President Trump ordered the firings of a few hundred probationary employees at the Small Business Administration earlier this month, as part of his effort to reduce the size of the overall federal workforce. A few hundred people will probably not have a significant impact at the agency, but it does invite a question: Is it not time to eliminate the SBA altogether?
It’s not as if this question hasn’t been raised before. In 1986, President Reagan proposed abolishing SBA in two separate budget proposals but failed. In 2012, President Barack Obama attempted to “reorganize” the agency, effectively placing it under the Department of Commerce. That didn’t get far, either.
Politicians hate to take positions that draw the ire of the enormous voting block of small-business owners. But I think it’s time to reconsider. As a small-business owner myself who has worked with and reported closely on countless small businesses over the past 25 years, I have come to the conclusion that the SBA is a largely failed experiment.
According to the agency, in fiscal 2024, the SBA provided “billions of dollars of loans” to “a record 100,000” individuals and small businesses in disaster areas, and at least $37.7 billion in 7(a) loans, 504 loans and microloans to small businesses that otherwise would not have been able to receive financing from traditional banks. This is important work that should continue.
Less important are the agency’s services.
The SBA runs programs for “Regional Innovation Clusters” and “International Trade Promotion” and “State Trade Expansion.” It has a program to help small-business owners get government contracts. It has other programs called “Empower to Grow” and for the “HUB Zone.” I’m sure the people involved in these programs can list a number of reasons why they shouldn’t be eliminated, and perhaps they’re right. But the only time I see them in action is when they’re sitting behind a table during a regional conference or handing out pamphlets to academics, employees at nonprofits and the odd business owner.
Are all these programs really effective? Are they the best use of our taxpayer dollars? I’m sure some businesses are benefiting, but what’s the return on investment?
I’m probably not being fair here, but that’s what I see. And the truth is that I can count on one hand the number of my own small-business clients who have taken advantage of these services, if they even know about them. Why? Because experienced business owners aren’t exactly pre-disposed to take counsel from government bureaucrats.
That’s not to say that parts of the SBA don’t provide great counselling and other services to small businesses. SCORE and the network of Small Business Development Centers are excellent resources. But in my experience, their value varies by location and their expertise can be limited, depending on who is providing the help.
I have publicly been a fan of prior SBA Administrator Isabel Casillas Guzman. “As a small-business owner and advocate, I have watched other SBA administrators with little enthusiasm,” I wrote a year ago. “[Guzman] been working hard and she’s been visible. And that’s what this agency needs: more visibility and more awareness.”
But even with such a talented person at its helm, what exactly did she accomplish? Was there a significant impact in awareness? Did the agency’s level of services, expertise and value noticeably increase for the 33 million eligible small businesses that could benefit? I never saw that, unfortunately. All I saw was lots of photos taken with lots of business owners of lots of different colors and genders.
This has always been my biggest complaint about the agency: it consistently ignores its core demographic.
Of course it’s important to support minority-owned businesses. But I speak to thousands of business owners every year at trade associations across the country, and these are not the people the SBA seems to make a fuss about. Why? Because it’s not politically expedient to admit that 85 percent of our nation’s business owners are white, 76 percent are men, and more than half are over the age of 50. These are not freelancers or side-giggers, mind you — these are the small-business owners who employ people and who could actually benefit from the SBA’s services.
You don’t see many photos of these business owners in the SBA’s promotions or on its website. We are not the cool, sexy, hip owners of an origami store or craft cookie shop in an urban development zone. We’re the people running old, boring unsexy family businesses — and yet we are desperate for help competing against China, big corporations and big government.
One other note: I don’t really blame the SBA for mishandling all of the fraudulent COVID loans. If anything, it only proves just how useless the agency can be, even when carrying out one of its core missions, which is providing financing to truly deserving small businesses.
That is why it’s not unreasonable to suggest eliminating the agency.
We can of course keep its best programs. We can move its disaster funding to FEMA, where it belongs. We can move its loan programs to Commerce. Let SCORE and the Small Business Development Centers continue to operate with funding from Commerce, but let them operate more independently as quasi-public entities and raise money from sponsors, subscribers and clients of their own (with a mandate to continue providing free services to those businesses in need). Divert support to private nonprofit groups that do a better job helping businesses with startup financing and getting government contracts.
The SBA was created in 1953 under then-President Dwight Eisenhower as a political gesture of outreach to the small-business voting bloc. It has grown to have as many as 11,000 employees with a total budget, including its loans, of about $1 billion. (Unfortunately, operating budget information is not readily available to the public.) Its administrators have been in the past a toothless position in some of the presidents’ Cabinets, and spending most of their time pursuing photo ops eating pastries with business owners in Kalamazoo or defending themselves to the House’s Small Business Subcommittee.
The SBA was an experiment that never really succeeded. Considering how everything in the federal government is now being scrutinized, now may be the right time to end that experiment. There are plenty of ways the federal government can support small businesses that would make a bigger impact.
Gene Marks is founder of The Marks Group, a small-business consulting firm.
