We talk (and write) a lot at Fundera about the US Small Business Administration (see here, here, or here…). But the SBA’s loan programs are only one of the ways the agency helps small businesses start, grow, and thrive. They also provide counseling, business education, Spanish-language services, lender-borrower matchmaking, and funding for innovation, just to name a few.
If you’re curious to learn more about the SBA and how it might be able to help your business, read on—and be prepared for a lot of acronyms.
The US Small Business Administration, under its current name, didn’t come into existence until 1953.
But its roots can be traced to President Herbert Hoover’s Reconstruction Finance Corporation, created in 1932 to help provide loans for businesses struggling during the Great Depression. The RFC was taken over by President Franklin Delano Roosevelt and became one of his pet programs, lasting until 1957.
The Office of Small Business in the Department of Commerce was the SBA’s other grandparent company. After World War II, it took on some of what are now the SBA’s educational tasks: creating brochures and pamphlets and counseling small businesses.
And speaking of World War II, two other organizations also played a role in the development of the modern SBA: the Smaller War Plants Corporation, created during WWII, and the Small Defense Plants Administration, created during the Korean War.
Wartime production needs tended to be hard for small businesses, who couldn’t keep up with the rapid production of bigger corporations. These two agencies provided loans, encouraged banks to make credit available, and advocated for small business interests, although they were disbanded after each war.
Finally, in 1953 under President Dwight Eisenhower, Congress created the SBA as a consolidation of the RFA, OSB, and wartime agencies.
Even the biggest companies you can think of started off as small companies—and many of them were helped along by the US Small Business Administration.
Under Armour, for example, was started in 1996 by a former Maryland football player, Kevin Plank, who was only 23 at the time. Plank saw a need for exercise apparel that wouldn’t become soaked the way cotton did, so he created a line of clothing that now pulls in billions of dollars of revenue each year.
But where did his startup funding come from?
As you can guess, $250,000 of it came from an SBA loan.
Apple—yes, that Apple—was originally given funding by a venture capitalist named John Hines, whose firm was supported by the SBA: it was part of the Small Business Investment Company (SBIC), which is SBA’s investment arm.
Other companies helped along by the SBA include FedEx, Ben & Jerry’s, Stonyfield Farm, Tom’s of Maine, Nike, Chobani, and JetBlueAirways.
Speaking of Apple, we can thank the SBA for that nifty fingerprint-scan technology on new models of iPhones.
One of their lesser known programs, the Small Business Innovation Research Program (SBIR), awards $2.5 billion dollars’ worth of research grants to small business innovators every year for research and development, and the research needed to develop that fingerprint technology was funded by SBIR.
SBIR also funded the development of several different systems that are currently part of the Mars rover Curiosity, including lithium batteries and a miniature vacuum pump.
The SBIR is managed by the SBA’s Office of Investment and Innovation (OII). Eleven federal agencies, including the Department of Agriculture, Department of Defense, Department of Education, Department of Transportation, and NASA, currently provide funding to the SBIR program. These agencies also evaluate and look at proposals for innovation.
The SBA likes to talk about their “3 Cs,” which is a catchy way for them to explain three of their primary methods of assistance:
…Which is made more accessible to small business owners thanks to SBA loans.
The SBA will guarantee a percentage of the loan offered by one of their partner lenders to a small business owner, which means that they’re promising to pay up if the borrower defaults. This eases the risk for the lender, making them more likely to offer the loan.
The most popular types of SBA loans are the 7(a) loans, a general loan program that can be used for a number of different purposes (including business acquisitions), and the CDC/504 loans, used for equipment or real estate. These are wonderful loan options because they offer longer terms and lower interest rates, but can be tricky to obtain.
The US Federal Government is the world’s largest customer—they spend $500 billion a year in the purchase of goods and services! The SBA assists small businesses benefit from these contracts in two ways:
The SBA has a massive network of physical resources available throughout the country, where you can meet with a mentor or a counselor and receive free advice.
In addition to over 80 regional offices, they partner with Small Business Development Centers (SBDCs), Women’s Business Centers (WBCs), and SCORE chapters, which are staffed by volunteer executives, business leaders, and entrepreneurs who donate their time and expertise to small business owners.
If you need help writing a business plan, finding sources of funding, managing your business, recovering from a natural disaster or selling your product to the government, you can look for a nearby counselor or mentor partnered with the SBA here.
The SBA is especially interested in reaching out to minorities, veterans, and women.
Women- and minority-owned businesses are 3 – 5 times more likely to receive financing from an SBA loan than from a traditional bank loan, according to a study done by the Urban Institute.
But they’re also much less likely to receive funding for an SBA loan than white-owned or male-owned businesses. The SBA’s published statistics from 2015 break down the approval rates for their loans over the year: Only 5% of 7(a) loan approvals went to veterans. Minority-owned businesses received 29% of the approvals for an SBA loan, while white-owned businesses received 57%. And 71% of the loan recipients were male-owned businesses, compared to only 29% for female-owned businesses.
To help improve these statistics, SBA provides counseling and educational services specifically for these groups, who may face more obstacles in starting and growing their business. Through their Office of Veterans Business Development, for example, the SBA offers 4 different programs for veterans considering opening a small business, while the Women’s Business Centers mentioned above provide a resource for women entrepreneurs.
In 2015, over 140,000 clients benefited from the WBC program.
They also offer 3 different programs to help disadvantaged businesses find and benefit from government contract money.
The HUBZone (Historically Underutilized Business Zone) program works with companies located in specific urban and rural areas (check if you’re in one here). The 8(a) Business Development program is intended to help socially and economically disadvantaged businesses. And the Small Disadvantaged Business Certifications let small businesses register themselves as disadvantaged, helping them access that 23% of federal contract money set aside for small businesses.
At the SBA Learning Center, you can take online courses in sales, business development, customer service, cybersecurity, copyrights, and pricing—to name only a few! And when we say “courses,” we don’t mean huge time commitments with homework: most courses take only half an hour to complete.
These are invaluable resources for new and continuing entrepreneurs who want to brush up on essentials, or who have questions about aspects of their business that are unfamiliar to them.
In the Sales course, for example, you’ll learn about sales plans, Customer Relations Management Systems, the four Ps of marketing, how to hire sales employees, and how to make those dreaded cold calls. In the Business Opportunities: A Guide to Winning Federal Contracts course, they’ll walk you through the federal buying market, how to find contract opportunities, and the ways in which SBA can help. And bonus: they’re free.
What do you do if your small business has been running a little too swimmingly—a major flood has wiped out your equipment?
You can turn to the SBA, which offers a disaster loan program. These are low-interest, long-term disaster loans, and they’re actually the only loans from the SBA that aren’t exclusively for small businesses: businesses of all sizes, families, and even individuals can apply for these loans. Loans for physical damage will help you deal with equipment or inventory, while loans for economic damage will help if you’ve lost sales or can’t pay your expenses as the result of a disaster.
The U.S. Small Business Administration recently joined the Small Business Technology Coalition along with several major technology companies like Facebook, Amazon, Zenefits, LegalZoom, and Microsoft. The goal of the initiative is to help small business owners access and use technology that could help them simplify their administration and increase sales.
Zenefits, for example, can help companies with administering payroll and benefits, while LegalZoom offers resources about business formation and protecting intellectual property. The Technology Coalition can help you navigate the overwhelming world of business technology and software by providing you with referrals to services approved by the SBA.
LINC, one of SBA’s newest initiatives, follows the trend of Internet matchmaking sites—by matching entrepreneurs with lenders.
LINC, which stands for Leveraging Information and Networks to access Capital, helps to connect small business owners with lenders who might be able to offer them the funding they need.
From 2007 to 2012, the percentage of Hispanic business owners in the US—out of all business owners—grew from 8.3% to 10.3%, and it continues to increase.
To that end, the SBA has translated its website into Spanish so business owners more comfortable with Spanish can access all the same information as native English speakers about how to write a business plan, how to qualify for a loan, or how to win a government contract.
The US SBA’s current administrator, Maria Contreras-Sweet, knows a lot about small businesses: she’s started three businesses herself, one of which was a community bank in Los Angeles that catered to small and midsize businesses. She’s also a member of President Obama’s cabinet.
The SBA is an excellent resource for small business owners.
Not only do they help to provide some of the best loans out there, but they’re dedicated to helping small businesses in any way they can.
Even if you’re not in the market for an SBA loan, you might find that you could benefit from a quick online refresher course or a meeting with a mentor, or that you qualify for one of their contract assistance programs.