Question

What value does the Small Business Administration bring to small business and should the role of the SBA be expanded or reduced in poor economic times? Should it continue its presence in better economic times?

Answer 1

A small business administration is a government body which helps, counsels, protects and supports small business in the US.

Why small business is important to the US economy is because since 1995 the number of jobs added by the small business is almost 60% of the net jobs created. This is almost 40 million jobs which include four million main street businesses i.e. neighborhood restaurants, dry cleaners and grocery stores. They form the backbone of the US economy.

Small business supports the growth and innovation in the US economy. They employ 43% of the high tech workers, produce 2.5 times the number of innovations compared to the large companies and relative to the number of employs they have. They have 16-17 more patents per employee compared to large patenting firms.

The SBA or small business administration supports the small business by providing technical assistance and financial assistance:

1. Technical assistance:   They host management courses and workshops. Help and support minority-owned small businesses. They have a network of small business institutes to provide technical knowledge and training skills. The SBA publication and small business development centers to support the growth, innovation and address the training needs of the small business.

1. Financial Assistance: The partially guarantee the business loans for the small business. If the business is able to repay the loan, they subside it to the extent of 90% of the loan amount. The loan grants are up to $2 million and size of an average loan is$ 300,000 for a period of 8 years. The SBA licenses regulate and assist small business investment companies. Veterans are supported and can get information on staring business and getting credit facilities.

During the bad economic time like the recession of 2008, the SBA role should become more active. They should and do support the small business in the following ways:

1. They provide loan guarantees, unfreeze credit markets and make regulatory changes.
2. They also provide loan waiver schemes and increase the loan limits for many small businesses.
3. They supported by reducing loan paperwork and the loan turnaround time

Their role should continue during all times but should be enhanced during the downtime where small business needs capital and support to continue tier business activity without worrying about repayment of loans.

In good times, the government can support small business with easy finance, good training facilities, reduced paperwork and also support in technological up gradation for the small businesses. Lastly, the SBA could partner with many private investors and lenders to support and promote small business by investing in them or getting an equity partnership in them. It will lead to economic growth and an increase in the number of jobs in the US economy