Bracing Small Business in a Turbulent Economy
THE Bush administration and others have praised small business as the engine of American job creation, but small-company owners are being squeezed by the shaky economy and rising health costs.
Their chief advocate, the Small Business Administration, has been criticized as ineffective by Democrats in Congress, by women who own businesses and by other advocacy groups. Its budget has also fallen by a third since 2000. But the agency is trying to revitalize itself under the leadership of Steven C. Preston, who took over in July 2006.
Mr. Preston, former executive vice president of ServiceMaster, outlined steps the agency is taking to aid small businesses. Here are excerpts from the interview:
Q. If the economy is headed for a serious downturn, or worse, how will this affect small business?
A. The indicators still show a fundamentally strong economy, but small businesses are seeing higher fuel costs, higher health care costs and potentially a slower growth. So the cost factors as well as some of these other issues are affecting them.
Q. What is the S.B.A. going to do to help small businesses grow?
A. We already guarantee about $75 billion worth of capital supporting small business. We and our resource partners train or counsel about one and a half million small businesses every year. We support small businesses in the process of getting about $80 billion worth of revenue from the federal procurement programs.
What happens in a situation like we’re seeing right now is that these types of services become even more critical because we help lenders make loans to small businesses that they wouldn’t make loans to otherwise.
Q. Have you loosened any guidelines to make loans easier?
A. No, but what happens is that banks will use our loan guarantees if it is a business that maybe needs longer payback periods, or maybe an unconventional structure or may not quite meet their credit standards. So in a situation where banks are pulling back on credit somewhat, having our guarantee becomes more important in reaching those businesses.
Q. Can you do anything to push them to be more lenient?
A. We have a nationwide effort going on right now to spend time with banks to make sure that they are looking at using all of our products where they are relevant. I personally am getting involved in outreach to major banks to make sure they are helping get capital to small business.
Q. The economic stimulus would double the amount small business can deduct for expenses. Why is this a good idea?
A. It encourages small businesses to make investments now, and provides them with the financial incentive to do so. And those investments fuel the economy. Secondly, they are making those investments to expand their business, or to leverage their employees through capital investments, or they’re upgrading their equipment.
Q. Is S.B.A. proposing anything for the upcoming government budget to shore up small businesses?
A. The uncertainty about whether the tax cuts, which are set to expire in 2010, will be extended, is hurting small business right now in terms of investment and understanding what their ability to deploy cash is going to be. If those taxes go up, they’re going to have less money to hire, less money to expand and less money to invest in their business.
Another very important thing is putting in place policies that reduce health care costs for small business. The president has been a strong advocate of small-business health plans, which allow small businesses to band together and buy health care through buying groups. It’s a simple way they can leverage size. In addition, he has proposed giving small businesses the same tax benefits that large businesses have in buying health care.
And we need to open foreign markets for small business. Right now, for example, small businesses represent 35 percent of our exports to Colombia. We want to open those markets so small business can expand their revenue base and increase our competitiveness.
Q. Why are these free trade agreements important?
A. One reason is that they provide better intellectual property protection so if you’ve got a technology product or a knowledge-based product, you’ve got to make sure they’re protected when they go overseas. And these agreements simplify the administrative process and make it faster to get goods over the border.
Q. What more can the agency do to counter criticism that it’s not doing enough to help small businesses, particularly those that are female-owned, to win government contracts?
A. Our contracts to women-owned small businesses reached $11.6 billion in 2006, a record level. It was also the largest growth in history, by $1.5 billion. The federal government hasn’t reached its 5 percent goal for purchase of its good and services from women-owned businesses, but we’re hitting records every year.
We are holding more outreach events and events to match businesses with buyers. We also have goals for all district offices to hold those events, and those have been ratcheted up this year. We are also providing technology tools so agencies can find the right small-business vendor to meet their particular need, and putting more S.B.A. people on site with federal contractors. We retrained the entire field network to help small businesses in the contracting arena.
So we are doing more than we ever have before — some of it’s people, some of it’s technology and some of it is extended outreach.
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