Archive for the ‘Small Business Administration’ Category

Hooray for Our SBA Administrator!

Sunday, May 1st, 2016
Supporting Small Business

Supporting Small Business

Continuing its excellent series for the 2016 Small Business Week, USA Today features an interview with Maria Contreras-Sweet, the Administrator of the U.S. Small Business Administration. Here is my favorite part of the interview:

Q:  What’s a main message that you would like to get out there during Small Business Week?

A:  Let’s level the playing field for small businesses. I see small businesses getting the run around at every turn. When a corporation arrives at a municipality and says, “We’re going to locate here,” that municipality says, “We’re going to give you tax breaks; we’re going to open up this for you.” When a small business shows up in City Hall, (they’re told) “Stand in line, take a ticket.”

Exactly – cities and states offering incentives, subsidies and tax breaks to large corporations are shifting the tax burden to smaller businesses and effectively acknowledging that they are such awful environments that they have to bribe large corporations (they are the ones with the clout to extract the concessions) to remain. I am glad Contreras-Sweet has a Cabinet-level position. It is so rare to have a plain-spoken person in public office.

Invest in Yourself

Friday, April 29th, 2016
Small Business Week

Small Business Week

“Invest in yourself” is the message from entrepreneur and power-motivator Tony Robbins, delivered in an engaging article in USA Today. The newspaper has planned articles featuring successful entrepreneurs to appear each day through May 7th in recognition of Small Business Week. This article cited research findings supporting the theme of small business owner burnout (lack of scheduled vacation, work in excess of 50 hours a week, etc.) leading Robbins to advise us to work smarter and not harder. I particularly appreciated his insights to the effect that we over-estimate what we can accomplish in a year, but we under-estimate what we can accomplish in a decade.  He advises better self-care to see that we accomplish what we are capable of doing and recommends that we invest in ourselves for learning and growth.

I have taken this message to heart. Each year, I commit to a professional/entrepreneurial development program. In recent years, this has included the Executive Learning Program for Diverse Suppliers and the Tuck-WBENC-IBM Executive Program. This year, I am participating in the Emerging Leaders Initiative of the U.S. Small Business Administration and am evaluating courses for the second half of the year. One of my classmates in Emerging Leaders is a professional football player, formerly with the New England Patriots who has his own fitness business. He provides strong motivation for fitness and better self-care to run the entrepreneurial marathon. Tony Robbins probably didn’t intend his remarks to be interpreted in my limited context of disaster preparedness and recovery, but his approach reinforces my belief that the resilience of the small business emerges from the resilience of the business owner.

SBA Simplifies Online Disaster Loan Application

Wednesday, June 20th, 2012

Print and Electronic Forms Now Match

This week, the U.S. Small Business Administration published its revised disaster recovery loan application. Until now, the SBA relied on an electronic loan application that guided applicants through a sequence of 80 screens, based on responses to questions to assess eligibility. The online application bore no resemblance to the paper form of the application, complicating the process for those who like to follow their notes as they work through the screens. The new version of the electronic loan application is identical to the paper form with three pages of information required for business loans.

The new online application can be found at The SBA is offering multiple channels to access assistance as small businesses and their advisers become familiar with the new application. A “Help” link appears at the top of each page of the loan application, which directs applicants to online support.  In addition, the SBA offers a dedicated disaster customer service line at 1-800-659-2955 or by e-mail at Further information about the disaster assistance program is available at The intent of the new online application is to reduce the burden on applicants and eliminate the confusion resulting from the differences between the paper and electronic versions.  Applicants should also consider sharing their experiences with the new application, both positive and negative, with their elected representatives. Is the SBA a more welcoming partner to work with small businesses? Revising the online loan application is certainly a step in the right direction.

SBA Recovery Loans Perform as Predicted

Saturday, September 4th, 2010

On March 23 of last year, I posted a blog entry critical of the America’s Recovery Loan Program of the U.S. Small Business Administration. Specifically, I wrote that to mitigate the moral hazard risk (inherent in raising federal government loan guarantees), the SBA stipulates that the loans “are to be extended only to ‘viable’ small businesses, which it defines as those that have ‘demonstrated an earnings history and a proven record for success that may just need a little extra help to get through a short-term downturn’. (Shouldn’t all loans be limited to ‘viable’ businesses? And how did the SBA determine that the current economic downturn will exist only for the ‘short-term’?)”

On June 17, 2009, I posted a follow-up entry to write that there may be relatively few qualified applicants to apply for this program given its unusual requirements and that banks would not likely find the 2 percent premium paid by the government sufficient compensation for the onerous underwriting requirements.

Here we are a year later. The Recovery Loan program expires this month and the SBA has approved just fewer than 8,300 loans, even less than the modest number (10,000) of loans that the SBA had funds available to support. The New York Times has reported that meeting the “struggling but viable” criteria proved difficult for small businesses and banks had little appetite for the extensive underwriting requirements. When you contrast this lame “recovery” program with the Troubled Assets Relief Program (TARP) that bailed out Wall Street, it makes it clear where Congress’ priorities lie.

Gulf Coast Environmental and Economic Catastrophe

Monday, May 10th, 2010
Gulf Coast Oil Spill Transposed

Gulf Coast Oil Spill Transposed

The oil spill resulting from the April 20 explosion on the Deepwater Horizon now covers at least 2500 square miles of water surface. To help visualize the size of the spill, Paul Rademacher created Google Map mashups that show the spill placed over various cities. This image shows the spill if New York were the epicenter. As you can see, it is enormous, covering landmass in four states. As it is on the Gulf Coast, tar balls from the spill are washing up on local beaches with damage evident in Alabama, Louisiana and Mississippi. BP has offered US-based fishermen (the spill has not yet reached international waters) a one-month pay settlement package as compensation. All of the owners of Louisiana small fishing businesses with whom I have spoken have declined the offer, as their ultimate income loss will likely extend over a much longer period. It is important to remember that it is not just the commercial fishing businesses that will be affected. Many downstream businesses, such as seafood retailers and processing plants, face serious financial losses.

Yesterday the fishing waters in the Gulf were closed. With an annual harvest of more than one billion pounds of fish and shellfish, that equates to a lost harvest of 273,000 pounds each day. In response to this economic loss, the Small Business Administration is offering Economic Injury Disaster loans for small businesses in 13 Louisiana parishes and two Mississippi counties. The loans will offer working capital for up to $2 million at a 4% interest rate for a term of up to 30 years. Existing SBA borrowers who have been affected by the oil spill may request a deferment of their loans.

I explain the issues around the SBA’s Economic Injury Disaster Loans in Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses (Wiley, second edition 2009). I am particularly concerned in this case that insurance recoveries for the Gulf Coast fishing businesses may be inadequate to retire the proceeds of the SBA loans. Indeed, when I was just in Louisiana two weeks ago, I learned that insurance for small fishing businesses continues to remain unaffordable in the post-Katrina era. We do have a federal government fund established to finance the cleanup of oil spills. As it is funded by an eight-cent tax levied on each barrel of oil, it is insufficient for an environmental catastrophe such as this one. We need a comprehensive approach to disaster finance in the U.S. and one that is self-sustaining.

What’s Not to Like?

Wednesday, June 17th, 2009
They Turn Very Slowly

They Turn Very Slowly

100% risk-free to the lender and interest-free to the borrower – what is not to like about America’s Recovery Capital Loans, the new program of the U.S. Small Business Administration? Well, for one thing, it is hard to find a bank that will underwrite the loans. SBA loans are guaranteed by the SBA, but issued by participating banks. I have called most of the institutions on the SBA’s preferred lender list and I have yet to identify one that has decided it will participate in the program.  The banks have identified four problems: first, they have to navigate the thicket of SBA rules with little guidance for this new program. That is a lot of work to do for loans capped at $35,000. Second, while the loans are interest-free for the borrowers, the SBA will pay the lenders prime plus 2%, a lower interest rate than the SBA charges for its other loan programs. Third, 100% of the principal is guaranteed and should the default rate continue to rise, a not unlikely prospect given that unemployment is high and rising, bankers don’t want to be blamed for shifting more losses to taxpayers. Finally, there may be relatively few qualified applicants for this program given the criteria established by the SBA and the risk for small businesses to assume more debt in such an uncertain market.

Lack of Enthusiasm Among Lenders

Friday, May 29th, 2009
Lots of Paperwork, Few Results

Lots of Paperwork, Few Results

According to a recent survey conducted by Coleman Publishing, 80% of small business lenders are not committing to participate in the emergency loan program of the U.S. Small Business Administration. Known as the “America’s Recovery Capital Program” the emergency loan program for small businesses was authorized in the stimulus bill passed in February. 35% of lenders surveyed decided categorically not to participate in the program; 45% had not taken a decision, as there was a lack of clarity about the program specifics, although loan applications are to be made available to participating banks on June 15. Only 20% of small business lenders surveyed stated that they would participate in the program. The issue is that the SBA itself does not make loans; it guarantees them to participating bank lenders. I had written in a blog entry on March 23 that I thought it unlikely that banks would want to participate in this program. With the principal guarantees on the loans being raised, taxpayers would assume a greater share of the losses. Presumably bank executives are sufficiently savvy to know how the public would assign blame for that outcome. I doubted that they would want to be once again on the receiving end of the pitchfork. Add to that other reasons for the lack of enthusiasm in the banking sector for this program: its complexity, the lack of fees or interest to compensate banks for their investment of resources in processing these loan applications, the definition of viable business and so on.  It is a substantial amount of work for relatively small loans with a limit of $35,000 and funding sufficient for only 10,000 small businesses to participate. That works out to 200 businesses per state. We could have that many small businesses apply for New York alone. This program appears to be an ill-conceived effort to throw a bone to the small business constituency that is understandably outraged about the bail outs of Wall Street and Detroit.