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Sequestration Cuts $92 Million From the SBA's Budget

When outgoing Small Business Administration chief Karen Mills briefed reporters last month, she said “the sequester is just terrible for small business.” How terrible it will be remains an open question. Small businesses that make their bread by contracting to government agencies are going to be hurt, though the extent of the damage won’t be known until agencies get more specific about which programs are losing funding.

Less widely discussed, but easier to put a dollar figure on, are cuts to the budget of the SBA itself, which is losing $92 million through the rest of the year. According to a March 1 letter from Jeffrey Zients, deputy director of the Office of Management and Budget, the bulk of those cuts will come from the disaster loan program ($45 million), the business loan program ($24 million), and salaries and expenses ($22 million).

Mills has said that despite the cutbacks, the agency won’t be forced to furlough employees and that the biggest effect will come from a mandated reduction in the volume of loans the agency guarantees. In a letter to the Senate last month, Mills said that every dollar in the SBA’s loan subsidy program guarantees $51 in lending and that sequestration would prevent the agency from helping entrepreneurs gain access to more than $900 million in capital.

That’s not the only consequence that Mills highlighted: She also noted that her agency helps small businesses bid on government contracts. And as Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce, explained to me last week, the federal government has traditionally struggled to meet goals of awarding 5 percent of its contracts to woman-owned companies and 23 percent to small businesses.

“If the SBA has less resources making sure that contracts are coming down to small businesses, it’s going to be that much harder for them to hit their goals,” Dorfman said.

Clark is a reporter for Bloomberg Businessweek.

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