrator may get hung up on some tricky personnel issues, too. Thomas J. McCool, the General Accounting Office's director of financial institutions and markets issues, says the SBA's staff-training program is inefficient.

While other government agencies face similar problems, the SBA will see more of its employees eligible for retirement in the next five years than any other agency in Washington. A tight budget, combined with President Bush's pledge to cut middle-management positions within the federal bureaucracy, could make recruitment tough.

All in all, it looks like a hard row to hoe for whoever takes charge at the SBA. Small business may finally have its legislative agenda front and center, but it's going to take more than a little elbow grease to make things come together. By Nicole St. Pierre in Washington, D.C.


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