I have also modified our regulations to simplify the requirements of an SBA loan document inspection prior to a secondary market sale. : And we are not going to stop there. We are moving to create a "certificate” which can be freely traded in the marketplace, making the secondary market process even more liquid. All these revisions are backed up by a new official opinion of our General Thus, it is now much easier for participating lenders to sell the guaranteed portions of their SBA guaranteed loans in the investor marketplace, increase their yield on SBA loans, and re-invest the proceeds in other small business loans. And, most important, there is no additional cost to small business. Further, instead of just relying on the traditional resources of the banking community, we now have opened the door to other investors, including insurance companies and pension and profit-sharing funds, which are restricted to dealing with U.S. "full faith and credit" securities. Neighborhood Revitalization Another major goal in the Plan is the restoration of the older urban neighborhoods of America. As a result of the President's concern for the economic difficulties in such cities, he recently appointed a Cabinet-level Presidential Committee on Urban Development and Neighborhood Revitalization, and I am pleased to be a member of that Committee. The Committee's job is to coordinate the delivery of present Federal programs and to recommend necessary changes, including new legislation. Current programs that are effective would be continued. Thus, SBA's "502" program, under which the Agency helps communities by providing Local Development Companies with financing to assist small businesses, will be applied to urban areas in the same way it has been operating successfully in small communities and rural areas. I will be proposing shortly new SBA regulations that will make commercial building firms and homebuilders eligible for loans to finance construction or rehabilitation projects for sale or rent. More Venture Capital We must open up more sources of venture capital, and that is another key of the Plan For Action. The lack of small business access to venture capital is serious. The SBA-licensed Small Business Investment Companies (SBICS) have been able to fill only a small fraction of the need-$135 million in the last year reported. I believe the SBIC program has a far greater potential than it has shown in its 18-year history, and I am forming a special 16-member task forceinvestment bankers, venture capitalists, small business persons, and others—to analyze the venture capital industry from a knowledgeable, market-oriented perspective and come up with their recommendations. It is time for the Congress, the Administration, our own Agency, and the SBICS themselves either to create a meaningful, effective venture capital financing program for small business or to forget having a Government program at all. I call for a new commitment, crossing all jurisdictions, to establish a workable system so that small business may realistically compete with the resources of major corporations. Management Assistance In another important area of the Plan we will offer more low-cost Management Assistance across the board-recruiting more volunteers in SCORE/ACE, professional associations, and universities. The latter includes implementation of the University Business Development Center (UBDC) concept of opening up the entire resources of universities to new and existing businesses. A person who does not have management skills will take our money and dissipate it and not employ very many people in the process. The tragedy of our schools today is that there are too few courses offered in free enterprise or the real meaning of how to run a business. Most business schools seem to prepare one to be the executive vice president of a giant corporation. In real life, most people get to be executive vice president, first mate, and janitor of their own relatively small businesses. Preparation for small business is part of the role the SBA can play in working with the educational system. Other Assistance Areas Minority enterprises need increasing help, and the Plan seeks to integrate all our program activities more fully into the small businesses of blacks, SpanishAmericans and all other minorities, using an “account executive" approach. i.e., a total package of all our programs to those seeking help. We are increasing our advocacy and public information programs because our surveys reveal that the services SBA has to offer are known to only a small percentage of the small business community. This includes "Project 1776", a major drive for 1,776 speaking engagements and other appearances by SBA management at business and civic forums by the end of this Bicentennial year. Our basic goal in Procurement Assistance is to accelerate small business' share of government contracts and subcontracts through increased and more effective liaison with procuring agencies and large prime contractors. Finding such government markets is one of the most valuable services we can provide to businesses-contracts do not have to be paid back. We are going to develop an aggressive program to identify international markets and joint venture opportunities for small businesses with export potential. In my travels aboard, I found the common complaint by foreigners is that there are few American salesmen trying to sell American goods, which are in demand. Small firms can capture those sales just as well as large. The SBA will conduct an International Symposium on Small Business in November 1976 for an exchange of ideas, concepts, information and results of research, including the potential of increased trade relations. Over 100 countries have been invited to this Washington, D.C. conference, which will be cosponsored by the Department of Commerce, Department of State, National Federation of Independent Business, and the American Assembly of Collegiate Schools of Business. Freedom at Stake I enter a new year for the Small Business Administration with a deep sense of responsibility toward helping the heart of American economic enterprisesmall business. For it is not just the businesses that are in jeopardy, but our whole way of life. It is my belief that small business is the voice of economic freedom in America, and that it is essential to the preservation of all the other freedoms we cherish so much. Since they are inseparable, if we lose one, it is inevitable that we will lose the others. We therefore have a solemn duty, an obligation, to assist and strengthen our small business community. Mitchell P. Hikelinch Mitchell P. Kobelinski 223-150 O 76 - 2 The Year Economic Conditions On balance, Fiscal Year 1976 was a good year for small business. It responded to Administration efforts to stimulate economic recovery through the private sector, and control inflation. There was significant activity to correct the biases in the tax laws against small business. The number of small businesses showed a healthy increase. New incorporations rose sharply, and fewer businesses failed. Availability of bank funds for loans was better. The cost of money, both shortand long-term, was lower. Credit from finance companies increased significantly. The housing industry advanced moderately. Retail sales and manufacturing profits improved. Loans Approved Small business received the second highest dollar amount of loan approvals in the Agency's history, nearly $2.1 billion, an increase of 30% over the previous year. It resulted in the creation and maintenance of approximately 288,000 jobs among the new and existing businesses assisted. Financial Assistance Total SBA financial assistance to small business, representing business loans, disaster loans, surety bond guarantees, investment company funding, and other SBA programs, was approximately $3.2 billion. Current Portfolio During the year, the Agency passed the $20 billion mark in total business, disaster, and investment company loans historically. In that period, 826,370 loans have been approved. The current portfolio of loans outstanding is 233,165 amounting to $7.4 billion. Help for Minorities The Agency's assistance to minority persons rose. Efforts were increased in behalf of American Indians. The Agency made 5,544 minority business loans for $262 million, more than 14% better than the previous year. 8(a) government contracts to the socially or economically disadvantaged grew to $369 million. Venture capital and management assistance were also at a higher level. Management Counseling Management assistance to owners and managers of small firms through individual counseling or training in seminars totalled more than 300,000, an increase of 17%. The University Business Development Center concept of opening up the entire resources of colleges to business persons was launched. At the same time, the number of universities participating in the Small Business Institute program of management counseling increased to 385. An Executive Order transferred back to the SBA all of the management assistance functions of the Service Corps of Retired Executives (SCORE) and Active Corps of Executives (ACE). Contract Procurement Procurement of government contracts for small business is projected at $18.9 billion, a record high. Sales of government property to small business, such as timber, also showed substantial gains. Legislation Passed New legislation during the year included a general increase in the dollar limit on individual business loans, gave more dollar leverage to Small Business Investment Companies, provided for a massive study of U.S. small business conditions, and made small farms and agriculture related industries eligible for all SBA programs for the first time. New Standards An across-the-board increase in maximum size standards was effected, allowing for inflationary trends over past years. The adjustment covered loans, all other types of financial assistance, and procurements. In effect, the move allowed a greater number of businesses to qualify as "small", as defined in terms of dollars, and thereby eligible for SBA assistance. Plan for Action The Agency sponsored a weeklong Bicentennial Salute to Small Business, at which time the Administrator announced a new "Plan for Action" to generate more productive jobs and make more capital available to small business. The Plan includes processing loans faster, increasing incentives for banks to participate in SBA loans, putting SBA assistance capability into the revitalization of older urban neighborhoods, opening up additional venture capital, greater cooperation with universities to bring more management knowhow to small businesses, and development of more foreign trade opportunities. |