The Small Business Administration defended its existence yesterday as critics slammed its response to Hurricanes Katrina and Rita and questioned the agency's definition of a small business.

Dozens of small-business advocates flooded the office of Sen. Tom Coburn with e-mails and phone calls this week after rumors persisted that lawmakers wanted to abolish the SBA.

Mr. Coburn, Oklahoma Republican, disputed the rumors. As chairman of Senate Homeland Security and Governmental Affairs subcommittee on federal financial management, government information and international security, he said, he requested the hearing yesterday to focus on financial accountability and the need for an economic impact study that demonstrates the necessity for SBA-guaranteed loans.

"While the SBA is supposed to help small business, the interests of small business and the interests of SBA are only synonymous if and when the SBA is achieving its mission effectively and efficiently," he said.

SBA Administrator Hector V. Barreto noted that guaranteed small-business loans under his tenure grew from $14 billion in fiscal 2001 to $19 billion in 2005. At the same time, the agency's funding was shrinking.

"Our budget has gone down by 30 [percent] to 40 percent, but our production's gone up," he said.

The federal government sets a goal of awarding 23 percent of its contracts to small businesses.

Mr. Coburn referred to a chart displaying seven examples in which SBA contracts were awarded to large corporations and asked for the SBA's definition of "small."

Mr. Barreto defended the agency's contracting process, noting that large businesses often buy smaller firms that hold the contracts, or the businesses simply grow as a result of the contracts.

A representative from the Government Accountability Office said the SBA's work force and loan-processing systems were overwhelmed by the volume of loan applications resulting from Hurricane Katrina, which Mr. Barreto estimated at 400,000. Since the storm ravaged the Gulf Coast Aug. 29, Mr. Barreto said, the agency has guaranteed $7.5 billion in loans.

The California organization American Small Business League announced last week that the hearing was a veiled attempt to abolish the SBA.

The controversy over a Senate bill to reauthorize the Small Business Administration is likely to begin anew when Congress reconvenes after Labor Day.

At issue are two provisions that the nation's leading small business gadfly says will divert billions of dollars in government contracts to large corporations.

The Small Business Administration recently began posting a list of banks making America’s Recovery Capital loans. The list, which is supposed to be updated weekly and is available here, makes for both interesting and depressing reading.

Depressing, first, because it’s not very long. As I report today in an article about one restaurant owner’s (ultimately unsuccessful) effort to secure an A.R.C. loan, just 405 banks had made 1,127 loans as of Monday. (The list, published Tuesday, is slightly more current, and shows that banks have made 1,191 loans.) Recall that at the outset, some people predicted that the money would run out by the end of September.

Also depressing because most of the names on the list will be unfamiliar to most readers. JPMorgan Chase is on the list, as are Wells Fargo and SunTrust. But from there, the national brands trail off. Of the 25 largest banks in the U.S. — which together control two-thirds of all bank assets — only eight have made an A.R.C. loan.

The prediction made by Tony Wilkinson, president of the National Association of Government Guaranteed Lenders, that banks would face a public relations problem if they didn’t participate, appears not to have come to pass — or at least banks are willing to absorb the bad P.R. as the cost of not doing business. Despite that early claim, the major bank absence will not come as a surprise to Agenda readers, many of whom have complained about how difficult it has been to get an A.R.C. loan.

But this next tidbit might surprise. It turns out that fully a third of the banks making A.R.C. loans — and one-third of the loans they’ve made — are in three states: Minnesota, Wisconsin and Iowa. Seventy-four of the more than 400 of A.R.C.-loaning banks are in Minnesota, 49 are in Wisconsin. Thirty-three are in Iowa. To put that in perspective: more banks in Iowa have made loans than in California, New York and Florida combined (together, however, the banks in the three big states made 77 loans to Iowa’s 57.)

The S.B.A. itself is at a loss to explain the disparity. Judith Roussel, the Illinois district director who is the acting administrator for the region that includes Wisconsin and Minnesota (as well as a tie for the fourth best-producing state, Ohio, and the sixth, Illinois) could shed little light. “I know in Illinois we have been very aggressively reaching out, and we’ve had a level of success, but banks are getting on board at different paces,” Ms. Roussel ventured.

“We have a very intensive lender contact program,” said Joseph Folsom, Iowa’s district director. “Our goal is to have a personal contact with every institution at the main bank level at least once a year. Keep in mind, there are nearly 400 banks and over 100 credit unions.” But, he allowed, the initiative is just as intensive in next-door Nebraska, where only 12 banks have made loans.

Lt. Gov Barbara Lawton of Wisconsin was happy to claim some credit. She called The Agenda on Tuesday after hearing we’d been poking around. “One of my concerns in the context of this economic crisis is that small businesses were feeling left out of the Recovery and Reinvestment Act,” she said. But she took note of its many provisions to bolster S.B.A. lending. “And because all of it is first-come, first-served,” she continued, “I thought my job is to make sure that Wisconsin businesses get at least their fair share.”

Ms. Lawton held road shows in cities and towns across the state, bringing together mayors and other elected officials, bankers, local chambers and businesses that found capital through various S.B.A. programs. “Our job,” she maintained, “is to get this story out.”

It’s also possible the disparity has less to do with outreach and more to do with the type of banks making these loans. A.R.C. lenders in Iowa “know their customer base, and know which customers will benefit from the program,” said Mr. Folsom. “And these businesses are usually located right down the street.”

Mr. Folsom was of course describing the archetypal community bank, known for practicing “relationship lending.” The swath of Midwestern and North Central states from Ohio and Michigan to Kansas, Nebraska and the Dakotas account for 44 percent of all community banks (and just over half the lenders and loans), according to the Independent Community Bankers of America, the trade association.

By contrast, the 12 westernmost states are home to about as many people (nearly a quarter of the U.S. population) but to just 10 percent of independent banks. Similarly, the nine Northeastern states, with 18 percent of the population, have just 9 percent of these banks. (One anomaly on the list: Utah is third in the nation for number of loans, with 66. However, most of those loans were made by one institution, Zions Bank of Salt Lake City, an early and enthusiastic participant in the program.)

More specifically, Mr. Folsom is describing rural community banks. S.B.A. district directors in both Iowa and Minnesota said that few loans had been made in urban areas — as of last week, none had as yet been made in Des Moines, Iowa’s largest city, according to Mr. Folsom. All community banks like to say they know their customers, but said Paul Merski, the I.C.B.A.’s chief economist, “it’s just a closer relationship in the smaller towns and cities.”

And yet even that cannot fully explain the disparity. Minnesota is actually not the leader in community banking; Illinois, with 653 institutions, and Texas, with 645, each have nearly 50 percent more banks. But 16 Texas banks have produced just 24 loans — not quite one-sixth Minnesota’s total — even though more people live in rural Texas than in rural Minnesota and rural Wisconsin combined.

“My guess is what’s really driving that is the herd mentality,” said Bob Seiwert, senior vice president at the American Bankers Association’s Center for Commercial Lending and Business Banking. “If you get a number of lenders in any concentrated area all of the sudden saying I’m going to offer this program, other lenders will jump on board, just so they’re not odd man out.”

In any case, if you’re thinking of applying, regardless of whether you’re located in the Upper Midwest, we have some suggestions for making the loan application go as smoothly as possible. You can read them here.

Source:  http://boss.blogs.nytimes.com/2009/08/12/want-an-arc-loan-head-to-the-heartland/

As the debate over health care reform heats up, both sides of the issue are increasingly invoking the plight of small businesses to score points about the benefits or evils of reforms under consideration on Capitol Hill.

The lobbying has become so intense, it’s spawned a corollary debate that is growing just as heated -- who really represents small businesses?

Although a half-dozen or so groups are nationally prominent, the National Federation of Independent Business, better known as the NFIB, has long claimed -- and is generally accepted -- to be the voice of small business in Washington. But long-held assumptions about the group are under question, if not assault.

A non-partisan, public policy organization in New York known as Demos, issued a position paper last year challenging the NFIB’s claim. The full article by Nicole D. Kazee, Michael Lipsky, and Cathie Jo Martin, titled “Outside the Big Box,” appeared in the July/August 2008 issue of the Boston Review.

The authors paid due homage to the group. While NFIB is relatively small -- 600,000 members compared to AARP’s 38 million -- it is remarkably powerful, they noted. In fact, Fortune magazine has frequently named it the most powerful business lobby in Washington.

Of significance to the current health care debate, the article credits the NFIB and local Chambers of Commerce with dealing the “decisive blow” against President Clinton’s health care plan in 1994.

Fast forward 15 years and the NFIB is once again a leading opponent of President Obama’s proposals. Two weeks ago, the group sent a letter to House lawmakers opposing two cornerstones of the Obama plan, an employer mandate and a public health insurance option. For its part, the U.S. Chamber of Commerce also sent a letter expressing the same position.

The letter prompted the Economic Policy Institute (EPI), a Washington-based think tank, to post a summary of the Boston Review article on its Web site, raising the question once again whether the NFIB truly represents small firms.

The NFIB claims it derives its authority to speak for small business through regular membership surveys. But the authors contend that the group has a clear ideological thrust: “It favors lower taxes; opposes minimum wage increases; and generally embraces small-government, free-market policies.”

Over the years, NFIB polls have uniformly reflected those views even though a variety of other polls suggest that small business owners are much more diverse in their economic and political preferences.

In various polls from the mid-1990s through 2006, for example, NFIB surveys claimed that only 25 percent of its members favored a government-funded single-payer health plan. NFIB surveys also routinely find that cutting taxes is among top small business concerns.

But a 2000 American Express poll found that more small business owners (82 percent) ranked “improving schools/training young people for work” and providing health care for employees (77 percent) over tax cuts (74 percent) and reducing regulations (72 percent).

In a separate 2008 study by the Robert Wood Johnson Foundation, 70 percent of small business owners favored government-managed health insurance purchasing pools, and two-thirds agreed that business should contribute to a reformed system along with government, the health care industry, and individuals, the EPI noted.

“Depending on the state, half to 80 percent of respondents agreed that businesses should pay something toward the health insurance of their workers,” according to the EPI.

In politics, researchers found similar anomalies. “On the eve of the 2004 presidential election, 95 percent of NFIB members said they planned to vote for George Bush, yet 41 percent of small business owners voted for John Kerry, and 39 percent of those were registered as Republicans,” the article noted.

In contrast, the NFIB endorsed 265 Republican candidates and only four Democrats in 2004, and 95 percent of its political action committee’s substantial donations went to Republicans.

By numbers alone, the NFIB also has scant claim to represent small businesses. Of the 27 million small business owners in the United States -- by Small Business Administration estimates -- only slightly more than one percent are NFIB members, they noted.

The authors concluded that the NFIB’s monopoly on small business issues is likely due to a more effective organization and a strategy that keeps “alternatives off the agenda.”

“As our analysis suggests, and experiences in Washington and the nation’s state capitals repeatedly reveal, the appeal of small business has been appropriated by a powerful interest group that does not fully represent the views of small business owners,” they added.

Not all small business groups, however, toe the NFIB line. The Main Street Alliance was founded last year and is building a network of state small business coalitions specifically to provide an alternative voice for small businesses on health care. Another non-partisan group, the Small Business Majority, is also working to enact health care reforms.

Lloyd Chapman, founder and president of the American Small Business League, has frequently taken an independent stance on issues, often contrary to the NFIB and the U.S. Chamber of Commerce. And the National Small Business Association also offers alternative views.

Health care is such lightning rod issue, when all is said and done, it could redefine the political landscape about who truly represents the best interests of the nation’s entrepreneurs. But one thing is certain, small businesses are far from monolithic, and no single group can rightly claim to speak for them in the current debate.

Source:  http://www.allbusiness.com/health-care/health-care-regulation-policy-health/12608199-1.html

No, despite what you may think, the headline isn’t rhetorical.  There’s something a-stinkin’ in Obamaland that should get every small businessman wondering what The One has up his sleeve, should he find himself occupying the Oval Office.

Back in February, Obama came out swinging in support of small business when a report found that billions of dollars in federal contracts intended for small business ended up being directed to Fortune 500 companies.  At the time, his Web site posted this statement:

“I am proud to have the support of the American Small Business League and their grassroots efforts to help protect American small business. Helping American small business is part of our movement for change and the end of politics as usual. 98 percent of all American companies have fewer than 100 employees. Over half of all Americans work for a small business. Small businesses are the backbone of our nation’s economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.”

The American Small Business League has found that the Web site has been modified so the sentence in bold above has been deleted and replaced with:

"Helping American small business is part of our movement for change and the end of politics as usual."

Says the American Small Business League:

"On Tuesday of last week, CNN ran a story on the fact that neither of Senator Obama’s recent rescue plans for small businesses or the middle class made any mention of his February statement calling for the end of the diversion of federal small business contracts to “corporate giants.” There has been absolutely no response from the Obama campaign to the story."

"Since making his original statement in February, Senator Obama has refused to mention the issue publicly or include any mention of it in his criticism of the Bush Administration. To date, Senator Obama and his campaign have not released a statement on this issue in any capacity."

What’s up? A counter-intuitive truth is what’s up: Despite all the railing by Dems about evil corporate America, they love big corporations because big corporations don’t hold to fundamental American values. They like government intervention when it serves their purposes; they would just as soon give in to the latest liberal social cause than fight it; they’re supporters of markets that are slanted in their favor, not free markets; and they’re all for big-money contributions and junkets because they know they can out-spend the smaller competition.

It’s called corporatism. The domain is owned by some left-wing paranoids who define it as a right-wing corporate fascism - they’re all messed up because they cling to the leftist mantra that corporations are a bad thing, while more enlightened liberals realize that if big government controls big corporations, it’s not that far removed from Socialism.  Wikipedia does a much better job with the term:

"Political scientists may also use the term corporatism to describe a practice whereby a state, through the process of licensing and regulating officially-incorporated social, religious, economic, or popular organizations, effectively co-opts their leadership or circumscribes their ability to challenge state authority by establishing the state as the source of their legitimacy, as well as sometimes running them, either directly or indirectly through corporations."

Sounds exactly like what’s happened to the financial sector in the last month, doesn’t it?  And doesn’t it sound precisely like the kind of vision Obama would hold for all sectors of American business?  Pull out his health care proposals again, for starters.  Yikes.

(A hat-tip to somebody for helping me get my arms around corporatism.  It was a talk radio host this morning; I think the stand-in for Michael Medved.)

Small businesses, on the other hand, are cantankerous.  They are often exempted from rules and regulations that apply to larger businesses, and therefore it’s much harder to get the bit in their mouth and direct them where you want them to go.  They insist on growing whichever way they want to and aren’t interested in fitting neat formulas or following book-thick directives.

Obama has thrown small business bones, but they’re brittle and hollow.  We’re screwed if we make over $250,000 ($150,000 for singles) - and only a fool would expect him to keep that promise; it’s no better than his campaign financing promise.  And capital gains breaks for start-ups?  Give me a break.  Since when have start-ups had capital gains to write off?

If there are any small business owners out there who are still for Obama, consider all this and please think again.  He’s got you right where he wants you, and you’re not going to like the results.

Source: http://www.cheatseekingmissiles.com/2008/10/21/is-obama-planning-to-screw-small-business/