Small Business Administration
The United States Small Business Administration (SBA) was established in 1953 to provide financial assistance, primarily direct loans, to small manufacturers (for the most part) who could not get them in the private sector. The agency was not the first source of federally subsidized finance for small businesses nor was it the first to provide management assistance. But early in its existence SBA became the symbolic focus for federal activities to support and promote small business. It remains so today despite major changes in the allocation and delivery of assistance and the spread of small-business programs to a host of other federal (and state and local) departments and agencies. Because of the agency’s symbolic value to many elements of the small-business population, its vendors, and other interested people, this issue of the National Small Business Poll is devoted to the Small Business Administration.
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Familiarity with SBA
Virtually all small employers have heard of the United States Small Business Administration (SBA). Ninety-five (95) percent report that they have heard of the agency while only five percent have not (Q#1). Still, hearing of the agency and familiarity with it are not synonymous. While 19 of 20 have heard of SBA, 62 percent of the group thinks that they are very or somewhat familiar with the agency (Q#2). Twenty-four (24) percent, in contrast, have heard of the agency and that is about all. Another 14 percent admit they are not too familiar with it. Thus, though the SBA name is common knowledge among the small-business owner population, familiarity with the agency is much less common.
Forty-two (42) percent of small employers who have heard of the SBA have no impression of it (Q#3). They have neither a favorable nor an unfavorable view of the agency. But of those small-business owners who do, most have a generally positive sense. Thirty-five (35) percent hold a somewhat favorable view of SBA, while another 8 percent have a very favorable one. Those who hold a favorable view, therefore outnumber those who hold an unfavorable view by a 43 percent to 14 percent margin. The single most important source of small-employer impressions of SBA is direct personal contact. Thirty (30) percent indicate that their impression comes from direct personal contact (Q#3a). That number represents about 17 percent of the total small-employer population. The second major source is the print media, such as magazines and newspapers. Yet, those sources amount to just 18 percent of those with an impression. The remaining sources are scattered and include talking with other business owners, meeting people who work in the agency or its programs, bankers, and the Internet among others.
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Eighty-five (85) percent of small-business owners aware of the agency think the Small Business Administration has had no direct impact on their business in the last three years (Q#4). Of those who think it has, over twice as many assess the impact as positive as assess the impact as negative. Seven percent think SBA has directly impacted them positively over the last three years, while 3 percent think the agency has impacted them negatively over the same time frame.
Most assessments of impact seem tied to the loan guarantee program or other finance activities. Thirty-one (31) percent of small employers who feel directly impacted specifically mention obtaining a loan and several others had negative comments about the loan program (Q#4a). Ten (10) percent even mentioned promoting or marketing SBA programs as the source of primary impact. However, living out of the agency in this manner amounts to only about 1 percent of the total small-employer population.
Another avenue to approach the agency’s impact is to ask about the positive impact of government agencies generally. How does SBA stack up against others? The survey, therefore, inquired about the government agency, federal, state or local, that has had the most positive impact on the owner’s business in the last three years. Seventy (70) percent could not think of a single government agency at any level that has had a positive impact on them over the specified time interval (Q#5). Of those who did identify an agency or unit of government, the specific agencies named were so fragmented as to defy generalization. One percent identified the Small Business Administration as the government agency most positively impacting them; the Internal Revenue Service (IRS) received about the same number of favorable mentions.
The agencies small employers mentioned as most positively impacting them over the last three years were divided almost evenly among the federal, state and local levels of government. Of those reporting a positive impact from any agency in the last three years, 38 percent note a federal agency, 31 percent a state agency, followed by 28 percent for a local unit of some type (Q#5a). As a result, 11 percent named a federal agency that had a positive impact on their business in the last three years and 1 percent named SBA.
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While one can quibble about the details, SBA is involved in four primary functional areas of activity – finance, management assistance, procurement assistance, and advocacy. Twenty-eight (28) percent of small employers who have heard of the agency could not identify which of these four SBA emphasizes (Q#6). But of those who did identify an emphasis, 42 percent noted finance, 14 percent management assistance, 8 percent advocacy, and 5 percent procurement assistance. None of these responses is right or wrong since SBA appears to have no priorities. But small employers, at least those who think themselves sufficiently knowledgeable to offer an opinion, clearly see the agency in its historical context as primarily a business finance organization.
Small-business owners agree with these perceived priorities. When asked which of the four principal functions should receive priority, their preferences reflected what they perceive the agency is already doing. Fifty-four (54) percent think SBA’s highest priority should be helping owners who cannot get financing in the private sector (Q#6a). Finance is followed by management assistance, advocacy, and procurement.
The corollary issue is what type of small-business owner has the greatest claim on agency assistance, if any. Small employers are divided with respect to SBA’s current policy priority. Twenty-six (26) percent think priority goes to people who own startup businesses. Another 26 percent identify socially and economically disadvantaged business owners as SBA’s priority group (Q#7). Fourteen (14) percent think the priority is owners of growing and larger small firms followed by 8 percent who identify owners of run-of-the-mill small businesses, aka, Main Street. The latter constitutes the overwhelming bulk of the small- employer population. Twenty-one (21) percent report not knowing which group receives priority, a percentage similar to that unfamiliar with any agency activity.
A substantial difference exists between small-employer views about who constitutes SBA’s priority and who should constitute it. Moreover, their judgment does not appear totally based on self-interest. Thirty-six (36) percent think SBA’s priority should be helping business start-ups (Q#7a). Twenty-six (26) percent think the priority should be run-of-the-mill businesses. The third tier is socially and economically disadvantaged owners and an unspecified combination of priorities. Fewest (9%) identify rapidly growing and larger, small businesses as the desired priority. Respondents with firms having 20 or more employees are twice as likely to identify the latter as those associated with firms employing fewer than 10.
About 5 percent of small-business owners are not aware of SBA. The survey, therefore, posed to that group the idea of a hypothetical organization very similar to SBA and identified its functions and primary beneficiaries. Too few respondents (cases) fell into this category to report results. But, integrating those responses into the larger group would not alter results to any noticeable degree. Hence, general agreement appears about the priorities of the Small Business Administration or an agency like it, both function and target group(s), regardless of familiarity with the agency.
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Participation in Agency Activities
About 7 percent of small employers participated in some type of SBA or SBA-sponsored program or activity in the last three years (Q#8). Participation ranges from receipt of financial assistance to attending a Small Business Week awards ceremony. Thus, participation could be intense or marginal. So, what is the functional matter of their participation? Sixty-nine (69) percent indicate that the program or activity (most important program or activity if the small employer participated in more than one) was finance or finance-related (Q#8a). Sixteen (16) percent listed management/marketing assistance/counseling as their primary interest. Management/marketing assistance could, of course, focus on finance. Eight percent each listed procurement and public policy or regulatory-related. Prior surveys in this series suggest somewhat more balance in service use between finance and management. For example, about 6 percent obtained financial assistance from any publicly-supported source in the prior three years – 2 percent a year (Contacting Government) and about 12 percent attended a Small Business Development Center function during the last five years – 2 percent a year (Workplace Safety).
Another way for the agency to engage small-business owners is providing information over a non-commercial Web site. SBA has such a Web site (www.sba.gov). In the last year, about 14 percent of small employers visited it (Q#9). Eighty-nine (89) percent of those who did visit the site visited infrequently, a couple of times in the year (Q#9a). About 5 percent of those who visited the site in the last year, or less than 1 percent of the small-employer population, could be termed “regulars” (daily or weekly visits).
A majority (51%) of the small employers who visited the SBA Web site were looking for information related to finance (Q#9b). Another 14 percent sought information on government requirements, rules, and/or obligations. Eleven (11) percent each wanted information on selling to the federal government (procurement) and management/marketing issues. While the Internal Revenue Service (IRS) Web site may be the logical place to seek tax-related information, 19 percent of those who visited the SBA Web site in the last year sought it there (Q#9c).
SBA’s Web site receives modestly favorable marks from its principal constituency. Forty-three (43) percent of small employers evaluate the usefulness of SBA’s site as average compared to other sites they frequently visit (Q#9d). However, 39 percent assess it as good or above average, though few (4%) term it superior. Just 12 percent combined consider it poor (below average) or inferior.
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Amount of SBA Resources
The resources available to SBA are a budget issue that periodically arises in Washington policy discussions involving small business. Small-business respondents were, therefore, asked whether the financial and human resources to support SBA programs and activities were too many or too few; an about-right option was purposefully not provided as a bail-out for respondents. By a 3 – 1 margin (46% to 15%), small employers judged SBA to receive too few resources (Q#10). However, 32 percent could not or would not provide an answer and another 7 percent volunteered about-right.
To put the resources issue in context, the survey asked those who did not think too many resources were devoted to SBA whether they would be willing to increase the federal budget deficit to procure additional resources for the agency. Sixty-one (61) percent said “no” (Q#10a); they would not be willing to increase the deficit to pro- vide SBA more resources. Thirty-two (32) percent would be willing to increase the deficit for that purpose. Assuming the 15 percent who think SBA already receives too many resources do not favor a larger deficit to give the agency even more, over two-thirds of the small employers would be unwilling to provide SBA greater resources if it meant increasing the federal deficit.
A second option to increase SBA resources is to raise taxes. But, if resource increases were to be financed by raising taxes, the small-business owner verdict is even more emphatic. Sixty-nine (69) percent of those who think SBA receives too few resources would not pay for those resources with higher taxes (Q#10b). Again, factoring in the 15 percent who think SBA already receives too many resources, nearly three-quarters of small employers would not be willing to raise taxes to pay for SBA resource increases.
Regrettably, the survey neglected to inquire about charging user fees/greater user fees to fund additional activity.
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“Warm and fuzzy” aptly describes small-employer views of the Small Business Administration. Most do not know very much about the agency. Nor do many think the agency has had a direct impact on them or their business. But the impression owners have is generally favorable.
The warm and fuzzy point is underscored by prevailing views about the need to provide the agency additional resources. While a significant percentage of small employers would not venture an opinion on the matter, a decisive majority of the remainder think the agency requires more resources than currently allocated to it. But when compared to the realities of greater budget deficits or higher taxes to pay for additional resources, support quickly fades. Overwhelming majorities would do neither to generate more resources for SBA.
For years SBA has been attempting to reinvent itself by adding major functions beyond finance and by changing the nature of the finance programs themselves. Still, the constituency considers SBA primarily a finance agency and regards that as a good thing. The preoccupation with finance remains a mystery. Federal Reserve studies among others suggest conventional commercial markets satisfy the borrowing needs of credit-worthy firms (and equity is small in the scheme of things) and relatively few ever receive SBA financial assistance. Perhaps, the impression continues because finance is tangible or because the finance programs serve as a psychological security blanket for a critical business function or because no one is paying attention. But for whatever reason, SBA cannot shake its image as a financing agency.
Finally, it is worth noting that 36 percent think the primary focus of SBA should be on start-ups, a considerably higher percentage than any other priority. Survey respondents are all current employers. While a small percentage of them are always in the process of starting other businesses, most will not benefit from favoring starters, and may in fact lose out to them as competitors. So, self-interest is not a likely motivator. Rather, it is conceivable that they are empathizing with those going through the difficult process they once experienced and think that is where the agency should direct its efforts.