The Small Business Administration (SBA) was established with the passage of the Small Business Act of 1953. The SBA succeeded the small business loan program of the Reconstruction Finance Corporation. The purpose of the SBA is to help Americans start, run, and expand small businesses, as well as aiding, counseling, assisting, and protecting the inteests of small business concerns.

Intrinsic to the SBA is the question: What is a small business? This question does not have a specific answer but Sec. 3(a) of the Small Business Act gives the following guidelines. A small business includes but is not limited to the production of food and fiber, ranching and the raising of livestock, aquaculture and all other farming and agriculture related industries. A small business is likewise independently owned and operated and not dominant in its field of operation. Agricultural enterprises are deemed to be small busness concerns if they, and their affiliates, do not have annual receipts exceeding $500,000. The number of employees, the volume of business, net worth, net income, or any combinations of these factors may be utilized to determine if an enterprise is a "small business." There are also restrictions on using a size standard for categorizing a business concern as a small business by a federal department or agency.

Based on its own information as well as data from the U.S. Department of Labor and the U.S. Department of Commerce, the SBA easily documents the enormous contribution small businesses make to the U.S. economy. The SBA estimates that in 1996 there were approximately 23 million small businesses in the United States, including the 842,357 new employer firms created that year alone. This represented a 2.8 percent increase over the figure for new firms in 1995. Also in 1996, industries dominated by small business concerns were responsible for 64 percent of the 2.5 million new jobs created that year. Small businesses also generally hire approximately 67 percent of first-time workers and provide them with initial job training in basic skills. Small businesses employ 53 percent of the private workforce; provide 47 percent of all sales in the United States; receive 35 percent of federal contract dollars; support 28 percent of high technology jobs; and are responsible for 51 percent of private sector output.

With small business concerns playing such a vital role in the U.S. economy, the SBA offers many services and programs designed to encourage small business start-ups, promote growth, and provide protection within this economic sector. The SBA provides disaster assistance for nonfarm, private sector losses that result from natural catastrophes such as floods, as well as damage from riots and civil unrest. The SBA also has a comprehensive array of financial programs for start-up as well as established small business concerns. Most of these programs offer loan guarantees to private lending institutions. Surety bond guarantees and export financing can also be provided to small business concerns. The SBA also ensures that small business concerns receive an equitable portion of government purchases, contracts, subcontracts, and sales of government property. Loan guarantees can be made by the SBA to state and local development authorities. In addition, the SBA is authorized to license, regulate, and make loan guarantees to investment companies falling within the SBA's definition of a small business.

The SBA also provides guidance in preparing a business plan, widely considered the most important step in starting a new business. A business plan is a blueprint that focuses the goals and helps gauge the progress of the new endeavor. It details the planned business and its major products or services, outlines the management team, and defines targets for sales, growth, new product development, etc.

Additionally, the SBA promotes business initiatives through its counseling, education, and training programs. One such program is SCORE (Service Corps of Retired Executives). SCORE is a free service consisting of thousands of retired volunteers who span the full range of business management—office managers, accountants, advertising and public relations experts, and sales managers. Many district offices also hold pre-business workshops for aspiring entrepreneurs. These sessions offer advice to those who want to start small retail and service businesses.

The SBA assures women, veterans, and minority groups full access to programs and services through its Office of Women's Business Ownership, Office of Veteran's Affairs, and Minority Enterprise Development Program. Another innovative SBA program is the bringing together of small business concerns and former welfare recipients turned job seekers. This program is in relation to the "President's Welfare to Work Initiative" and the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

Aida Alvarez was appointed to head the SBA by President Bill Clinton in early 1997. Under her administration the SBA arranged for 6,360 lenders to make 45,288 start-up and expansion loans worth $9.46 billion 1997.There were also4,131 long-term fixed asset financing loans valued at $1.44 billion for a record $10.9 billion in loan guarantees.

SEE ALSO : Minority-Owned Businesses ; Small Businesses ; Women Entrepreneurs

[ Michael Knes ]


Alvarez, Aida. "A Record Year for SBA." Credit World, January/February 1998, 31-33.

Godfrey, Nicola. "Aida Alvarez." Working Woman, July/August 1998, 26 + .

Small Business Administration. Borrower's Guide. Washington: Small Business Administration, 1996.

——. "U.S. Small Business Administration: Learn about the SBA." Washington: Small Business Administration, 1998. Available from .

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