U.S. GOVERNMENT | A resilient balance of institutions
05 May 2008
Federal Agency Encourages, Supports Small Businesses
Small Business Administration helps entrepreneurs with financing, training
Washington -- In an age of multinational corporations, many based in the United States, it is easy to see how “Big Business” affects national economies and global finance. But the U.S. economy was founded and still rests heavily on small business -- entrepreneurs whose energy and fresh ideas stimulate competition, establish new fields of commercial enterprise and strengthen the economy.
The U.S. Small Business Administration (SBA) was created in 1953 as an independent federal agency tasked with aiding, counseling and protecting the interests of small business. Since then, the SBA has grown and evolved but its mission is unchanged: It helps Americans start, build and expand businesses. Through an extensive network of field offices and partnerships with public and private organizations, the SBA serves people throughout the United States and its territories. The agency has delivered about 20 million loans, loan guarantees, contracts, counseling sessions and other forms of assistance to small businesses.
The concept of federal help for small businesses first arose in the United States in response to the Great Depression of the 1930s. The Reconstruction Finance Corporation (RFC), created in 1932, was a federal lending program for businesses of all sizes hurt by the Depression.
Concern for small business intensified during World War II, when small companies struggled to compete against large industries as they increased production to fulfill wartime defense contracts. To help small business participate in war production and remain financially viable, Congress in 1942 created the Smaller War Plants Corporation (SWPC), which provided loans to private entrepreneurs, encouraged large financial institutions to make credit available to small enterprises and advocated small-business interests to federal procurement agencies.
After the war, the SWPC was dissolved and its lending powers absorbed by the RFC, but the Office of Small Business in the Department of Commerce assumed many of the SWPC nonlending functions. In particular, that office produced brochures and conducted management counseling for individual entrepreneurs to counter the lack of information and expertise that led to small-businesses failures.
By 1952, with pressure mounting to abolish the RFC, President Dwight Eisenhower proposed creation of the Small Business Administration. In the Small Business Act of 1953, Congress created the new agency to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns."
GROWTH IN FINANCIAL AID, RANGE OF PROGRAMS
Beginning in 1954, the SBA made direct loans and guaranteed bank loans to small businesses, made loans to victims of natural disasters, helped get government procurement contracts for small businesses and aided business owners with management and technical assistance and business training.
A 1958 law established the Small Business Investment Company Program, under which the SBA licensed, regulated and helped fund privately owned and operated venture capital investment companies. In 1964, the Equal Opportunity Loan Program relaxed credit and collateral requirements for lower-income applicants to encourage new businesses that were commercially sound but financially challenged.
In its half century of operation, the SBA has grown in both total assistance provided and range of programs offered to encourage small enterprises. Programs include financial and federal contract procurement assistance, management assistance and specialized outreach to women, minorities and veterans. The SBA also provides loans to victims of natural disasters and specialized advice in international trade.
Nearly 20 million small businesses have received direct or indirect help from SBA programs since 1953. The agency's current business loan portfolio of roughly 219,000 loans -- worth more than $45 billion in 2007 -- makes it the largest single financial backer of U.S. businesses in the nation. Since 1958, SBA’s venture capital program has put more than $30 billion into the hands of small business owners to finance the growth of their companies.
“There are those who argue that big businesses, profiting from ‘economies of scale,’ can produce far more efficiently than small businesses. But small business is where the innovations take place,” the SBA states on its Web site. “Swifter, more flexible and often more daring than big businesses, small firms produce the items that line the shelves of America's museums, shops and homes. They keep intact the heritage of ingenuity and enterprise and they help keep the "American Dream" within the reach of millions of Americans.”
Additional information about the Small Business Administration is available on its Web site.
