Since the U.S. Small Business Administration (SBA) was founded in 1953, it has helped companies secure millions of dollars, loan guarantees and contracts. The agency was created by Congress to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns” and ensure that small-business owners get a "fair proportion" of government contracts. It also provides small-business owners with free counseling sessions to take their company to the next level.
Maria Contreras-Sweet was appointed the 24th SBA Administrator and a member of President Obama’s Cabinet in April 2014. She founded the first Latino-formed commercial bank in California and a venture capital firm providing investments to small businesses.
OPEN Forum recently sat down with Contreras-Sweet in Chicago to discuss how small-business owners can best use the SBA’s resources and what they can expect from the agency in 2015.
What are the SBA's goals for helping small businesses this year?
The goals I have set for this year are threefold: I want the SBA to become smart, bold and accessible. So around "smart," we are launching new technology initiatives to help us be more efficient at the SBA, to help our lending partners be more efficient and to help navigate small businesses through the panoply of technological developments. Around "bold," the new marketplace is now a global marketplace and we want to help small businesses be bolder in accessing markets, helping them go into federal government work and corporate supply chains and compete internationally. The third initiative is around accessibility. I am here in Chicago to license a microfinance [organization] that will help get more small loans into communities.
Small businesses were hit hard by the last recession. How has the SBA supported loans to small businesses since then?
What happened, to be really frank about it, is we raised the limit [of loans] from $2 million to $5 million to push more capital out the door, but there are sometimes unintended consequences. So banks navigated to the larger size loans. It’s easier to put out two $5 million than 20 $500,000 loans. So what I am doing now is saying it’s about the units, not just the dollar loans. For example, in Chicago, units are up and the volume is down a little bit, but I am OK with that because more people are benefiting from the SBA.
People don’t always need as much capital as they think for their business. Some risk their life savings. Can the microloan program help?
Before you get to any dollar amount, it is really important to understand what you are trying to do … and the financial aspects to it, because so many times people get into it and say, "Well, I didn’t understand this was not an emerging business and that the margins were not great." It is so important that we help small businesses get the right counseling before they put out their hard-earned savings. We have seen seniors put their savings into a business that didn’t work, so let’s start with the counseling.
What is the biggest misconception people have about the SBA as a resource?
Well, you know the old stories that this is not your grandfather’s SBA. Today we are going to be launching technology that will take us completely online with E-Verify and E-Signature and other consent forms. We have amplified the credit box so more people get through. We are now using smart scores that allow people to be qualified much more quickly. Some banks are reluctant to use the SBA ... [one] way to fix that is an interface where you answer the questions and we’ll tell you if it's green-lighted or not, and [they] don’t have to worry about it. The other is the fee structure. People say the loans are expensive. It’s important for us to think about ways to facilitate access to our loans from a cost standpoint. So we have zeroed out fees of loans under $150,000. It’s really huge. We are really trying to push those loans out the door.
What is the most underutilized offering from the SBA?
Our surety bonds. People are starting to learning more and more about SBIR, the Small Business Innovation and Research Grants, which is like angel financing. What I really want to promote more is the surety bond program. If you need a bid for bond or performance, we have surety bonds. Another program that is getting an uptick is the Export Working Capital Program that guarantees 90 percent of your loan. That’s phenomenal. You are not going to find that anywhere else, and yet not enough people are taking advantage of that program.
Tell us about SBA One and government contracting.
They are two important but separate programs. SBA One, which we are launching in a couple of months, is what I referenced earlier for taking everything online—blow up the faxes and present ourselves to financial institutions through the Internet. It will be able to populate the questions … when you say no, [those questions] disappear. So it’s not a static application; it’s dynamic.
In contracting, the U.S. government is the largest procurer in the world, and we direct 23 percent of that spend to small business.  was the first time we reached our 23 percent goal in eight years. We are very heartened by the results, and the numbers are looking good for what we finished in 2014. I am pushing hard already now in 2015 to keep that momentum going, and I am very enthusiastic about the progress we are making.
Where should small businesses start to work with the SBA? It can be confusing.
It’s important to navigate through the website, SBA.gov, first to get to know what we’ve got. It’s sort of like shopping for a car; the more research you do online, when you finally get to the car dealership, you know what color, what size, what price you are willing to pay. You know it all. So to the extent that people become familiar with our site and know our offerings and know where they are, how to access them and some of the success stories, then they are able to navigate once they walk into our district office.
What else could you be doing for small business?
I understand that not everyone feels comfortable doing business with the federal government. I think it’s important at the SBA to feel that we don’t have to compete with the marketplace, but we are there to complement and undergird it. We put out a special competition recently to support the [accelerator] ecosystem across the country, [where we] picked the 50 best pitches. It was very well received in the industry. I didn’t know if one or two would respond. 823 applications came in! Part of our criteria for receiving this grant was to come into the White House and to introduce them to the resources at Agriculture, the Treasury and Commerce and all the departments across the board to develop strong partners in the community. It is important at SBA that we can’t be everything to everybody all the time, but to the extent we promote [these] programs, that is important work we must continue to do.
Read more articles about the SBA.