Worship

Many of you may have reacted with mixed thoughts to the article in the Ithaca Journal this past Tuesday, about the action against Providence Hobbies by the New York State Tax Authority. Having worked with small businesses throughout upstate New York the past eight years, I find Jeff Wity’s experience more than symbolic of the dire situation of our current economy, and specifically, of small business, the backbone of our economy. 

Anyone who has not experienced the high risk rights of passage of entrepreneurship, such as being required to secure business lines of credit with personal assets, and who passes judgment regarding a business owner’s seeming failure or success, has little understanding of the business landscape on “Main Street.” 

As the economy worsens, more and more individuals are pushed from the pseudo-security of a paycheck in exchange for their time and talents into the self-employment arena.  Keith Girard, who writes the Business Intelligence articles for the Dun & Bradstreet online newsletter www.allbusiness.com, notes in his blog post 'SBA Ill-equipped to Handle Stimulus Funds,' "
If past recessions are any indication, tens of thousands of workers laid off in the current downturn won’t have jobs to go back to as the economy recovers. Instead, many will try to start their own businesses. This is one of the few benefits of a downturn. Recovering economies typically spawn thousands of nimble, innovative new businesses, many of which will have the potential for success. Over the years, the SBA has been one of the principal sources of business advice and training."  

The U.S. Small Business Administration Office of Advocacy’s 2009 Edition of the Report to the President  not only corroborates the significance of a worsening economy in exacerbating the numbers of self-employed workers, but also acknowledges the vast lack of capital available to help finance their endeavors and chance for long-term success.

Wikipedia offers a nice overview of the role of the SBA: "The SBA was established on July 30, 1953, by the U.S. Congress, with the passage of the Small Business Act.  Its function was to ‘aid, counsel, assist and protect, insofar as possible, the interests of small business concerns.  The mission of the Small Business Administration is 'to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.'"

So what has the SBA done for small business lately? 

I find it compelling to take a look in the rearview mirror with Girard’s abovementioned February 12th posting, in light of a recent article posted September 7th, 2009 in the Baltimore edition of BizJournal by Kent Hoover, the BizJournal’s Washington Bureau Chief, 'Running On Empty.'

Back in February, following the announcement of Obama’s Stimulus Package, Girard accurately predicted the failure of this initiative to boost small business based on the structural changes within the agency that seriously crippled its historic role in providing financial and advisory assistance to small business in America.  Add to that, …"the collapse of the financial markets in September 2008 and," as the 2009 Report to the President acknowledges, “…especially the malfunctioning of the interlender and working capital markets for nonfinancial corporate businesses, dramatically disrupted the flows of working capital to the small business economy.”

Testimony of the SBA’s growing ineffectiveness, Girard states, “Over the years, the SBA has been one of the principal sources of business advice and training.  But a recent congressional hearing revealed that the SBA’s entrepreneurial development programs are in disarray as well. ‘The SBA entrepreneurial development programs have grown into a fragmented array of programs,’ said Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce, in testimony before the House Small Business Committee. ‘These fragmented programs have resulted in a disorganized, overlapping, and inefficient delivery of service in a system that is ill-prepared to effectively address the challenges of our current economy.’

Fast forward, and let’s look at Hoover’s predictions: “Economic incentive money that allowed the SBA to boost small-business loans is about to run out.  This could mean an even tougher borrowing atmosphere for business in the near future.”

Why is it so important that small business owners have access to loans?  In these trying times, with consumers tightening their belts, revenues in many industries are down 20 to 25 percent.  With a significant reduction in cash flow, businesses are finding themselves looking for short-term solutions to the deficits while they try to hang in there until business volumes increase.  However loudly some of our media outlets are announcing an end to the recession, I guarantee your local business people, who don’t have access to fat government contracts, will whole- heartedly contest its demise.  That’s not to say that a typical entrepreneur will not put her/his heart and soul into finding a way to survive, and even thrive.  Their biggest challenge is to figure out how to do it without enough cash going through the business.   And, for not only the time being, but for an undeterminable time in the future, without our government’s help. 

Hoover says, "SBA Administrator Karen Mills said the SBA and the Obama administration are committed to making sure small businesses have access to capital.  How that should be done is still being discussed," she said.

Hoover suggests that Congress or the presidential administration can come to the rescue with special emergency programs.  Meanwhile, Ms. Mills  says the SBA is rebuilding its infrastructure.  Does American small business have the time to wait for more bureaucrats to make decisions that literally affect their survival?

What can we do about the financial debacle that has stolen from middle America to line the pockets of less than 1% of the super wealthy?  Will the SBA once again become a champion of the one-half of all Americans in the private workforce?

I agree with Girard, who says, "The Obama administration needs to send a clear signal that small businesses will be a priority in his administration.  The president can do that by restoring the SBA to cabinet-level status, which it had under the Clinton administration.  The fact that he hasn’t so far, despite the call of legislative leaders, is disappointing.  The president must also commit to a top-down overhaul of the SBA.  Anything less and the government will wind up throwing a lot of money at the problem with slim chances of success, not only in meeting the needs of entrepreneurs but in spurring economic recovery."
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