Obama Proposes to Close the Small Business Administration as Predicted

Press Release

Obama Proposes to Close the Small Business Administration as Predicted

October 31, 2012

Petaluma, Calif. – Tuesday, President Obama reiterated his administration’s plans to combine the Small Business Administration (SBA) with the Department of Commerce. The American Small Business League (ASBL) maintains this move is aimed at eliminating small business programs under the guise of saving money.

On November 25, 2008, ASBL President Lloyd Chapman issued a press release predicting that President Obama would attempt to close the SBA by combining it with the Department of Commerce. He made the same prediction in November 2010 and August 2011.

Chapman believes President Obama's latest move is prompted by pressure from lobbyists of large corporations that want 100 percent of all federal contracting dollars. The federal government has a congressionally mandated goal of awarding 23 percent of federal contract dollars to small businesses. However, because of fraud and abuse, billions of dollars in contracts earmarked for small businesses are systematically diverted to large corporations.

Since 2003, a series of more than a dozen federal investigations have discovered billions of dollars in federal small business contracts that have been diverted to some of the largest corporations in the United States and Europe.

Some of the companies that have received federal small business contracts include Lockheed Martin, Boeing, AT&T, Raytheon, Dell, British Aerospace (BAE), Rolls-Royce, Hewlett-Packard, IBM, Oracle, and an international arms dealer owned by the Russian government named Rosoboronexport.

The ASBL is also concerned President Obama’s plans will destroy several years of documented fraud and abuse of federal small business contracting programs.

“Once the SBA and the Department of Commerce are combined, 10 years of documented fraud and abuse of small business contracting programs will be a moot point, “said Chapman. “U.S. Census Bureau data tells us that small businesses create more than 90 percent of all net new jobs. Closing the only agency to service the nation’s 27 million small businesses where most Americans work would be economic lunacy. If Obama wants to create jobs, he should quadruple the SBA’s budget, not plan to close it by combining it with the Department of Commerce.”


SBA no shot in the arm


SBA no shot in the arm

Small-biz loans lag

By Josh Kosman
New York Post
October 31, 2012

At a time when small-business owners are struggling and legislators are looking for ways to jump-start the economy, a key government program tasked with helping small businesses expand has been hamstrung.

The Small Business Administration’s decades-old program for investing in small-business investment companies, or SBICs as they are known, has missed its target for a second year as it struggles with staffing shortages and red tape, according to sources.

The SBIC program provided $1.92 billion in loan guarantees to SBIC funds in fiscal 2012, which ended Sept. 30. That is slightly better than $1.8 billion in 2011, but still well short of the $3 billion available to the SBIC program.

A top administrator for the SBIC program acknowledges it could plow through more fund applications with a bigger staff.

Just three staffers determined if the 70 applicants for SBIC licenses were qualified investors.

“We have shown we can do a lot more” with additional resources, Sean Greene, the Small Business Administration’s associate administrator for investment, told The Post.

The decades-old program allows Uncle Sam to send capital to startups. The SBIC program has invested some $63 billion in more than 110,000 small businesses since its launch in 1958.

Mike Staebler, a lawyer for Pepper Hamilton, who helps private-equity firms get SBIC licenses, said, “If you think the government has some role in job creation, this is it.”

He added, “It would be truly helpful to add another 10, 15, 20 people” to the SBIC’s current 80 workers.

Typically, the program lets private-equity investors leverage their capital, with the government matching what they raise on a 2-to-1 basis.

So if they raise a maximum of $75 million in private money, the SBIC will lend the applicant $150 million, presently at a 2.25 percent interest rate. This gives them $225 million total to lend and invest in small businesses.

“It’s easy to make 20 to 25 percent returns” with that low cost of capital, said one source who applied for an SBIC license.

Despite the program’s allure, investors tell of a frustrating process to get approved. “The process is painfully slow and overly bureaucratic,” said the source.

Greene said that it takes, on average, 18 months for the 20 to 25 percent who apply and qualify to close an SBIC fund.

While there is a lot of rhetoric centering around helping small-business owners, proponents worry that the SBA will have to do even more with less.

President Obama said this week that he wanted to merge the SBA with the Commerce Department, raising concerns more cuts are in store.

“If there is a one-stop shop, it’s common sense that the biggest companies will get catered to first,” American Small Business League Communications Director Brian Reeder told the Post.

Reeder said President Bush cut the SBA staff in half, and that Obama has increased spending just slightly.

Reeder added that there are 27 million small businesses that fit the SBA definition.

Original Source: http://www.nypost.com/p/news/business/sba_no_shot_in_the_arm_h5mt71TNdxo00OqETXFXwO