The SBA focuses on providing financial support to small business owners in America. On a national level, the agency does this by working directly with lenders—providing support and financial guarantees to encourage lending activity. The government secures up to 75 percent or 85 percent of the loan amount, acting like a personal guarantor for many entrepreneurs, for loans up to $5 million. The SBA also has 68 district offices throughout the country, which oversee and promote the program from a grassroots level.
To learn more about the work the SBA does and the opportunities it creates for small business owners, we spoke with Beth Goldberg, director of the New York District Office. SBA’s New York District Office encompasses 1.6 million small businesses, which collectively employ roughly 5 million people. Beth has served as district director since 2015, and last year her office reached a new funding record: over $1 billion in small-business loan guarantees.
Can you tell us more about the work of SBA district office?
Beth: Two of our most important missions are to teach lenders—they could be banks or credit unions or not-for-profit agencies—on the use of SBA’s financial tools and the importance of our guarantee: How to increase their lending, increase profitability, to better service their clients and increase their market share, all through the use of SBA’s tools. [The second mission is] getting our money to borrowers who would not normally get a “yes” from a lender. We’re at that market where the lender’s not sure, and it’s a “maybe.” We’re trying to turn that “maybe” into a “yes.”
Another thing that we’re involved in is government contracting. We work with our local partners here in New York, at both the city and the state; $125 billion is reserved for small-business contracting each year by the federal government. One of our primary missions is to educate people on how to use that program and access those dollars. In our 8(a) Business Development program, it’s a nine-year commitment by the federal government. It can be life-changing and life-altering for a small business to secure federal government contracting dollars.
How much in funding runs goes through your district?
Beth: In our district we did $1.017 billion [last year]. It was the first time ever that the New York District Office broke a billion dollars. We have a relatively new district director here and have refocused some of our work and our efforts. Also in FY 17, we guaranteed more loans than any of the other district offices across the country: 2,998 loans. Which, to me, is significant, because it means that we’re reaching more businesses with our services. Nationwide, [SBA does] $31 billion in lending a year. We gave loans to nearly 66,000 businesses last year.
So we have a huge credit line, and people should learn how to access that credit line. It’s not restricted to any one district office in the country; it’s for the entire nation.
Has New York City’s appetite for small-business loans grown in recent years?
Beth: Yes. Our numbers are up 36 percent so far this year, in the number of loans; and we [were] up 5 percent in lending through the end of April. So we’re just out there constantly working with these audiences to let them know that we’re here.
I personally do a lot of lending panels in the district, where we have either traditional lenders or these not-for-profit lenders, so that people can learn how to access [funds] and what bankers are looking for. We just want to feel secure that we’re involved in your business enough to know that you’re going to pay off your loan, and maybe take another loan in the future.
What are some common mistakes you see businesses making? Why do they get denied a loan?
Beth: They often approach a lender after it’s already too late. The most common thing, even when I talk to somebody right now, is when I ask them what they want to use their money for, they don’t have a specific plan. Or, a common answer is—I ask you, “Robert, what do you want to use the loan for?” and you say to me, “How much do you want to give me?” rather than telling me a specific number
It’s not about, “How much am I willing to give you,” it’s how much you need to help your business grow to that next step. Or, how do we keep you operating? Let’s say you have people that don’t pay you in your industry; you have to extend 90-day credit: How do you keep your own staff going? But most people think that you approach a bank when you are desperate for money. You really should be approaching a bank when you’re thinking about growing a business, and include the lender in that process. Bring them in to help you from the beginning.
What types of entrepreneurs are you seeing most of here in New York City?
Beth: I think New York attracts the young and creative. When I did step back into government that was one of the surprises. This whole incubation, shared workspace environment. And I’m not talking just for rent. At the institutions of higher education, we have biotech and biomedical and veterans working in labs together. This shared community of entrepreneurship and energy is in every corner of the city, and in every university. It’s been really wonderful to see and support.
In my generation you wanted to secure that big job with a big company when you graduated college or graduate school. You expected them to send you for training, and if you were happy you’d be there forever. That’s not the case now.
Can you walk us through other programs the SBA offers?
Beth: In the 23 percent of the dollars reserved in the federal budget for contracting with small businesses, that’s further divided down into 5 percent reserved for Women-owned small businesses, 5 percent for Small disadvantaged businesses, 3 percent for Service-disabled veteran owned small businesses and 3 percent for small businesses located in HUBZones. So you can hone in more and more on what the federal government has; you can become more attuned to the needs of certain procurement officers to fulfill those needs. When we do government contracting training out in the community, we touch on all of that.
We have special programs for our veterans called Boots to Business and Boots to Business | Reboot. Whether veterans are transitioning out of the military or they are already out and looking to go into business for themselves, these programs help them understand the services SBA offers. The program focuses on evaluating a business, developing a business plan and other start-up resources to transition into small business ownership. Veterans and their significant other, or whoever is important to them in that business effort, can take a course that’s provided to them through this effort.
And SBA also provides services through our Resource Partners. These business advising centers are another way for SBA to support small business owners. We work with 12 Small Business Development Centers, 4 Women’s Business Centers and more than 20 SCORE chapters throughout the New York District to counsel and educate entrepreneurs on every aspect of growing a business. This is always the first place a small business owner should go if they’re looking to start or work through some growth pains of their company. They’re located all over the district so that anyone can access them no matter where they are located.
Are there any other programs that aren’t a traditional small-business loan?
Beth: The SBA also has an Office of Investment and Innovation. We have an $80 billion portfolio; it’s one of our best-kept secrets. It’s implemented through the Small business Investment Companies (SBIC) program, where through a process, an investment firm can leverage a maximum of $150 million of SBA money and relend it into businesses that are basically too big for our funding programs, but too small for private equity. So we help them in that next stage of growth.
When companies are in their growth stage, it’s not necessarily traditional bank lending or credit union lending that will help that growth: It’s like the next stage of a startup; the startup stabilizes and then it’s ready to grow again. And private equity is looking to invest big dollars. So we have another filler of the private market: gap financing. The SBA has helped launch household names through this program. The companies that have used SBA’s programs are amazing: Apple, Under Armor, Ben & Jerry’s Ice Cream, Callaway golf clubs … household American institutions. Some of them started with either an SBA loan or SBA financing.
We also have something called the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) R&D granting program. There are things on the Mars Rover that were created in this program through innovation. It was also instrumental in the development of 3D printing. This 3-phase funding program helps R&D-focused, cutting-edge small businesses prove whether their idea is viable and then develop a prototype. If the prototype fills a need in the market, the company is encouraged to commercialize. This is a great opportunity with $2.5 billion per year in annual funding with 11 federal agencies participating.
If entrepreneurs in the New York City area want to learn more about all these resources, where can they turn?
Beth: We invite all small business owners to sign up for our newsletter or go to our website, www.sba.gov. They should also visit one of our Resource Partners – the SBDCs, WBCs or SCORE chapters. Our Resource Partners are well connected in the community and really are a gold mines of information. We’re also lucky to have hundreds of chambers of commerce, trade associations and small-business groups. We work through a whole network of partners to get our word out into the local community.