Small Business Administration

Congress and the SBA should assist SMEs in traded sectors in obtaining access to credit, in part by creating a 95 percent loan guarantee program.

Particularly in the wake of the recession, small manufacturers are having a difficult time accessing credit from financial institutions, and several policies could help remedy this. First, to help small manufacturers that have work orders in hand get credit, Congress should enact a 95 percent loan guarantee program for small manufacturers under the SBA 7(a) guarantee program. Second, the Federal Reserve should consider relaxing some of the stringent guidelines it has placed on local banks with regard to the liquidity ratios SME manufacturers must meet to be eligible for commercial loans. This would allow local banks to better understand and service SMEs’ capital requirements, given their particular cash flow constraints.

Congress should direct the Small Business Administration to shift its focus toward traded sector firms.

The U.S. Small Business Administration should focus more on traded-sector firms through its financing programs, including its 7(a) loan guarantee program. However, the SBA does not appear to give any special priority to traded sector firms, treating all industries alike in its funding priorities, in large part because this is SBA’s charge from Congress. But there are significant differences for U.S. job creation and prosperity between a small manufacturer and a small retail firm, for example. The former plays a significantly more important role in driving economic growth and—through the multiplier effect—jobs. Moreover, the United States will anyway have all the retail firms it needs (e.g., that the market demands), since the sector is not traded. As such, Congress should require the SBA to develop a report for Congress within six months on two items: an analysis of all SBA financing by sector (e.g., how much financing went to manufacturing, retail trade, personal services, information, etc.) and a plan for how SBA can significantly increase the share of SBA financing going to firms in traded sectors. Congress should then require that a significant share of SBA lending—both guarantee and direct lending—go to fund scale-up activities for SMEs in traded sectors.

The Administration should create a one-stop website portal for business registration in the United States.

The Administration should task the Federal CIO with redesigning business.gov and undertaking a strategic design review of the federal and state small business registration process, redesigning it to create an integrated business registration Website encompassing both federal and state requirements and contemplating the entire lifecycle of needs for small business start-ups, thus creating a one-stop shop for business registration in the United States. In addition to federal requirements, the portal would incorporate all states’ business registration requirements into an integrated one-stop system. The registrant would need only to visit a single Website to register his or her business both with the Federal government and the relevant state government. The redesigned business registration process would also contemplate the entire lifecycle of needs and concerns for the small businesses. For example, it would bring information forward to the registrant about whether there are loan programs the business is eligible for, such as relevant Small Business Administration (SBA) or Economic Development Agency (EDA) loans, or information about lines of credit from local commercial lenders.

Congress and Small Business Administrators should create a Young Entrepreneurial Fellowship Program.

The Young Entrepreneurial Fellowship program would be a modest Small Business Administration (SBA) program, with funding of $5 million per year, to support the living expenses of 25 young entrepreneurs for two years each. An outside panel of entrepreneurs would help SBA review proposals and business plans from applicants. The fellows would also receive mentoring and other technical assistance as they seek to build an ongoing business. If just one of the 25 fellows creates a successful enterprise, the program would likely pay for itself in job creation and increased tax revenue.