What Is the Small Business Administration (SBA)?

What Is the Small Business Administration (SBA)?

Let me tell you about the Small Business Administration, or SBA—it's a U.S. government agency set up to strengthen and promote the economy by helping small businesses across the country. Created back in 1953, the SBA's main role is to guide people who want to start and expand their own businesses. You'll find a range of tools on its website that can assist both new and established small business owners. The agency is led by an administrator and a deputy administrator, along with a chief counsel for advocacy and an inspector general, all of whom get confirmed by the Senate. The SBA maintains at least one office in every state, the District of Columbia, and various American territories.

Key Takeaways

The Small Business Administration, established in 1953, functions as a government agency aimed at bolstering and promoting the economy through direct assistance to small businesses. It's headed by an administrator and a deputy administrator, both confirmed by the Senate. The agency delivers various resources to small businesses, such as access to capital, entrepreneurial development, government contracting, and advocacy services. One of its most prominent features is the loan guarantee program.

Understanding the SBA

The SBA delivers a wealth of educational information focused on helping small businesses develop and grow. As I mentioned, the agency offers numerous tools on its website, including a small business planner and additional training programs. According to the SBA's site, it provides small businesses with access to capital through options like microlending—small loans for those who might not qualify otherwise, issued by partner banks, credit unions, and other financial institutions.

Entrepreneurial development comes via counseling services and low-cost training, available to new and existing owners in over 1,800 locations nationwide. There's also a mentor program pairing new owners with retired or experienced entrepreneurs. For contracting, the SBA reserves 23% of government contracting dollars for small businesses, working with other federal entities, and guarantees 5% for women-owned businesses and 3% for those owned by disabled veterans.

On advocacy, the SBA reviews legislation and safeguards small business interests nationwide, advocating at state and federal levels. Over the years, the agency has assisted countless small businesses in securing loans, guarantees, contracts, and other services.

Fast Fact

Isabella Casillas Guzman serves as the SBA administrator; before this role, she was the director of California's Office of the Small Business Advocate.

The SBA Loan Program

The SBA's loan programs stand out as some of its most visible offerings, featuring longer repayment terms for small businesses. The agency doesn't issue most loans directly—except for disaster relief ones—but instead guarantees them, with lenders handling the issuance under SBA guidelines.

Among the backed loans are the 504 loan, providing up to $5.5 million for fixed assets like real estate; the 7(a) loan, the primary program with a maximum guarantee of $5 million; disaster loans to aid recovery from declared disasters; and microloans up to $50,000, averaging around $13,000, for startups or expansions including some nonprofit childcare centers.

Small businesses find it easier to qualify when loans are SBA-guaranteed, allowing lower payments over extended periods. Despite efforts to eliminate the SBA, it persists with support from political figures, strengthened by acts like the 2009 American Recovery and Reinvestment Act and the 2010 Small Business Jobs Act.

Important Note

The SBA operates local offices across the U.S. and territories, offering personalized events for small business owners, including in-person counseling on business plans and loan assistance.

How the SBA Can Help You Start Your Business

If you're looking to start your own small business, the SBA has plenty of resources to guide you from idea to reality. In the business planning section of their website, you'll find steps and tools for market research, developing a business plan, and securing funding. You can also learn how to select a location, choose a business structure, and pick a name.

The SBA covers what you need to register your company, obtain tax documents, permits, and licenses, and even open a business bank account. When it comes to launching, many planning elements carry over, like location choices influenced by zoning and taxes. The site also details business insurance to protect against operational losses.

How the SBA Can Help You Manage and Grow Your Business

Beyond starting up, the SBA provides resources for managing and growing your business. On management, you'll get tips for handling finances, hiring employees, paying taxes, staying compliant, purchasing assets, and developing marketing strategies. Cybersecurity is a big focus, with advice on spotting scams like malware and ransomware, assessing risks, and using best practices to prevent attacks, plus access to training and events.

This area also addresses hiring people with disabilities, closing a business, and disaster recovery. For growth, resources cover additional funding, expansion, and mergers and acquisitions. The SBA ensures a percentage of federal contracts go to small businesses, with an easy registration process for becoming a contractor. You can connect with partners for exporting and find info on businesses owned by women, Native Americans, veterans, minorities, LGBTQ+ individuals, and rural operators.

The History of the SBA

President Dwight Eisenhower established the SBA by signing the Small Business Act in 1953, replacing the Reconstruction Finance Corporation from 1932 under President Hoover. Its mandate was to aid and protect small businesses, ensuring they got fair shares of government contracts and surplus sales.

The SBA's history has been turbulent—in 1996, the House threatened elimination, but it survived and received a record budget in 2000. Loan programs faced cuts from 2001 to 2004, with some expenditures frozen. During COVID-19, the SBA supported hard-hit owners with Economic Injury Disaster Loans (EIDL) for working capital, which required repayment, and EIDL Advance funds that didn't, though applications closed in 2022.

What Does the Small Business Administration (SBA) Do?

The SBA assists small business owners with tools for new and existing entrepreneurs, aiming to provide capital access, foster entrepreneurship, reserve contracting dollars, and advocate for small businesses.

Where Does the SBA Get Its Funding?

The SBA's annual budget comes from federal government approval, covering salaries, grants, loans, and administrative costs. Remember, the SBA guarantees most loans rather than issuing them, helping individuals start and grow businesses through approved lenders.

Who Qualifies for an SBA Grant?

The SBA typically doesn't issue grants to individuals but provides them to organizations promoting business ownership, like nonprofits, resource partners offering training and funding, and educational groups—not for expanding existing businesses or startups.

The Bottom Line

The SBA stands as the federal government's primary resource for fostering U.S. small business growth, offering loans mostly through third parties to start or expand your business, along with programs to build knowledge in taxes, marketing, cybersecurity, and more. It issues few grants, mainly to organizations promoting entrepreneurship, and advocates for owners. With offices nationwide, during COVID-19, it delivered essential loans and grants to impacted small businesses.