Voices That Matter: Karen Mills, Administrator of the SBA

Small business is big business to the United States government. Small businesses generate over 70 percent of new jobs, and half of the nation’s work force either owns or is employed by a small business. 

To find out how the government is working to help small-business owners, Business on Main spoke to Karen Mills, the new administrator of the Small Business Administration, about the SBA’s emerging role in the nation’s economic recovery.

Business on Main: When you were first invited to become the head of the Small Business Administration, did you and President Obama discuss a list of objectives?

Karen Mills: Yes, I was on President-elect Obama’s transition team and first met him in Chicago. He came into the room and said, “Hi, I’m Barack. I want to talk about the SBA and how we’re going to stimulate the economy and improve small business.” The two of us had a long discussion about what can be done.

Does your mission at the SBA reflect Obama’s grassroots campaign values?

Absolutely. The President has seen how small business is the path to middle-class prosperity. And for immigrants, which is my family’s story, you come to this country looking for the American dream. You can find it by starting and growing a small business. 

How does the SBA help America’s startups and small-business owners?

The SBA is a remarkable jewel. There are 2,000 people who work at the SBA, plus over 14,000 resource partners and several thousand more lenders. Through this network, we provide small-business owners with counseling, training and access to capital.

It seems every few weeks the SBA announces a new initiative or loan program for small-business owners. Are business owners responding?

 
In March, the Congress and the President approved $730 million in Recovery Act funding for SBA programs. The first thing we did was increase our loan guarantee to encourage small-business lending from our partner banks. Since the signing of the act, weekly loan volume is running almost 40 percent higher and over $5.5 billion has been loaned to small businesses.

Who are these loans going to?

The SBA tends to over-index to minority, women, veteran and immigrant-owned businesses. We are three to five times more likely than a conventional lender to back a loan to a woman- or minority-owned business.

With these new loan programs, could entrepreneurs who may have previously been turned down for credit get a loan today?

It’s a very good time to come to the SBA, because we’ve increased our loan guarantees to partner banks and also reduced or eliminated SBA loan fees. There is story after story of business owners who were able to use these fee savings to hire another person or save someone’s job.

One of the most recent loan programs offers five-year, no-interest loans to certain business owners. This seems too good to be true.

 
America’s Recovery Capital, or ARC, is an excellent program that will benefit thousands of small businesses. ARC loans provide up to $35,000 to viable businesses that are undergoing economic hardships. The loans are made by banks, but 100 percent guaranteed by the SBA. They are interest free to the borrower. Businesses can also use ARC loans to pay down business credit-card debt.  

Who defines what type of business is viable, the SBA or the commercial lender?

The SBA defines the criteria because we provide a 100 percent loan guarantee to the lending banks.

Could critics of the Obama Administration say that good taxpayer money may be chasing businesses that are not viable?

The ARC program is not for startups, but for businesses that have been profitable in the past. The point is to try to temporarily bridge them, as we say, over troubled waters. 

Is there an expiration date to this program?

ARC is offered on a first-come, first-served basis. We think we have program funding to accommodate about 10,000 businesses.

President Obama wants to generate new jobs through the development of environmentally friendly technologies. How will the SBA help realize this vision?

Many green jobs are going to be generated by small business. The Department of Energy has asked us to partner in a number of programs that have been funded by the Recovery Act. And, by the way, green doesn’t just mean solar or wind power. There are enormous opportunities for entrepreneurs in being a part of the many supply chains that create or deliver new green technologies.

How can green small businesses learn more about these funding opportunities?

We’re going to work with the Department of Energy and all SBA counselors to reach out to entrepreneurs to make these programs accessible. Throughout the green supply chain, we also hope to help small-business suppliers grow into greater businesses by providing capital and expertise. We want them to become ongoing job creators even after the Recovery Act program is complete.

Federal contracts are a great way to prop up small businesses. The Department of Defense is by far the largest federal contractor, yet in recent years has not met any of its small-business contracting goals, including for veteran business owners. How can small business get more lucrative contracts?

The SBA is responsible for making sure that 23 percent of all federal contracts go to small businesses. One of the reasons why it is difficult to meet these goals is finding small businesses that can perform these contracts. So it’s a priority to us through our procurement specialists to play matchmaker to bring small businesses to the attention of the folks awarding the contracts.

As part of the Recovery Act initiatives, we have put up a Web site to list contract opportunities.

Is now a good time to start a business?

One of America’s greatest assets is its entrepreneurial spirit. We also have entrepreneurial know-how, capital and rule of law that other countries don’t have. 

In the Recovery Act, the SBA secured $50 million more in loan capability for micro loans in the Recovery Act. These loans offer up to $35,000 to startup businesses, plus technical assistance and counseling. 

Separate from loan programs, what can the SBA offer to entrepreneurs who work from their homes?

One area of policy that we are active in is health care. Half of the businesses that employ under 10 people don’t provide health care. It’s not because they don’t want to, they just can’t afford it. The SBA is engaged with the White House health care team on exactly how to ensure that these small businesses get access to affordable health care.

Given that small business represents 99 percent of employer firms in the U.S., shouldn’t the SBA gain cabinet-level status?

I’d say we have more than a seat at the table. I have been asked to serve on the National Economic Council. We are engaged in health care, federal contracting, and the President’s initiatives on innovation and green jobs. We are collaborating with the Veteran’s Administration to create opportunities for our troops as they come home. I am engaged with the Cabinet in driving the success of the Recovery Act. The White House is relying on the SBA network to activate small businesses. We all know it’s the engine for economic growth in this country.  

How will your background in venture capital influence your leadership agenda?

I’ve spent 25 years growing small businesses, mostly in manufacturing. I understand the challenges small-business owners face and what it takes to create a job. This is in my bones. I know what businesses need to survive and flourish. And if small businesses flourish, so will the United States.

This interview was conducted, compressed and edited by Susan Schreter for Business on Main.

Susan Schreter is a 20-year veteran of the venture finance community and a university educator in entrepreneurship and social enterprise development. Schreter is the founder of Takecommand.org, a community service organization that empowers entrepreneurs to fund and manage their businesses with confidence.