Published June 2004

Small-biz agency sending mixed signals
SBA’s budget cuts and service consolidation coincide with new Internet-based initiatives

By John Wolcott
SCBJ Editor

There have been mixed signals in recent months about the future of the U.S. Small Business Administration, as the federal agency announced new Web sites and faster Internet loan services at the same time the Seattle District Office has been losing staff and budgets have been pared.

The SBA’s media spokesman in Seattle, Roger Hopkins, had no official comment on the seemingly conflicting indicators that have been surfacing in news stories and federal news releases. Lynn Hamilton, acting director of the Seattle SBA office, has been in Orlando, Fla., for the SBA’s national awards conference and was not available for comments at press time.

Yet what is already in the public record is enough to raise questions about where the agency is going and how changes impacting the SBA will affect the Snohomish County economy.

In 2003, SBA lenders completed 256 local business loans in Snohomish County valued at $53.4 million for the kind of startup and expansion loans treasured by small businesses. First Heritage Bank of Snohomish led the roster of nearly 40 lenders, with 64 loans valued at $14.3 million. Bank of America was second with 60 loans in the county, valued at $1.5 million.

The Seattle SBA District Office is the largest in Region X, serving 15 of the 39 counties in the state, including Snohomish, King and Pierce. Overall, it serves areas that account for 3.5 million people, 72 percent of Washington state’s total population and more than 70 percent of the state’s businesses.

With more than 90 percent of Washington state’s businesses being classified as small, the SBA financial programs and technical assistance services are vitally important to the community. That’s why some observers find it disconcerting that SBA staffs and some services are being reduced through consolidation of offices and services and budget cuts.

Under a restructuring plan for agency operations, the SBA Office of Field Operations merged the Seattle and Spokane district offices in October, making the Spokane office a branch operation of the Seattle office. They will continue to serve the same geographic areas.

While still in office, former Seattle District Director Bob Meredith said the merger would not disrupt or diminish any of the SBA services traditionally delivered by the two offices to small businesses and partners throughout Washington and Northern Idaho. He noted that the combined strengths of the offices would further enhance SBA’s transformation and client services.

Individually, the two offices had record numbers in 2003 for guaranteed loans, technical assistance and government contracting opportunities. As a result, the past year’s lending activities of both of these offices combined ranked the Seattle District 11th in the nation among all SBA offices.

Combined figures for the two SBA offices in fiscal year 2003 reflected more than $400 million in bank guaranteed loans to 1,900 small businesses, plus technical assistance and counseling programs for some 35,000 small-business men and women. That figure compares to just under $325 million loaned to 1,230 small businesses a year earlier, resulting in a 23 percent increase last year in dollars for the startup and expansion of small businesses.

But a shrinking budget forced suspension of the SBA’s most popular lender guarantee program — for 7(a) loans — in January. Then a resumption of lending was constrained by limiting loans to a $750,000 maximum, compared to the previous $2 million ceiling. That change erased millions of loan dollars for small-business growth and expansion that would have been financed by small businesses who had counted on the larger loans for their enterprises. After Congress finally provided more funding, the $750,000 cap was lifted.

On the positive side, the SBA has just launched a Web site — www.business.gov — meant to provide a single Internet portal for information about federal small-business loan programs. Also, SBA news released recently reminded businesses of its innovative Business Enterprise Center in Seattle that features a state-of-the-art lecture hall, resource library and staff of business counselors who offer a one-stop planning and research center for small businesses, part of the SCORE program.

And on May 3, the SBA announced E-Tran, a new Web-based loan application process available to participating lenders that makes it easier for them to submit loan applications to the SBA and receive an immediate response from SBA staff. The E-Tran program “dramatically decreases the time and cost associated with originating a loan,” said SBA Administrator Hector Barreto.

However, the move toward more efficient Internet-based processes appears to be linked to reductions in staffing and office consolidations, though the cuts also can be traced to criticisms of the SBA in recent months for being top-heavy with management staff.

In April, the SBA offered early retirement to 600 upper-level employees at its Washington, D.C., headquarters and district offices around the country. One district director who left was Seattle’s longtime chief, Meredith. Since leaving his post, Meredith has accused the Bush administration of “carefully dismantling” the SBA, calling the situation “absolute chaos.”

Attrition in the Seattle office, where staff has shrunk from 44 in 1999 to 22 employees currently, also has been blamed on the SBA’s new centralized liquidation center in Herndon, Va. Transfers to the East Coast were offered to some staff members in liquidation departments in the Northwest but several declined the jobs and simply left the SBA.

Also in April, the processing of SBA 504 loans for commercial real estate and heavy machinery was transferred from Seattle’s district office to Sacramento, Calif., in another consolidation move.

On top of that, in the wake of President Bush’s paring of the SBA budget from $718 million in this fiscal year to $678 million, funding questions are being raised about the future of the SBA’s 53 women’s business centers around the country, including one in Everett and another in Seattle.

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