The role of the SBA
Helping small business when it needs it most
Janita Stewart is Mississippi district director for the Small Business Administration in Jackson. She recently sat down with the Mississippi Business Journal’s Nash Nunnery to discuss the SBA and other topics relating to small business in our state.
A – The U.S. Small Business Administration (SBA) is a small, independent federal agency created in 1953 to aid, counsel, assist, support, protect and champion small businesses and aspiring entrepreneurs. Simply put – SBA’s role is to help people get into business, grow and prosper. How we do this is through a host of SBA financial assistance and non-financial assistance programs and services. These include management and technical assistance, counseling and training designed for start-up and existing businesses and is provided in part by our district and branch offices, and to a greater extent through our primary resource partners including the Mississippi Network of Small Business Development Centers (SBDCs); SCORE; and our two Women’s Business Centers (WBCs) located in Greenville and Forest. The SBA provides major funding to the SBDCs and the WBCs. SCORE is a volunteer organization. All three organizations are excellent resources here in our state and the services they provide to new start and existing small businesses are free and confidential. Other very critical programs SBA offers include our loan programs which primarily fall under the umbrella of our Section 7(a) Guaranty loan program (SBA’s largest loan guarantee program which serves a wide variety of small business borrowing needs); Section 504 Certified Development Company (CDC) loan program (supports small business capital-asset and real property investments); and our Microloan Program. The 7(a) and 504 loan programs have generated an average of tens of billions of dollars in lending to small businesses across America on an annual basis. But for the SBA working in partnership with our in and out-of-state bank and non-bank lenders, this much needed financial assistance would otherwise not have been made available. SBA is also charged with the responsibility of oversight and management of the federal government’s procurement programs to ensure that civilian and military buying agencies expend a fair proportion of the approximately $538 billion federal marketplace by providing federal contracts to small businesses, small disadvantaged businesses, HUBZone-certified, women-owned businesses and Service-disabled Veteran-owned businesses. SBA is the designated federal agency charged with the responsibility of monitoring, rating and ranking these buying agencies on their annual contracting activities. Along those lines, SBA also manages some very crucial certification programs including the premier Section 8(a) Business Development and HUBZone Procurement programs. SBA, working in conjunction with a host of in and out-of-state federal procurement agencies, resulted in the award of over $200 million in 8(a) contracts and modifications to Mississippi 8(a) certified firms during FY 2009. Another very important part of SBA’s mission is the role it plays in times of federally-declared natural disasters. SBA provides low-interest rate, long-term loans to renters, homeowners, businesses of all sizes, and non-profit organizations who have been impacted by these disasters. Maximum disaster loan amount is $2 million, maximum term is 30 years and the interest rate generally does not exceed 4%.
Q – The Mississippi district office saw an increase of 161 percent in the number of loans granted in the three months that ended Dec. 31, 2009. What do you attribute to volume of loans, as well as the dollar value of the loans?
A – We started this fiscal year rolling out loans in the same manner we ended fiscal year 2009. In the three months ended December 31st, participating lenders made 298 SBA-guaranteed loans in Mississippi totaling almost $56.88 million. Compared to the first quarter of fiscal 2009, this represents a 161 percent increase in the number of loans – the largest percentage increase in Region IV which also includes Alabama, Georgia, Florida, North Carolina, South Carolina, Tennessee and Kentucky – and a 133 percent increase in loan dollars. Even more recently – as of the Week Ending February 5, 2010 – Mississippi has 420 loan approvals for $78.7 million. This is extraordinary! We haven’t even made it to mid-second quarter and this increased loan activity in terms of numbers and dollars already exceeds the loan activity produced in some entire fiscal years passed.
Our district and branch offices do extensive marketing and outreach on a regular and continuous basis of all of our programs and services, including, of course, our loan programs. We conduct and participate in all types of conferences, seminars, workshops, training sessions, forums, expos, trade fairs, meetings and other forms of networking. Our reach extends throughout the entire state of Mississippi. We receive visitors in our offices, counsel people by phone, e-mail and snail mail, set-up and conduct large loan conferences, loan clinics, and train lenders and potential customers on our programs, etc. We work with our resource partners mentioned above, as well as with our bank and non-bank lenders, our CDCs, MDA, Chambers, and others. SBA’s footprint is quite prevalent. The result of our efforts is evidenced in our numbers. We concluded FY 2009 ranking in the top 10% of the entire nation. This has never happened before. Mississippi was one of only seven (7) SBA offices out of the total of seventy (70) offices nationally, that met/exceeded all of our assigned goals and compliance requirements. Additionally, we were the only SBA office in the entire eight-state nine-district southeast region that did so. We also ranked #1in our market size, and all done even in spite of the state of the economy. Out of the 44 lenders that made loans through our programs last year, 24 of them were new lenders or lenders that had not made loans through our programs for quite some time. As the numbers reflect, we’re continuing this trend into FY 2010 and are working hard to provide assistance to Mississippi’s small businesses. All in all, I attribute this increase in lending to a dedicated SBA staff, to our participating lenders and CDCs, to our resource partners, and to the enhancements made to our loan programs due to the Recovery Act.
Q – Has the American Recovery and Reinvestment Act contributed to this increase in activity?
A – Absolutely. February a year ago, the Obama Administration put into place an unprecedented effort to jump-start the economy, create or save millions of jobs, and ensure our nation can meet the challenges of the 21st century. The Recovery Act assigns a key role in this effort to the SBA, providing it with program tools that offer new economic incentives to small businesses and lenders alike, all aimed at growing our economy through job creation, re-starting lending, and investing in small businesses and the American entrepreneurial spirit. SBA’s piece of the Recovery Act includes nine key components: temporary elimination of loan fees; temporary 90 percent guarantees; Secondary Market liquidity for Section 7(a) loans; America’s Recovery Capital (ARC) Stabilization Loans; expanded Microloans; Surety Bond Guarantee Program expansion; Secondary Market for first mortgages associated with Section 504 CDC loans; expanded refinancing project for Section 504 loans; and Small Business Investment Company Program expansion. In addition to this, during the summer of last year, SBA rolled out a Dealer Floor Plan financing loan program designed to address the problems that automobile dealers, RV dealers, manufactured home dealers and the like were facing. Specific to Mississippi, the fee waivers and increase in guaranty percentage along with a new loan program called the ARC (America’s Recovery Capital) loan program, although temporary, serve as major incentives for SBA lenders to make loans to small businesses. These loan program enhancements helped boost our loan approvals last year, continuing into this year. In looking at the overall picture, it has been the “small and community banks” in Mississippi and throughout the nation, that have embraced the enhancements made to SBA loan programs and they are using these loans to provide much needed financial assistance to their small business customers.
More recently in February of this year, the President outlined the latest in a series of new small business proposals aimed at allowing small businesses to refinance and increase limits for working capital. These are legislative proposals designed to help these businesses through what continues to be a difficult period in the credit markets. We know that if we give small businesses the tools they need, they will create jobs and one of the most critical tools is capital. Included in this overall approach to support job creation is a $30 billion Small Business Lending Fund targeted at community and smaller banks that lend the most to small businesses; support for extending the Recovery Act provisions including the temporary higher SBA loan guarantees and elimination of fees; and support for higher SBA loan limits on a permanent basis on 7(a) and 504 loans from the current maximum of $2 million to $5 million ($5.5 million for 504 manufacturing projects) and from the maximum of $35,000 up to $50,000 on microloans – among other initiatives.
Q – Explain to our readers the types of loans available to individuals that want to launch a business. Can existing small businesses obtain loans as well?
A – Yes, our loan programs are designed for existing small businesses that want to grow, and for people who want to start a business. SBA’s primary loan program falls under two categories – 7(a) and 504. The 7(a) Loan Program is SBA’s primary program to help start-up and existing small businesses obtain financing when they might not be eligible for business loans through normal lending channels. SBA does not make loans, but guarantees a portion of loans made and administered by commercial lending institutions. These loans are the most basic and commonly used type of SBA loan. They are flexible, since financing can be guaranteed for a variety of general business purposes, including working capital, machinery and equipment, furniture and fixtures, land and building, leasehold improvements, and some debt refinancing. Loan maturities can be up to ten years for working capital and up to 25 years for fixed assets.
SBA’s 504 Loan Program is designed to assist entrepreneurs obtain long term, fixed-rate financing for capital assets like the purchase of real estate and equipment. Recognizing that small business owners sometimes have more difficulty getting traditional business financing but need funds to grow, the 504 loan program provides financing for entrepreneurs to invest in their own facilities, expand and create new jobs. The community gets the benefit of additional jobs, business growth and tax revenues from a growing small business.
There are a host of spin-off loan products that fall under the umbrella of the 7(a) guaranty loan program, including the SBAExpress loan; CommunityExpress loan; GO (Gulf Opportunity) loan; Patriot Express loan – all which are expedited loan products targeting specific small business markets and give eligible lenders delegated authority to make the loans on behalf of SBA. Other loan programs available include CAPLines; International Trade; Export Express; Export Working Capital; and the Microloan program. For more detailed information about SBA loan programs, please visit www.sba.gov.
Q – If someone wishes to start a new business, how would they go about securing an SBA loan? What are the steps?
A – First things first. He or she must ensure that they possess the drive, determination, patience, persistence, stamina, skill, commitment, and must be a self-starter – these are critical components it takes to start a business. When people come to SBA seeking assistance on the front end in terms of ‘how to get started’, we talk with them about what they’re wanting to do, tell them about SBA programs/services, give them a start-up kit, and refer them to their local SBDC, SCORE or WBC. We also oftentimes refer them to the MDA if they are seeking certification from the state or want to get assistance from the PTACs. These resources are where they get the ball rolling. They’ll need to develop a business plan which will serve as their road map as to where they are now, where they want to go and how they propose to get there. The business plan also includes their financial projections and the SBDC, SCORE or the WBCs can assist them with preparation of their business plan – free and confidentially. Once they’ve got that nailed down and if they need financial assistance (most people do because they don’t have a ‘rich uncle’ to get a family loan) then SBA may be able to assist them along with their lender.
Q – There have been attempts by lawmakers over the years to eliminate the SBA’s loan program. What would this mean to the future of small business in America if the program were eliminated?
A – What has happened over time under some previous administrations is dialogue concerning elimination of the SBA. There have been various scenarios presented including placing SBA under the Department of the Treasury and also taking certain functions out of SBA, for example, the Section 8(a) Business Development program, and merging it into MBDA. These attempts were met with much resistance and never came to fruition. There are about 26 million small businesses in America. Small businesses are the innovators and job creators. SBA plays an extremely crucial role in the lives of small, small disadvantaged, HUBZone, women-owned, and Veteran-owned small businesses. Because of SBA, these businesses would not have been able to obtain sorely needed financing or awarded federal government contracts. SBA, America’s small business resource, is an ‘independent’ federal agency, and it is vital that it maintain its autonomy.
Q – The “America’s Recovery Capital” loan program struggled early last year but was revived. What is the program and has it been satisfactorily retooled?
A – The America’s Recover Capital (ARC) loan program, is a temporary loan program created by SBA from scratch that provides up to $35,000, is 100% SBA guaranteed, fee-free, interest-free to the borrower, and payment deferred. This program is designed to provide short-term relief for viable small businesses facing immediate financial hardship to help them ride out the current uncertain economic times. The loan proceeds are used to pay down certain debt (principal and interest) over a six-month timeframe, serving as a bridge over troubled waters to help these small businesses through these tough economic times and regain profitability.
As is the case with any new program created from scratch, there will be wrinkles in the process. SBA held national conference calls with field staff and lenders, provided training, and asked for input and feedback about this new program. Those ideas, suggestions, recommendations were taken into consideration, and as a result the wrinkles have been ironed out, and the process is smoother now. Although nationally, the ARC loan program was met with some skepticism earlier on, it caught on pretty quickly in Mississippi. A total of 247 ARC loans totaling $8.2million have been approved in Mississippi since the ARC loan program was introduced last year, and nationally, SBA has approved 5,726 ARC loans totaling $184.8 million by 1,109 lenders to help small businesses make it through this tough economy.
Q – What are some things about the SBA that the average citizen would be surprised to hear?
A – That there are almost countless small businesses that got their start or received help from SBA. There are names that most people would easily recognize – some of which have grown into large businesses. Some of these well-known businesses are:
Nike; Hewlett-Packard; Intel; Federal Express; Black Enterprise Magazine; KLLM Transport Services; Paul Dean; Staples; JetBlue Airways; America On Line; Jenny Craig; Outback Steakhouse; Winnebago Industries, and many, many more. Check out www.youtube.com/sba.
Degree: Bachelor of science – University of Southern Mississippi
Favorite Food: Mississippi farm-raised catfish and Gulf shrimp
Favorite Movies: Various comedies and drama
Last Book Read: “The Fifth Mountain”
Person Who’s Most Inspired You: My grandmother – she always managed to make something out of nothing
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