In a recent interview, the head of the SBA claims that the lending climate has improved since the economic meltdown in 2008, but access to credit remains a challenge for many small businesses. SBA small business administration loans have evolved over the last few years to fill the gap left when the banks were not lending, particularly to small business. Loan guarantees have been raised, fees have been reduced,  and activity has increased from both community banks and larger banks. Ms. Mills claims it is because they realize that the pendulum swung too far and they are refocusing on getting working capital into the hands of small businesses.  As a result, the SBA loan volumes have gone up and the last fiscal year was a record year. The US is dependent on small business to drive economic growth. This sector of our economy has suffered in the downturn. In this kind of challenging climate, cash is king.  Small businesses need access to opportunity — access to credit.  Companies that have faced rejection by the banks, often find the working capital they need from an SBA loan or an asset based loan.

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Source: The Daily Record, May 23 2012, by Associated Press

When Karen Mills became head of the Small Business Administration in April 2009, the U.S. was in a recession and a credit crisis. It was hard, if not impossible, for many to borrow money.

Karen Mills has been head of the SBA since April 2009.

It also was a difficult environment for a government agency charged with helping small businesses. But Mills came to the SBA after a career as a venture capitalist — she was in the business of buying small companies and building them up. Mills, 59, was one of the founders of Solera Capital, a private equity firm in New York. She was also president of MMP Group, which owned companies involved in consumer products, textiles and industrial components.

The SBA has grown significantly under Mills. It had shrunk under the Bush administration, with its work force falling to 2,000 employees from 2,800. There are now 3,000 employees under Mills. In January, the SBA regained its status as a Cabinet-level agency that it lost during the Bush years.

Mills spoke with the Associated Press recently.

Question: What does the SBA see as the greatest challenges that small business owners face?

Answer: Over the past several years, the greatest challenge that small business owners faced was access to capital. Because in October 2008, credit markets froze and small businesses rely on banks for credit and the banks were not lending, particularly to small businesses. At the Small Business Administration, we run a guarantee program in which we have a $90 billion portfolio of guaranteed loans. So we’re one of the most important actors in giving access to capital to small businesses when the market is not functioning. And we were able to step into the market with enhanced loan guarantees.

In the (American) Recovery (and Reinvestment) Act (of 2009), we raised our loan guarantees to 90 percent (of the amount of money borrowed, up from 75 percent to 85 percent) and we reduced or eliminated or the fees. Our (loan) volumes went up and the last fiscal year, we had a record year. We did $30 billion worth of loan guarantees and that is $30 billion into the hands of small businesses. So, we are now back at above 2008 levels at the SBA in terms of loan volume. But loans are not the only thing that small businesses need. It turns out, if you give them the money without also some other tools, it is not as effective. So, a second critical aspect of what we do that small businesses benefit from is mentoring, advice and counseling. And we have data that shows that if you are a small business who has a long-term counselor, you get better sales, you get more longevity, you hire more people.

Q. We’re still hearing that many banks are wary about lending to small businesses. What is your sense of the lending climate?

A. In the last several years, we’ve brought over a thousand community banks back to SBA lending who had not made a loan since 2007. In addition, this year we went back to our bigger banks, our 13 largest lenders and each of them has stepped up and committed a total of $20 billion in incremental small business lending over the next three years. So we have increased activity from both community banks and our larger banks because they realize that the pendulum swung too far and they are refocusing on getting capital into the hands of small businesses.

Q. What do you see as your biggest accomplishment in helping small business?

A. What we have been able to do in addition to really having a record year is bring a comprehensive view of the tools that small businesses need. Instead of operating in silos at the SBA, we see our role as providing a continuum of services to small businesses. So for instance, you might need a counselor and adviser when you start up. Then you might need access to capital and then as you grow you might see an opportunity to do a government contract, which is a program that we oversee. And heaven forbid there’d be a tornado or a hurricane. We’re also there in the event of disasters. So we view ourselves now as helping small businesses do what they do best, which is grow and create jobs.

Q. What has been your biggest challenge?

A. This is an economy now that is ever more dependent on small businesses and in our economy today, we need all of our entrepreneurs, from every community. In this downturn small businesses have really suffered and many sectors of the country and many small business owners have really faced a challenging time. At the SBA, we know that our fastest-growing segments in small business are women-owned small businesses, Hispanic-owned small businesses. Veterans and returning veterans. All of our diverse constituencies in this country need a path to entrepreneurship. Our biggest challenge is to make sure they have access and opportunity, especially where the market is not providing a broad enough path to that access and opportunity. We know that half the people in this country own or work for a small business and that two out of three net new jobs are created by small business. So if we want to make sure the economy continues to grow and that we have competitive advantage around the globe, we have to give all of these small business owners a path to success.