Plan to Consolidate SBA into Larger Agency Causes Concern Among Small Business Owners

883336_64495290_01242012.jpgPresident Obama announced a proposal on January 13, 2012 to ask Congress to authorize the consolidation of several federal agencies that deal with business and trade, including the Small Business Administration (SBA). Other agencies affected by his proposal are the U.S. Trade and Development Agency, the Export-Import Bank, the Overseas Private Investment Corporation, the Office of the U.S. Trade Representative, and several programs operated directly by the Commerce Department. Supporters of the consolidation proposal emphasize the cost savings and added opportunities for small business. Critics worry about transparency and balancing small business interests with those of larger organizations.

President Obama said that the newly-consolidated entity would streamline various government functions and allow a “one-stop shop” for business development, financing, and expansion. He continues to assert his support for small businesses, and he raised the SBA to a cabinet-level agency. This means that SBA Administrator Karen Mills will report directly to the White House instead of the Department of Commerce.

One supporter of the proposal interviewed by CNN argues that consolidation opens up new opportunities for entrepreneurs who might have been deterred by the complicated web of government agencies that deal with business interest. Putting agencies with related roles together under one roof can also save costs for the government, leading to greater efficiency and therefore more support for businesses. Supporters in Congress also say that small businesses could have advocates at higher levels of decision-making after consolidation.

Critics of consolidation worry, first and foremost, that small business interests will have to compete for attention if they are in the same big pot with large, multinational corporations. The giant organizations might inevitably overshadow small business in such an arrangement. Trade groups have also expressed concerns. One organization worries that creating a larger government agency will hurt transparency and make it more difficult to ensure the federal government meets the legal requirement that 23 percent of federal contracts go to small businesses. Another group worries that a larger agency would impact the SBA’s loan programs.

The SBA was formed in 1953 to support small businesses and entrepreneurs and to help businesses in areas affected by disasters to recover. Much of its assistance to businesses is in the form of loans issued by private financial institutions and guaranteed by the SBA up to a certain amount. It also enforces the federal government’s policy of giving a minimum percentage of federal contracts to qualifying small businesses. The SBA focuses on U.S.-based businesses. Other agencies included in the consolidation proposal, such as the U.S. Trade and Development Agency, focus on American businesses abroad. The proposal could potentially open up new opportunities for small businesses that have only availed themselves of the SBA’s programs so far, but critics’ concerns are also important to keep in mind.

States may offer their own programs to support small businesses through loan assistance and more. The New York State Small Business Development Center and the New Jersey Economic Development Authority work with the SBA and state governments to provide resources for small businesses.

The New York business attorneys at Samuel C. Berger, PC offer fixed-fee legal services to businesses and investors who want to do business in New York and northern New Jersey. To speak to a member of our skilled legal team, contact us today online or at (212) 380-8117.

More Blog Posts:

State Small Business Credit Initiative Creates Loans for New York and New Jersey Small Businesses, New York & New Jersey Business Lawyer Blog, January 10, 2012
Expect Slow Business Growth for New Jersey in 2012, says SBA, New York & New Jersey Business Lawyer Blog, December 29, 2011
New Jersey Offers Support to Prospective Entrepreneurs, New York & New Jersey Business Lawyer Blog, December 27, 2011
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