December 22, 2014

A Public Program That Actually Returns Money to the Treasury

Small Business Development Centers provide free adviceMost of the time that you read about the U.S. Small Business Administration in the news, the topic is small business lending or perhaps the federal budget.

You may even have wondered why there’s so much fuss about the SBA. If you’re not in the market for a loan, you may wonder what good is it?

Earlier this year, the National Association for the Self-Employed found in a member survey that less than 20% of microbusiness owners had ever made use of any of the SBA’s other programs. Why not? Well, about half of them (49%) said they didn’t know about them.

On the other hand, only 14% said they didn’t need the help, thus exploding another myth.

Most telling was that 62% of survey respondents rated those federal small business programs somewhat or very valuable, while a whopping 81% felt that increased funding for them should be a priority for the Obama Administration.

What these numbers suggest is that there are a lot of small business owners out there who need various sorts of help, that said help is available at no direct cost to them, and that too few of them know about the programs but most consider them a good investment.

In short, and contrary to what most small business owners are said to believe, the federal government is not completely useless.

For example, an oft-sited statistic from a 1980 Dun & Bradstreet report notes that 44% of small business failures come about due to lack of business management experience or training. That means that small business owners can increase their chances of success significantly by taking it upon themselves to learn how to run a business.

That sort of training is available for free through SBA entrepreneurial development programs like the Small Business Development Centers (SBDC).

The SBDC program is the grandfather of the SBA’s entrepreneurial development programs, established in 1980. It is an outstandingly successful program that typically returns a minimum of $2 to the federal treasury for ever $1 spent on it, and saves or creates countless small business jobs on an annual basis.

The SBDC network is affiliated with colleges and universities or with state economic development departments around the country. There are SBDC state affiliates associated with such august institutions as Howard University in Washington, D.C. and the University of Pennsylvania’s prestigious Wharton School of Business in Philadelphia.

As you might imagine, the services offered by the SBDC network – comprised of over 1,000 locations around the country – are very much in demand right now. That, in its turn, is putting something of a strain on the resources of the SBDCs; the network has not even received an inflationary increase in its funding since fiscal 2000.

Meeting demand is a cause for concern, according to Don Wilson, president of the Association of Small Business Development Centers.

“We’re so concerned, particularly about the huge number of unemployed that are out there looking for help in going into self-employment, plus businesses that are hanging on by their fingernails who don’t know where to go for help,” Wilson told me during a recent telephone interview.

It’s a peculiar conundrum for the administrators of the program. They are aware that relatively few small business owners know about them but, without the resources to meet increased demand, can you market your services with a clear conscience?

Even without a marketing budget, the SBDC network is seeing a decided increase in the number of small business clients and recently displaced workers seeking their services. Network centers offer workshops and classes in various aspects of business management, such as cash flow management, inventory management and cost containment measures.

They also offer one-on-one counseling, which is a big hit among their small business clients and is one of the main reasons why the program is so successful. To find an SBDC near you, visit their web site at www.asbdc-us.org.

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About the Author: Dawn Rivers Baker, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the Publisher of the MicroEnterprise Journal, where the nation’s business meets microbusiness.  She also publishes the Journal Blog.

20 Comments ▼

Dawn R. Rivers


Dawn R. Rivers Dawn R. Rivers, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the publisher of the MicroEnterprise Journal. She also publishes research at the Microbusiness Research Institute and she blogs at The MicroEnterprise Journal Blog.

20 Reactions

  1. Dawn, thanks for sharing this information. I’d love to see more people participate in the SBDC programs.

    Anita

  2. I am interested to learn more about SBDC. I could tell you about a successful program here in Sweden called “Drivhuset” (“hothouse” in Swedish). It is located in conjunction with universities in different cities.

    I must comment on the statement: “In short, and contrary to what most small business owners are said to believe, the federal government is not completely useless.”

    The government is not useless, but it should not have an active role in business, on principle, according to my view. Its sole function is to protect our individual rights by providing us with police, military defense and a court system. Nothing less, nothing more. Recommended reading: The Nature of Government by Ayn Rand. Her book, Atlas Shrugged is the most popular item in Classics section at the moment.

  3. Hi Dawn,
    This is terrific. Based on this and Anita’s comment, I need to research the SBDC again. Years ago, when I started my first company, I’m pretty sure I went through an SBDC course. Your post has inspired me to see what else they have cooking these days.

    Do you know if the ARRA — fed stimulus has filtered over to them with any new funds to help in new ways??
    Thanks again.

  4. Great article. I was nicely suprised to find a few locations around me. I’m going to explore their websites now. Thank you for reminding us that educated help is out there.

  5. thank you thank you thank you.. I am a business coach/consultant for the SBDC based in Ventura CA and we are one of the great secrets. Our clients besides loving the services we provide, most of which are free, are starting maintaining and growing their businesses. In the several years i have been working with them I have had only 1 client close down and that was because of a an issue with a partner.
    For those of you in the LA/Ventura/ Santa Barbara area call 805-648-8941 and get more information about our classes and one on one consulting. Oh and we come to your business when we can.

  6. to TJ Yes ARRA has filtered down and it’s called ARC and it’s making it easier to get loans

  7. Glad to see that you guys found the information helpful. It’s a great program, I’ve used it and have been writing about it for years.

    @ TJ

    Well, it’s to be hoped that between Treasury buying securitized small business loans and the reduced or eliminated loan fees provided for under ARRA, the 7(a) lenders will respond by unfreezing the lending. But there are a lot of small business owners who want a loan like they want a hole in the head right now. For them, guidance on navigating a recession is on their wish list. I just had lunch with Don Wilson yesterday and he says that demand for their services continues to rise.

    There’s nothing specifically for the SBDC program in the ARRA but you may be interested to know that House Small Business Committee Chairwoman Nydia Velazquez just proposed to beef up the SBDC program funding from $89 million (fiscal 2009) to $135 million for fiscal 2010. That is full funding for that program and that has never happened before that I’m aware of — or certainly not within the last 20 years.

  8. I often refer the SBA website to people asking questions about how to set up or start up a small business. I think it’s one of the best sites available. I certainly hope that the funding increases for the invaluable SBA programs, like SBDC.

  9. Dawn, this is good news. Thank you for sharing this information.

  10. One of the reasons that a lot of folks do not know about the SBA and it’s programs as much as they should is because in the past getting a SBA loan was about as much fun as getting your wisdom tooth pulled out, which is to say it was not much fun at all!

    Only know, since conventional (bank) loans have all but dried up are folks turning to the SBA in numbers because they are the only folks putting the money out via their guarantee programs with lenders.

    With some luck they will ‘streamline’ their business loans applications and we will see more small businesses take advantage of the much needed liquidity.

  11. @ Vivian

    Well, actually, the SBA hasn’t been “putting money out via their guarantee loan programs”. Those programs have been as frozen as all other forms of commercial credit; SBA loan volume was down 57% for the first four months of the current fiscal year. (Not sure what the number is now but I doubt it’s much improved.)

    That’s a big plank of President Obama’s recently announced small business plan, using TARP funds to buy securitized SBA loans and inject some liquidity into that market. It is hoped that, between that and the elimination of lender and borrower fees, the 7(a) lenders will actually start lending again.

    Parenthetically, I’ve been trying to get Tony Wilkinson, president of the National Association of Guaranteed Government Lenders, on the phone to talk about this, with no luck. He seems to be doing his best to be in three places at once these days and I guess I can see why.

    Having said all that, one of the main reasons why so few small business owners know about programs like the SBDCs is because SBA District Office personnel are evaluated on things like loan volume and loan dollar volume. In fact, back in 2002 I believe, several members of Congress were dismayed by a finding in a GAO report that SBA personnel were under the impression that their “customers” were banks, not small business owners.

    So, loans are what the agency jumps up and down about and yells about the loudest. And that, in turn, is what the media picks up on.

    From what I’ve heard from some of my sources, that hasn’t improved noticeably. SBA personnel sometimes push loans onto small business owners who didn’t want them and don’t really need them. SBDC counselors, on the other hand, will tell you straight up front that a loan is the last thing you need, if that’s the situation. I know. I’ve seen it.

  12. Dawn, what can you also say about the AIG bonuses?

  13. The SBDCs are a great resource. Practically all of them also have websites. While some of the websites are very simple, many of them are extensive and offer a variety of online resources as well as information on, and links to, other local resources for entrepreneurs and small businesses in their area.

    In my experience, the people staffing the SBDCs are not only knowledgeable but are truly interested in helping small businesses thrive. Any business person who fails to look into the programs available through their local SBDC is missing a great opportunity.

  14. Thanks for sharing this post.. This is very interesting..I will take a close look at it.. Looking forward for the success of this program..

  15. @ Arthur

    Hmmm … what is there to say about those AIG bonuses?

    It’s been a good twenty years or so since I have had even a glancing acquaintance with corporate America. So, a story like this makes it that much more alien to me than it already is. I’m kind of old fashioned, too, and it’s tough for me to imagine a world in which bonus-worthy performances by management and the company almost imploding and going under are not mutually exclusive.

    On the other hand, if those managers operated things in such a way that the shareholders made a bucket of money and weren’t hit with any of the losses, I suppose I can see why *they* would have had no problem with the bonuses. The only problem is, of course, that the shareholders are not the ones paying for those bonuses. We are.

    And, from our perspective, the folks getting those bonuses haven’t earned them. Au contraire, in fact.

    This is not the first time that executive compensation has come up in relation to TARP money. If I’m remembering this right, the last time Hank Paulson hinted that financial institutions receiving TARP funds should pull back on the executive bonuses and such, said institutions indicated that if Henry were going to play that way, they might not play at all.

    Henry backed off.

    I disagree with that move. The banks are saying the same sorts of things right now. There’s a story in this morning’s Washington Post in which banks are said to be indicating that attaching strings to executive compensation might drive banks away from the program.

    (Also of course, Congress’s knee-jerk reaction may backfire if it catches innocent bystanders because the earnings bar is set too low. In justice to them, I think it is possible that their own outrage is genuine and not as cynical as it may appear.)

    I’d say, let them. In fact, I’m wondering if maybe we need to consider building a new system from the ground up and letting this one topple if the bankers won’t cooperate. When somebody is drowning and they ask you to wait while they think about whether to accept the lifeline you toss them, how long do you stand there and how hard do you argue with them about it?

    Sorry, a lot of this is coming across to me as very kindergarten/schoolyard. Must be all the kids I’ve got.

  16. Dawn, I am in charge of the website for the SBDC Network, SBDCNet.org. So you can imagine my excitement when I found this article today. It is great having such a prominent voice in our corner.

    Anyone wanting more info can go to the site. we have tons of sample business plans, a directory to get you to your local, E-newsletters, blog,

    Also we are about to launch two social networks the first is going to be a ning site, even though it isnt officially launched yet, I will go ahead and extend an invite to your readers they can sign up at sbdcnet.ning.com

  17. I agree that the most failures of the small business come about due to lack of business management experience or training. According to Med Yones, management expert small businesses can also benefit from an action-oriented management training of the International Institute of Management which focuses mainly on the key general management functions. For details go to

    http://iim-edu.org/managementtrainingcoursesusa/index.htm

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