You’re the Boss Blog: Putting the S.B.A. Into Perspective

Searching for Capital

A broker assesses the small-business lending market.

In this political season, there will be a lot of dialogue about the Small Business Administration as a possible solution to the small-business lending crisis in America. As two examples, the S.B.A.’s administrator, Karen Mills, spoke recently at the Democratic National Convention and Robb Mandelbaum wrote a post for this blog about the effect a Romney administration might have on the S.B.A. budget.

And that’s an important conversation to have. But it’s also important to keep something in mind about the S.B.A.: it is actually a very small part of overall small-business lending in America. This is easy to forget when government officials and politicians are hiding behind S.B.A. programs and stats, using them as benchmark for the state of small-business lending and implicitly suggesting that the S.B.A. can solve all small-business problems.

The numbers are clear. There are 318,396 loans currently being managed by the S.B.A. Meanwhile, there are 17,249,884 small-business loans on the books of banks insured by the Federal Deposit Insurance Corporation. By this measure, the Small Business Administration. administers 1.85 percent of all small-business loans. The S.B.A.’s impact is greater if you compare the loans by dollar volume. The S.B.A. has a little more than $79 billion of loans on its books, compared to the more than $646 billion dollars of small-business loans held by those banks. That’s 12.23 percent.

But even this overstates the power of the S.B.A. Keep in mind that the F.D.I.C. numbers don’t reflect the tens of billions of dollars that are lent out by alternative private lenders — such as factors and  merchant cash-advance lenders — to small businesses. There is no data available for those loans.

Let me be clear, I am a proponent of the Small Business Administration. I believe it’s a good program and that it does important work. This post is not intended to be critical of the S.B.A. or to take a political position. It is meant to say that when we hear politicians talk about changes they intend to make in the Small Business Administration, they are only scratching the surface. If the S.B.A. makes progress, that’s great — but the problems are bigger than the S.B.A.

When it comes to solving the puzzle of improving access to capital for small-business owners, the S.B.A. may be a piece of the puzzle — but it is only a piece. And we should all think about it that way.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2012/09/14/putting-the-s-b-a-into-perspective/?partner=rss&emc=rss