The Next Four Years at the SBA

Cutting taxes, reducing regulation, encouraging low-cost health insurance, and discouraging frivolous suits -- those goals top SBA chief Hector Barreto's to-do list

A former entrepreneur, Hector Barreto was named head of the Small Business Administration by President Bush in 2001. Under his watch, the 7(a) loan program has gained in popularity, with a record number of loans awarded over the past year, but also faced a funding dry spell forcing its temporary shutdown in January. The SBA's budget also has dropped nearly 25% since Bush took office, though Barreto says his agency has all the resources it needs to continue helping small businesses. Following the President's reelection, BusinessWeek Online reporter Erin Chambers and SmallBiz Editor Rod Kurtz spoke with Barreto to hear his outlook on the next four years. Edited excerpts of their conversation follow.

Q: What is your reaction to the election?

A:

We feel great. I think it was a historic election, and obviously we believe in the President. We got a lot of support from small-business owners, and we're very happy about our ability to help get that message out, and have a successful election.

Q: In talking to small-business owners, we know there is some sense of relief that the uncertainty of election is over, and with the President staying in office, they will not have to brace for a transition. What is the SBA's approach, knowing that you will be working with the same President for the next four years?

A:

One of the things I think is very important is the President's small-business agenda, and we've made a lot of progress on it. One of the major elements is to continue looking at ways to find tax relief to small businesses, and making a lot of those provisions permanent. A lot of small-businesses struggle because they pay higher taxes than a lot of major corporations, and the tax code is very complicated for them. They end up spending a lot of time and money that they shouldn't have to spend.

The No. 1 issue for small business continues to be access to comprehensive, low-cost health care. We've begun the process with the health savings accounts. We'll be looking at ways to expand those, provide more incentives, and maybe some tax credits to small businesses. We also want to take another look at association health plans. It's a big issue over the last couple years and has passed in the House of Representatives twice on a bipartisan basis, but we just weren't having any luck getting it on the schedule in the Senate. With the new seats, we think we're going to have a much more receptive audience.

We want to continue making progress on regulatory issues. Our Office of Advocacy tracks all this stuff, and they say we've saved small business something in excess of $31 billion in costs they would have to spend if it wasn't for our streamlining of our compliance regulations and removing redundancies in the regulatory process. Another issue that's going to come up is energy. It's the same kind of a thing. We're stuck in the Senate.

Q: The SBA reported a record number of loans this year. How to do you measure a loan program's performance?

A:

We want to make sure we're reaching all segments of the small business community. Not only did we do more loans, but we broke another historic record in terms of dollars $12.7 billion dollars just in our 7(a) loan program.

Q: And the 7(a) loan program is largely self-sufficient now?

A:

It is operating self-sufficiently right now. And we'll have to see what Congress determines to do anything different when they finalize our budget. Right now it's a zero-subsidy rate program. We look at job-creation, the business longevity of those small businesses. We look at revenue growth and our number of defaults. In every one of those areas, the performance measures have been way up...and we're very proud of that.

Q: Obviously, there were funding issues with the 7(a) loan program this year, and your own budget has dropped since 2001. How do plan to adapt and deal with the funding challenges?

A:

We've done an incredible job over the last couple years, and I think there's a misunderstanding about the SBA budget. I've told people continuously we have enough resources to do our job, and that's proven by the bottom line.

Are we doing more loans? Yes. Are we training more small businesses? Yes. Are we getting more federal contracts. Yes. In fact, we've achieved historic numbers in all those areas. We've closed down no offices, no major programs.

There is this feeling that the SBA has less resources and is doing less and less, and nothing could be further from the truth. The thing that is a big challenge for us is because of our appropriations process, we always start our fiscal year without a budget. And there's very little we can do about that. This is the third year in a row we don't have a budget and we don't know where we're going to have one. It's one of the things that put so much stress on the 7 (a) loan program.

Q: Three-quarters of new jobs created come from small business. How do you get the money into the hands of fast-growing, entrepreneurial companies that are actually creating jobs?

A:

That's one of the biggest success stories of the SBA over the last couple of years. We've already accomplished that. This year we're going to facilitate $20 billion of capital. That's an all-time high for small business. Our loans to minorities have doubled since 2001. Last year we did 30% more loans to emerging markets. We did 25% more to women-owned businesses. We did more rural loans, more export loans. We did not only the small loans, but medium sized and large ones, multi-million dollar loans. The way that we've done it is that we measure it. We have ambitious goals and every year they go up. When you streamline your processes and you don't have all your people in the offices pushing paper, you can get them back out in the community to develop the relationships that they need. They can educate and market the programs. It's easier to do business with the SBA.

Q: Are you increasing your commitment to offer nonmonetary services such as advice on how to write a business plan?

A:

If you listen to your customer, [they] will tell you everything they need to be successful. Not only are we improving more of our core programs, but small business are saying they need advocacy, a voice at the table. We're getting killed on regulations. We're getting killed on taxes. We're getting killed on health care and frivolous lawsuits. Our energy costs are going up, and we need new markets. And so those are things we've worked very closely with the small-business community to provide real change in all those areas, and I think we've accomplished it -- and still have a lot more to go.

We've also had successful public-private partnerships. Our Small Business Expos draw thousands of people. We're training more people online now. We get 1 million visitors to our Web site, SBA.gov, every week. At the end of the day, it's about surrounding small business with the tools they need to succeed.

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