Bush Budget Cuts Could Hurt Small Businesses

(WOMENSENEWS)–President Bush’s budget outline cuts funding to the U.S. Small Business Administration by 43 percent, from $900 million to $540 million, and imposes a total of $168 million in new fees on small businesses seeking the agency’s loans and assistance.

This includes $12 million in new fees imposed on small businesses that use some 1,000 agency-funded Small Business Development Centers located across the country, serving small business owners, many of whom are minority and women entrepreneurs who are leading the way in business creation. At the current time, the centers do not charge fees.

It is also not known how these cuts will eventually affect the 100 Women’s Business Centers, also partially-funded by the agency. The proposed elimination of special programs for low-to-moderate-income individuals could diminish the centers’ ability to assist women entrepreneurs.

An agency spokesperson in Washington, D.C., said that both the centers receive straight-line, appropriated funding which should not be affected by the president’s proposed budget plan.

However, Nydia M. Velazquez, Democratic leader of the U.S. House Small Business Committee, said in a written response to the Bush budget that “small businesses will pay for the president’s tax cuts through higher loan costs and new taxes, disguised as fees, while critical programs spurring investment in low- and moderate-income areas and helping minority-owned businesses will be eliminated.”

Bush Proposed Budget Will Hurt Small Business Programs

These are the several ways Bush’s proposed budget, according to Velazquez, will affect the agency’s programs:

Restrict access to capital by imposing new fees under the 7(a) Loan Guaranty Program and the Small Business Investment Company Program, the agency’s two largest loan programs, resulting in small businesses paying an additional $1,400 to $2,400 for an average 7(a) loan, plus higher interest rates on these loans and also disaster loans.
Eliminate the New Markets Venture Capital Program, the first to provide both venture capital and technical assistance to businesses in low- and moderate-income areas.
Cut the BusinessLINC Progam, a large-to-small business mentor/partnership program, a high priority of the Congressional Black Caucus and also supported by Velazquez and other women in Congress.

Small Business Development Centers Will Feel the Pain

Christian Conroy, associate state director of the Pennsylvania Small Business Development Center, located at the University of Pennsylvania’s Wharton School of Business, says that if the centers are forced to charge fees, this will change their status from a supportive agency to just another fee-based firm, taking money needed for startups or expansion from business owners.

Since 1995, over 1 million women have been counseled and trained by these centers. The programs deliver up-to-date counseling, training and technical assistance in all aspects of small business management to both current or potential small business owners, with special efforts to reach women and male minority members of socially and economically disadvantaged groups, veterans and the disabled.

“The refund of investing in these centers is significant,” says Conroy. “For every one dollar invested in assisting small business owners, our government receives in return, seven dollars and eleven cents in tax revenues.”

Women’s Centers’ Effectiveness Could Shrink

Harriet Fredman, deputy assistant administrator of the SBA’s Office of Women’s Business Ownership explains that these centers are a network of nonprofit organizations located around the country, in Puerto Rico, the District of Columbia, the U.S. Virgin Islands and in American Samoa.”

Also partially-funded through the Small Business Administration, the women’s centers’ purpose, Fredman says, was and still is to assist women in starting or expanding businesses and to reach out to women, particularly those who often have a lack of access to resources for a business startup. The centers assisted approximately 40,000 last year.

For example, Tina Schaffer and Kathy Wilson, partners in a volume mailing business called Letter by Mailing Services turned to Philadelphia’s Women’s Business Development Center for business management training. Wilson says, “Their programs made us realize that we needed to learn much more if we were going to have a successful venture.” And Schaffer added that the center’s president, Geri Swift, and her staff had always been able to answer questions and encourage the pair as the business grew and expanded.

Swift says her center receives as many as 200 phone calls a month from women wondering if self-employment is for them. The center offers entrepreneurial training programs in three top areas: access to capital, marketing and sales. Their counseling includes guidance on how to apply for the federal Small Business Administration loans. And as an affiliate of the Women’s Business Enterprise National Council, the center also offers the national WBE certification program.

The most critical piece in determining the future of these Women’s Business Centers, says Swift, depends on the federal government continuing its support. The dollars coming from the small business agency, she says, “helps to increase our viability and credibility, which leads to more funding and support.”

Law Guarantees Funding for Women’s Centers, but Not the Programs Women Rely On

The women’s centers will stay open, despite the cuts to the programs they rely on to assist their clients, because their funding is mandated by law.

To protect the future of the women’s centers, the Association of Women’s Business Centers was formed three years ago as a separate nonprofit trade association. Swift, a member, says they are a bipartisan, political policy advocacy group that helped put in place the Women’s Business Center Sustainability Act of 1999 to establish a long-term commitment of support by the federal government and allow the centers to apply for additional grants.

Congresswoman Carolyn B. Maloney, D-N.Y., one of 36 cosponsors of this bill says, “Women’s Business Centers can play an important role in providing women entrepreneurs with the technical and financial assistance to transform ideas into working enterprises. I strongly support the Women’s Business Centers and believe they are one of the best success stories at the SBA.”

Geri Swift says, “There is a tendency to think in 2001, women have made it and there is no need for women to get help and assistance along the way, so from my perspective that is a huge challenge–and part of that challenge is because frequently most of the people who make the decisions about funding are men, and until that changes, it is going to be very difficult.”

Although President Bush said in his joint address to Congress that “help for small business means jobs for Americans,” his budget plan does not support this statement. Velazquez says, “He needs to get the message that small business is big business in America.”

Priscilla Y. Huff is a free-lance business writer who testified in 1996 before the Committee on Small Business of the United States Senate about the needs of home-based business owners.