Basic History of the SBA Since its founding on July 30, 1953, the U.S. Small Business Administration has delivered about 20 million loans, loan guarantees, contracts, counseling sessions and other forms of assistance to small businesses. The SBA was officially established in 1953 by President Dwight Eisenhower. In the Small Business Act of July 30, 1953, Congress created the Small Business Administration, whose 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. By 1954, SBA already was making direct business loans and guaranteeing bank loans to small businesses, as well as making loans to victims of natural disasters, working to get government procurement contracts for small businesses and helping business owners with management and technical assistance and business training. The Investment Company Act of 1958 established the Small Business Investment Company (SBIC) Program, under which SBA licensed, regulated and helped provide funds for privately owned and operated venture capital investment firms. They specialized in providing long-term debt and equity investments to high-risk small businesses. Its creation was the result of a Federal Reserve study that discovered, in the simplest terms, 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 was nevertheless sound commercial initiatives. Over the past 55 years, SBA has grown in terms of total assistance provided and its array of programs tailored to encourage small enterprises in all areas. SBA's programs now include financial and federal contract procurement assistance, management assistance, and specialized outreach to women, minorities and armed forces veterans. The SBA also provides loans to victims of natural disasters and specialized advice and assistance in international trade. Nearly 20 million small businesses have received direct or indirect help from one or another of those SBA programs since 1953, as the agency has become the government's most cost-effective instrument for economic development. In fact, 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. From FY 1991-2000, the SBA has helped almost 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. Since 1958, SBA’s venture capital program has put more than $30 billion into the hands of small business owners to finance their growth. Last year 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. SBA continues to branch out to increase business participation by women and minorities along new avenues such as the minority small business program, microloans and the publication of Spanish language informational materials. Directors of Federal Agency Office of Small and Disadvantaged Business Utilization (OSDBU)/Directors of the Office of Small Business Programs (OSBP) for Defense agencies, are in place at the headquarters level of each Federal agency and department. They are responsible for ensuring that small businesses are afforded an equitable opportunity to compete for their agency’s/department’s prime contracting opportunities. The OSDBU Directors have formed an Interagency Council which meets regularly to, among other functions, identify procurement practices that will enhance small business participation for the Government’s procurement opportunities. SBA Certification Program Formal certification by small business concerns is not required to bid on Federal contracts. The SBA currently has 4 contracts-related certification programs. The 8(a) Business Development program assists eligible small businesses to compete through business development assistance. Although primarily a business development program, there are certain contracts restricted to certified 8(a) concerns. Certification in the Small Disadvantaged Business (SBD) and Historically Underutilized Business Zone (HUBZone) programs entitles qualified firms to special bidding benefits in the Federal contracting arena. In 2004, the SBA announced a new procurement program to boost federal contract opportunities with contracting officers able to restrict contract awards for service-disabled veteran-owned businesses (SDVOSB), who self-certify. The SBA offers an on-line application process that makes it easier for small firms to apply for 8(a) Business Development, Small Disadvantaged Business (SDB) and HUBZone Certification directly from SBA’s website. The applications are 100% web-base, which incorporates context sensitive help, real-time validation, printer-ready versions and integrates with the Central Contractor Registration (CCR) database. Small Business Goaling Summary Report The SBA has set the following goals for the below categories of business owners: Category Small Businesses Small Disadvantaged Businesses Service-disabled Vets Women HUBZone Goal % 23% 5% 3% 5% 3% 2007 % 22% 6.6% 1.01% 3.4% 2.2% $ $83.2 billion $24.9 billion $3.8 billion $13 billion $8.5 billion
Guiding Principles of the SBA: Creativity Our people inspire creativity in the American economy by developing and supporting entrepreneurs through a vast network of resource partners. Advocate We advocate for all small businesses by taking leadership in building a productive partnership between the American people and its government. Results Our team focuses on delivering results for small business, being accountable, accessible and responsive. Empower We empower the spirit of entrepreneurship within every community to promote and realize the American dream. Success We facilitate the environment necessary for America’s small businesses to succeed, measuring our performance by small business success. SBA Loan Program: The most visible elements of the administration are the loan programs it administers. The SBA itself does not grant loans with the exception of Disaster Relief Loans. Instead, the SBA guarantees against default certain portions of business loans made by banks and other lenders that conform to its guidelines. Disaster Relief Loans are issued directly from the SBA. Contrary to popular belief, these programs are not generally for persons with bad credit who can't get bank loans, nor are they primarily used for startup funding; rather, the primary use of the programs is to make loans for longer repayment periods and with looser affordability requirements than normal commercial business loans. Also, a business can qualify for the loan even if the yearly payment would be the same as the previous year's profit, whereas most banks would want payment for a loan to be no more than two-thirds (2/3) of the prior year's profits for a business. The lower payments, longer terms and looser affordability calculations allow some businesses to borrow more money than they could otherwise. Types of Guaranteed Business Loans through banking institutions include:
Loan Guarantee Program: The 7(a) Loan Guarantee Program are designed to help small entrepreneurs start or expand their businesses. The program makes capital available to small businesses through bank and non-bank lending institutions. 504 Fixed Asset Financing Program: The 504 Fixed Asset Financing Program is administered through non-profit Certified Development Companies throughout the country. This program provides funding for purchasing land or construction. Of the total project costs, a lender must provide 50% of the financing, a Certified Development Company provides up to 40% of the financing through a 100% SBA guaranteed debenture, and the applicant provides approximately 10% of the financing.
MicroLoan Program: Available for up to $35,000 through non-profit, micro loan intermediaries, to small businesses considered unbankable in the traditional banking industry. Economic Development Program: SBA partners such as SCORE and the Small Business Development Centers (SBDC's), operating in each state provide free and confidential counseling and low-cost training to small businesses 8(a)-Business Development Program: Assists in the development of small businesses owned and operated by individuals who are socially and economically disadvantaged.
Doing Business with the Federal Government – A Twelve Step Program for Success Study Says Delays at S.B.A. Harm Program for Women – New York Times Women Business Owners Seek Better Access to Federal Contracts – New York Times Female Business Owners Fault New Rules on U.S. Contracts – New York Times