Masonry Magazine October 1965 Page. 9
The U.S. Small Business Administration
By Ross D. Davis
Executive Administrator
Small Business Administration
A 74-year-old grocer in Cordova, Alabama, sought financing for needed repairs and expansion of his small store. His needs were ignored by local lending institutions, possibly due to the age of this ambitious businessman. Competition was mounting, and although the little grocer rendered a community service, he was suffering a loss in trade.
He turned to the U.S. Small Business Administration for the required financing. His application for $4,000 was filed with SBA on July 8, 1965. Less than a month later a check for the full amount was in his hands.
The loan enabled the little businessman to modernize his store and add to his inventory. It also permitted him to operate with a small amount of working capital-holding him over until business picked up again.
The story of this 74-year-old businessman is one out of some 56,000 loans totaling more than $2.5 billion made by the U.S. Small Business Administration to owners of small concerns.
SBA loans go to all types of businesses manufacturers, wholesalers, retailers, the service trades, dental and veterinary clinics, nursing homes, hospitals, and others.
All SBA business loans are made at 55½ percent interest, except in areas of substantial unemployment when the agency's rate is reduced to 4 percent.
SBA business loans are of two types participation and direct. Since the Agency is not in competition with America's banking system, but rather encourages small business loans through local lending institutions, SBA's bank participation loans are the greatest number made. About 60 percent of the loans by SBA in its 12-years of operation have been made in participation with banks.
The Agency will make a loan by itself when bank participation is unavailable for long-term periods, or where reasonable interest rates cannot be obtained.
The loan funds may be used for construction, purchase of machinery, equipment or inventory, or for working capital. SBA will lend up to $100,000 to any one borrower. However, when a bank provides at least 25 percent of the loan, SBA may lend as much as $350,000.
More and more small loans are being approved by SBA for all types of businesses. During fiscal year ended June the Agency provided financial help for more than twice as many small businesses as it did the year before. Long-term loans totaling $418.1 million went to 13,420 small firms in fiscal 1965, compared to 6,288 business loans for $312.2 million the previous year.
Nearly 60 percent of SBA's business loans in 1965 were under the agency's small loan program, which allows loans up to $15,000 for up to 6 years. SBA, then, is reaching smaller firms most in need of government financial assistance.
This high level of SBA lending is a direct reflection of present booming business activity, and an indication of the confidence the business community has in the future. Other types of financial assistance available from SBA include loans through local development companies, and loans and equity capital from SBA-licensed small business investment companies. The Agency also makes disaster loans at 3 percent interest rate to businesses of any size to help rehabilitate or reconstruct property destroyed or damaged in natural catastrophes, such as storms, floods and earthquakes. There is no monetary limit on disaster loans.
Financial aid is one of several major activities of the Agency. Just as important is its program of help to small firms in getting government contracts.
SBA has worked out agreements with military and civilian purchasing agencies to set-aside Federal purchases for exclusive bidding by small firms.
SBA's contract help covers every facet of government purchases from nuts and bolts to items vital to the inner-workings of missiles and other spacecraft.
In one case, SBA contract help was responsible for what apparently is an impending transition of a Colorado firm from the "small business" category to the "big business" bracket.
This liquid oxygen fuel cleaning business, primarily engaged in rocket and missile fuel cleaning, opened its doors in July, 1963.
The firm appealed to SBA for contract help.
SBA representatives told the company's officers how and where to bid on various government purchases, and put them in touch with prime contractors in the missile and space-craft fields for subcontract opportunities.
Today, only two years later, the company is recognized as one of the outstanding systems cleaning firms in the Rocky Mountain area and is in a position to continue to provide a needed competitive service to the missile industry for years to come.
The company recently wrote SBA saying "We anticipate a rapid growth and expansion which should put us in an annual gross volume of over a million dollars within a year. Since the next time we may be writing you we may be a "large business, we would like to take this opportunity to thank you while we are still small... Small businesses have a strong ally in the Small Business Administration."
One of the prime reasons for small business failures is lack of management know-how.
And the small businessman, whether he be the owner of a little drug store or a missile subcontractor, may fail within the next 12 months or so if adequate management methods are not a primary part of his business.
To overcome management inadequacy, SBA conducts various training activities for established small businessmen as well as for prospective business owners.
These include courses cosponsored with educational institutions, trade associations, and civic organizations for the teaching of management tactics and up-to-date mehods of operating a business.
Publications on various aspects of managing a business (continued on page 24)