Small Business Administration (SBA)

What Is the Small Business Administration?

The term Small Business Administration (SBA) refers to a U.S. government agency that is designed to bolster and promote the economy by assisting the country's small businesses. Established in 1953, the SBA's largest function is to counsel individuals who want to start and grow their own businesses. It provides a series of tools on its website to assist new and existing small business owners. The agency is headed by an administrator and deputy administrator and also has a chief counsel for advocacy and inspector general—all of which are confirmed by the Senate. The SBA has at least one office in every state.

Key Takeaways

  • The Small Business Administration is a government agency designed to bolster and promote the economy by providing assistance to small businesses. 
  • The agency was established in 1953.
  • The SBA is headed by the administrator and deputy administrator who are confirmed by the Senate.
  • The agency offers various resources to small businesses including access to capital, entrepreneurial development, government contracting, and advocacy services.
  • The SBA's loan guarantee program is among its most visible elements.

Understanding the Small Business Administration

The Small Business Administration offers substantial educational information with a specific focus on assisting small businesses to develop and grow. As noted above, the agency has numerous tools for businesses that can be accessed on its website, including a small business planner and additional training programs.

According to its website, the SBA provides the following services to small businesses:

  • Access to Capital: The agency offers a variety of financial resources for small businesses including microlending, or small loans that are issued to those who wouldn't otherwise qualify for financing. Loans are issued by partner banks, credit unions, and other financial institutions.
  • Entrepreneurial Development: This is driven by counseling services and low-cost training provided by the SBA. This is available to both new and existing business owners in more than 1,800 locations across the United States. There's also a mentor program that connects new business owners with retired and/or existing entrepreneurs.
  • Contracting: The SBA reserves 23% in government contracting dollars for small businesses with the help of other federal departments and agencies. The agency guarantees 5% of these contracting dollars for women and another 3% for business owners who are disabled and veterans.
  • Advocacy: The agency acts as an advocate by reviewing legislation and protecting the interests of small business owners across the country. The agency also advocates are presents business owners at the state and federal government levels.

The agency has helped small businesses across the country get access to loans, loan guarantees, contracts, and other services.

Isabel Guzman is the administrator of the Small Business Administration. Prior to holding this office, she had served as the director of California's Office of the Small Business Advocate. 

The SBA Loan Program

The loan programs offered through the SBA are among the most visible elements the agency provides and come with longer repayment periods for small businesses. Keep in mind that the agency doesn't actually issue loans—with the exception of disaster relief loans. Instead, loans are backed or guaranteed by the SBA and issued directly by lenders that meet the agency’s guidelines.

Loans backed by the SBA include the:

  • 504 Loan (or the grow loan), which provides small businesses with up to $5 million in financing to buy the fixed assets they need to run their operations, including real estate.
  • 7(a) loan, on the other hand, is the agency's primary loan program. The maximum loan amount guaranteed under this program is $5 million.
  • Disaster loans and microloans

Small businesses qualify for loans more easily when they are guaranteed by the SBA. The agency also allows entrepreneurs to make lower payments for a longer period of time. Despite numerous attempts to do away with the SBA entirely, many political officials and offices continue to support the agency. The SBA’s ability to offer loans has also been significantly strengthened by the American Recovery and Reinvestment Act (ARRA) of 2009 and the Small Business Jobs Act of 2010.

The SBA has local offices throughout the United States and associated territories, which provide more personalized special events for small business owners. These offices provide in-person, one-on-one counseling services that include business plan writing instruction, and assistance with small business loans.

How the SBA Can Help Start Your Business

The SBA has many resources available for people who want to start their own small businesses. If you're one of those people, this section highlights some of these resources that can take you from start to finish.

Business Planning

This section of the website includes steps and resources related to the development of your business. This includes conducting relevant market research, developing a business plan, and funding.

You can also learn about what you need to do to choose a:

  • Location for your business
  • Suitable business structure
  • Business name

The agency also provides key information about what you need to register your company, getting the appropriate tax documents, as well as permits and licenses. You can also get some insight into what you need to open a business bank account.

Launching Your Business

Launching your business is just as important as starting it, which is why you'll find some of the same resources from the section above seeping into this one. For instance, choosing your location will depend a lot on zoning ordinances and laws. It will also affect the kind of incentives and taxes that apply to your organization.

The SBA's website has more information on these but also provides information on business insurance, which is a very important part of protecting your interests. This helps protect your business from any unforeseen losses that take place during normal operations.

How the SBA Can Help You Manage and Grow Your Business

The agency doesn't just help people start and launch their own businesses, but it also has resources available to help manage and grow them, too.

Management

You can learn valuable tips and tricks on how to manage your finances, hire employees, and pay taxes. Other important information includes staying compliant, how to purchase assets, along with marketing and sales strategies.

Because cybersecurity is a key threat to many businesses, the SBA also provides some common sense tips to stay safe. This section includes helping business owners spot some of the most common scams (like malware and ransomware) and how to understand and assess your risk. You can also use some of the agency's best practices to avoid cyber attacks and access SBA training and events.

This section also deals with certain circumstances like hiring people with disabilities, what to do when you must close your business, and how to recover from disasters.

Growing Your Business

It isn't enough to just learn how to start your business. That's why the SBA also has resources to help you grow. Some of the aids in this section include how to access additional funding, how to expand, and what to expect from mergers and acquisitions (M&A).

As per the agency's mandate, it guarantees a certain percentage of federal contracts to small business owners. As such, the SBA encourages businesses to become federal contractors and has an easy registration process. You can also get the resources you need to improve your bottom line by connecting you with partners to help export your products and services.

You can also find useful information about different types of businesses, such as women-owned, LGBT-owned, and those in rural areas.

The History of the SBA

The SBA was established by President Dwight Eisenhower when he signed the Small Business Act in the summer of 1953. It replaced the Reconstruction Finance Corporation (RFC), which was created under President Herbert Hoover in 1932 after the Great Depression. The newly-formed SBA's mandate was to aid and protect the country's small businesses and ensure they received a fair portion of government contracts and surplus property sales.

The SBA has had a rocky history. In 1996, the agency was under threat of being eliminated by the House of Representatives. However, the agency survived this threat and went on to receive a record budget in 2000. There was also a lot of resistance to its loan program, which led to repeated cuts between 2001 and 2004. That's when certain SBA expenditures were frozen altogether.

Small business owners were among some of the hardest hit during the COVID-19 pandemic. The SBA helped these owners, providing them with two different types of funding. These included the:

  • Economic Injury Disaster Loan (EIDL): This program was designed for businesses to use approved funds for working capital and other day-to-day expenses. Since capital is loaned, it must be repaid. The SBA stopped accepting applications as of Jan. 1, 2022, but loan increases will be approved until funds are depleted.
  • EIDL Advance Programs: Funds are granted to people who filed for EIDL assistance as long as they meet certain criteria. Unlike the loan program, funds approved through this program don't have to be repaid.

What Does the Small Business Administration Do?

The Small Business Administration is a U.S. government agency that provides assistance to small business owners. It has a series of tools available for new and existing entrepreneurs. Its goals include providing business owners with access to capital, developing entrepreneurial spirit, reserving contracting dollars for certain business owners, and advocating on behalf of small business owners.

Where Does the SBA Get Its Funding?

The Small Business Administration receives an annual budget approved by the federal government. This money goes toward salaries, grant and certain loan programs, as well as administration costs. Keep in mind that the SBA doesn't actually provide loans to small businesses. Instead, the majority of loans issued to small business owners through SBA programs are guaranteed by the agency and issued by approved financial institutions and other lenders. This source of capital helps individuals start and grow their businesses

Who Qualifies for an SBA Grant?

The Small Business Administration generally doesn't issue grants. But it does to certain organizations, namely those that promote entrepreneurship in their communities. These include nonprofit organizations, organizations that provide their communities with training and funding (known as Resource Partners), and educational organizations. Grants are not provided to owners who want to expand an existing business or to startups.

Article Sources
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  2. Debt.org. "Small Business Administration."

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  5. U.S. Small Business Administration. "7(a) loans."

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  14. Inc. "SBA Budget Cut--Again."

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  17. U.S. Small Business Administration. "Resource Partners."

  18. U.S. Small Business Administration. "Grants."

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