US Small Business Administration

The Small Business Administration (SBA) is a government agency with the following mission:

Maintain and strengthen the nation’s economy by aiding, counseling, assisting and protecting the interests of small businesses, and by helping families and businesses recover from national disasters.

History of the Small Business Administration (SBA)

The Reconstruction Finance Corporation (RFC), created by President Herbert Hoover in 1932 to alleviate the financial crisis of the great depression, was the beginning of what became the SBA. The RFC was basically a federal lending program for all businesses hurt by the depression, large and small. It was adopted as the personal project of Hoover’s successor, President Franklin D. Roosevelt.

Concern for small business intensified during World War II when large industries beefed up production to accommodate wartime defense contracts and smaller businesses were left unable to compete. Congress responded by creating Smaller War Plants Corporation (SWPC) in 1942 to provide direct loans to private entrepreneurs, encourage large financial institutions to make credit available to small enterprises, and advocate small business interests to federal procurement agencies and big businesses.

The SWPC was dissolved after the war, and its lending and contract powers were handed over to the RFC. At this time, the Office of Small Business (OSB) in the Department of Commerce also assumed some responsibilities that would later become characteristic duties of the SBA. Its services were primarily educational. Believing that a lack of information and expertise was the main cause of small business failure, the OSB produced brochures and conducted management counseling for individual entrepreneurs.

During the Korean War, Congress again created a wartime organization to handle small business concerns – the Small Defense Plants Administration (SDPA). Its function was similar to that of the SWPC, except that ultimate lending authority was retained by the RFC. The SDPA certified small businesses to the RFC when it had determined the businesses to be competent to perform the work of government contracts.

When the Korean War ended, the RFC was abolished, but some of the important small business assistance programs were rolled into a newly created organization called the Small Business Administration via the Small Business Act of 1953. The SBA’s function was to “Aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” The charter also stipulated that the SBA would ensure small businesses a “fair proportion” of government contracts and sales of surplus property.

Soon, the SBA was making direct business loans and guaranteeing bank loans to small businesses, making loans to victims of natural disasters, working to get government procurement contracts for small businesses, and helping business owners with management, technical assistance and business training.

The Investment Company Act of 1958 established the Small Business Investment Company (SBIC) Program to license, regulate and help provide funds for privately owned and operated venture capital investment firms. Its creation was the result of a Federal Reserve study that discovered that small businesses could not get the credit they needed to keep pace with technological advancement.

In 1964, SBA began to attack poverty through the Equal Opportunity Loan (EOL) Program. The EOL Program relaxed the credit and collateral requirements for applicants living below the poverty level in an effort to encourage new businesses that had been unable to attract financial backing but were nevertheless sound commercial initiatives.

Since 1953, nearly 20 million small businesses have received direct or indirect help from one or another SBA programs. From 1991 through 2000, the SBA has helped 435,000 small businesses get more than $94.6 billion in loans; more than in the entire history of the agency before 1991. No other lender in this country, perhaps no other lender in the world, has been responsible for as much small business financing as the SBA has during that time. SBA’s current business loan portfolio of roughly 219,000 loans worth more than $45 billion makes it the largest single financial backer of U.S. businesses in the nation.

In 2003 alone, the SBA backed more than $12.3 billion in loans to small businesses. More than $1 billion was made available for disaster loans and more than $40 billion in federal contracts were secured by small businesses with SBA’s help. Moreover, since 1958, the SBIC has put more than $30 billion into the hands of small business owners to finance growth.

The SBA itself claims, “There are those who argue that big businesses, profiting from economies of scale, can produce far more efficiently than small businesses. However, small business is where the innovations take place. Swifter, more flexible and often more daring than big businesses, small firms produce the items that line the shelves of America’s museums, shops and homes. They keep intact the heritage of ingenuity and enterprise and they help keep the American dream within the reach of millions of Americans.”

Over the years, the SBA has grown in terms of total assistance provided including its array of programs tailored to encourage small enterprises in all areas. Programs now include:

• Financial assistance
• Federal contract procurement assistance
• Management assistance
• Specialized outreach to women, minorities and armed forces veterans
• Loans to victims of natural disasters
• Specialized advice and assistance in international trade

As a US citizen, portions of your tax dollars go towards supporting SBA programs. These programs are designed to support you and your business in various ways. You should take the time to familiarize yourself with the SBA programs and at least consider including the US government as a potential customer. After all, they purchase $200 billion in goods and services each year from private businesses! Why not yours?