The Small Business Administration(SBA) was established in 1953. Since that time the agency has dispensed huge amounts of money in loans and loan guarantees, contracts, consulting assistance and other programs for business across the United States.
The seeds of the formation of the SBA were sown within the challenges of the Great Depression and World War I and grew due to numerous predecessor organizations.
Earlier Small Business Administration Agencies
In 1932 Herbert Hoover instituted the Reconstruction Finance Corporation. The agency sought to ameliorate the consequences of the Great Depression.It sought to achieve this through the establishment of a loan program to support businesses adversely effected by the Great Depression. It had been adopted as the personal project of Hoover's successor, President Franklin D. Roosevelt.
The need to assist small business intensified with the onset of World War II, when they were placed at a competitive disadvantage vis-a-vis larger concerns. The Smaller War Plants Corporation was formed in 1942 to help with minor businesses, enhance their financial strength and enable them to more fully take part in the war effort. The Smaller War Plants Corporation accomplished this through providing loans directly to private entrepreneurs, providing incentives to large financial institutions to increase lending to small enterprises and acting as an advocate for small business in the federal procurement process.
After the war the SWPC was absorbed into the Reconstruction Finance Corporation. In addition to the services offered by the RFC the Commerce Department also had an Office of Small Business. The charter of the Office of Small Business was primarily educational, predicated on the stance that the lack of success of many business was insufficient access to information of operating a business and business skills. The Office focused its offerings on pamphlets and management consulting to individual entrepreneurs.
Through the Korean War the Congress created yet one more agency focusing on small business, the Small Defense Plants Administration. It carried a portfolio just like its predecessor Smaller War Plants Corporation with the exception that small business lending authority remained with the Reconstruction Finance Corporation. The Small Defense Plants Administration performed initial screening and provided counseling services to small businesses and provided certification that they were qualified to receive government contracts. The businesses then entered the loan process of the Reconstruction Finance Corporation.
The Founding of SBA
To streamline government support for minor business President Eisenhower proposed the organization of the Small Business Administration and it was developed by Congress in July 1953." The charter also stipulated that SBA would ensure minor businesses a "fair proportion" of government contracts and sales of surplus property.
Initially the SBA concentrated on providing direct loans to small businesses, guaranteeing bank loans and making loans to victims of natural disasters. The Administration also provided help to small businesses to obtain government contracts and provided management consulting and technical assistance.
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 operated and operated venture capital investment firms. They specialized in providing long-term debt and equity investments to high-risk minor businesses. Its creation emerged as the result of a Federal Reserve study that discovered, in the basic form, that these businesses cannot get the credit they needed to keep pace with technological advancement.
In 1964 the SBA expanded its portfolio to join the War on Poverty, with the Equal Opportunity Loan Program (EOL). The Equal Opportunity Loan Program presented citizens living below the poverty level with the chance to receive credit with reduced collateral and application requirements. This enabled businesses with sound employment opportunities to obtain the financing that they needed to pursue them.
SBA Today
The breadth and scope of programs offered by the SBA has never been more extensive than it is today. The SBA helps and is an advocate for all U.S. businesses in every enterprise category and every State and Territory. Whether its providing procurement assistance for federal contracts, management consulting, or outreach to women, minorities and veterans, the SBA is an able partner. SBA also provides loans to victims of disasters and specialized advice and assistance in international trade.
Showing posts with label small business. Show all posts
Showing posts with label small business. Show all posts
Thursday, November 17, 2011
Friday, December 17, 2010
Small Business Administration Programs
By Peter Gitundu
There is a government agency in the United States that seeks to support small upcoming enterprises. The name of the agency is Small Business Administration. What the agency does is that, it seeks to make the enterprises stronger by funding them through loan assistance. The mission of the agency is to facilitate economic recovery and maintain this strength.
This is done by overseeing the establishment of small businesses and ensuring that the enterprises have access to loans from lending institutions. It acts as a guarantor for these loans, especially for those people who may want these loans but have nothing to offer as security. In other cases, it goes ahead and gives the loans directly to enterprises affected by unfortunate circumstances like fire outbreak.
Furthermore, Small Business Administration assists small enterprises to manage their operations, gain technical experience as well as provide training to their staff or administrators. Other services include helping the enterprises get government procurement contracts. As per the statistics, the agency has actually helped over 18 million ventures soar high.
All the same, this success has not been easy to come by. The agency has been faced with many challenges every now and then, but thankfully, it has been able to overcome them. Just to site an example, the existence of the agency has been threatened before by the Republican House of Representatives, which planned to wipe out the program. The problem was further compounded by the Bush government which sought to frustrate its efforts by reducing its budgetary allocation monies. However, the agency has survived this far and is doing well.
There is a government agency in the United States that seeks to support small upcoming enterprises. The name of the agency is Small Business Administration. What the agency does is that, it seeks to make the enterprises stronger by funding them through loan assistance. The mission of the agency is to facilitate economic recovery and maintain this strength.
This is done by overseeing the establishment of small businesses and ensuring that the enterprises have access to loans from lending institutions. It acts as a guarantor for these loans, especially for those people who may want these loans but have nothing to offer as security. In other cases, it goes ahead and gives the loans directly to enterprises affected by unfortunate circumstances like fire outbreak.
Furthermore, Small Business Administration assists small enterprises to manage their operations, gain technical experience as well as provide training to their staff or administrators. Other services include helping the enterprises get government procurement contracts. As per the statistics, the agency has actually helped over 18 million ventures soar high.
All the same, this success has not been easy to come by. The agency has been faced with many challenges every now and then, but thankfully, it has been able to overcome them. Just to site an example, the existence of the agency has been threatened before by the Republican House of Representatives, which planned to wipe out the program. The problem was further compounded by the Bush government which sought to frustrate its efforts by reducing its budgetary allocation monies. However, the agency has survived this far and is doing well.
Obama's Changes to the Small Business Administration - Welcome Relief For Small Business Owners
By Sue B. Malone
On March 16, 2009 President Obama, in a long awaited address, finally reached out to the 27.2 million small businesses in this country and extended his hand. He may not have gone to the mountain, but he certainly walked down Main Street and acknowledged the plight of struggling small business owners. And it was just a matter of time that he did so. After all, the American Recovery and Reinvestment Act of 2009 ("Recovery Act") nicely laid out beneficial provisions for small businesses and just as promised, regulations have come out by the SBA to start the ball rolling. And I'm not talking about more government promises or red tape, but bottom line capital to be infused into the coffers of deserving business owners. So let's roll up our sleeves and see one of the more important elements that was put into place on Monday.
SBA loan programs historically had guarantees of 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (13 CFR Part 120). On the other hand, there are some programs that only go as high as 50%, including the Express Loan program (for those types of loans the new guarantee will not change).
As we all know, on February 17, 2009 the President signed into law the Recovery Act which, under section 502, authorized the SBA to guarantee loans up to 90%. On Monday, the SBA completed its review of the legislation and announced in a Policy Notice that indeed the guarantee would go up to 90% effective March 16th under the various 7(a) SBA loan programs.
Simple math tells us more guarantee, the greater the likelihood of the bank making the loan. For goodness sakes, 90% is tapping on the door of a 100% guarantee! Also note the guaranteed portion is typically sold on the secondary market (which has recently shut down to almost nothing in September of 2008) so there is more chance for loans to be sold and more money to go back into the coffers of the banks for further lending.
Now let us translate this into popular programs for small businesses. The Community Express Loan Program allows quick and reasonably priced SBA loans up to $250,000 (although most lenders are dispersing monies in the neighborhood of between $5,000 and $50,000 unsecured). They are now guaranteed to 90%. And remember there are lenders now making such a loans even in this economy. The equally popular U.S. Patriot Express Loan Program for veterans and their spouses or windows, goes to $500,000 and is also guaranteed now to 90%. At the same time, the workhorse 7(a) loan program, which is usually for loans in the hundreds of thousands of dollars, was likewise increased to 90%. Not to bore you with the details, but the only exceptions are almost minuscule, namely the guarantees are not used for business ventures involved in gambling, aquariums, zoos, golf courses, or swimming pools. Further, the SBA will not issue a guarantee to a borrower that hires, recruits, or refers for a fee, employees that are unauthorized aliens as defined by the Secretary of Homeland Security.
And it gets even better. Banks that are already SBA lenders don't have to do anything different in the loan process. Namely, there is no change to the submission process to get a SBA guarantee loan number. They simply get their approvals from the same central processing units throughout the nation as they did before. The same streamlined paperwork.
Of course, taxpayers' dollars will be funding these guarantees, especially since the borrower no longer pays for a guarantee fee on closing. In other words, the 90% guarantee will stay in effect as long as there is money appropriated by Congress. The current estimate is that approximately $8.7 billion will be allocated for these guarantees, of course depending upon the loan volume and default rate.
So how will the banks react to this news? Many experts predict in a favorable manner. Obviously, with a 90% guaranty, there is less risk if the loan goes south. This also means the traditional robust secondary market for purchasing government backed loans, once it starts to kick-in, will also find them desirable for purchase in investment pools. There is also another intangible you don't read about in the news: The environment in Washington has never been better for small businesses. You now have an Administration that respects small businesses and wants to do everything it can to engender their success.
Translation: banks are comfortable with the new SBA (as opposed to the more insular and contentious regime under the Bush administrations that spent more time fighting and failing to communicate with lenders than trying to treat them as partners) and so more willing to make loans even though the default rates go higher. They know the Obama Administration will probably understand the situation because of current market conditions.
On March 16, 2009 President Obama, in a long awaited address, finally reached out to the 27.2 million small businesses in this country and extended his hand. He may not have gone to the mountain, but he certainly walked down Main Street and acknowledged the plight of struggling small business owners. And it was just a matter of time that he did so. After all, the American Recovery and Reinvestment Act of 2009 ("Recovery Act") nicely laid out beneficial provisions for small businesses and just as promised, regulations have come out by the SBA to start the ball rolling. And I'm not talking about more government promises or red tape, but bottom line capital to be infused into the coffers of deserving business owners. So let's roll up our sleeves and see one of the more important elements that was put into place on Monday.
SBA loan programs historically had guarantees of 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (13 CFR Part 120). On the other hand, there are some programs that only go as high as 50%, including the Express Loan program (for those types of loans the new guarantee will not change).
As we all know, on February 17, 2009 the President signed into law the Recovery Act which, under section 502, authorized the SBA to guarantee loans up to 90%. On Monday, the SBA completed its review of the legislation and announced in a Policy Notice that indeed the guarantee would go up to 90% effective March 16th under the various 7(a) SBA loan programs.
Simple math tells us more guarantee, the greater the likelihood of the bank making the loan. For goodness sakes, 90% is tapping on the door of a 100% guarantee! Also note the guaranteed portion is typically sold on the secondary market (which has recently shut down to almost nothing in September of 2008) so there is more chance for loans to be sold and more money to go back into the coffers of the banks for further lending.
Now let us translate this into popular programs for small businesses. The Community Express Loan Program allows quick and reasonably priced SBA loans up to $250,000 (although most lenders are dispersing monies in the neighborhood of between $5,000 and $50,000 unsecured). They are now guaranteed to 90%. And remember there are lenders now making such a loans even in this economy. The equally popular U.S. Patriot Express Loan Program for veterans and their spouses or windows, goes to $500,000 and is also guaranteed now to 90%. At the same time, the workhorse 7(a) loan program, which is usually for loans in the hundreds of thousands of dollars, was likewise increased to 90%. Not to bore you with the details, but the only exceptions are almost minuscule, namely the guarantees are not used for business ventures involved in gambling, aquariums, zoos, golf courses, or swimming pools. Further, the SBA will not issue a guarantee to a borrower that hires, recruits, or refers for a fee, employees that are unauthorized aliens as defined by the Secretary of Homeland Security.
And it gets even better. Banks that are already SBA lenders don't have to do anything different in the loan process. Namely, there is no change to the submission process to get a SBA guarantee loan number. They simply get their approvals from the same central processing units throughout the nation as they did before. The same streamlined paperwork.
Of course, taxpayers' dollars will be funding these guarantees, especially since the borrower no longer pays for a guarantee fee on closing. In other words, the 90% guarantee will stay in effect as long as there is money appropriated by Congress. The current estimate is that approximately $8.7 billion will be allocated for these guarantees, of course depending upon the loan volume and default rate.
So how will the banks react to this news? Many experts predict in a favorable manner. Obviously, with a 90% guaranty, there is less risk if the loan goes south. This also means the traditional robust secondary market for purchasing government backed loans, once it starts to kick-in, will also find them desirable for purchase in investment pools. There is also another intangible you don't read about in the news: The environment in Washington has never been better for small businesses. You now have an Administration that respects small businesses and wants to do everything it can to engender their success.
Translation: banks are comfortable with the new SBA (as opposed to the more insular and contentious regime under the Bush administrations that spent more time fighting and failing to communicate with lenders than trying to treat them as partners) and so more willing to make loans even though the default rates go higher. They know the Obama Administration will probably understand the situation because of current market conditions.
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