Small Business Administration (SBA)

About the SBA

Although the SBA was not officially established until 1953, there were other agencies that acted in a similar manner in prior years.  Much of the work of the SBA was started by President Herbert Hoover in 1932.  The agency at that time was Reconstruction Finance Corporation (RFC) and it was established to assist businesses hurt by the depression. Later (1942, during WWII) Congress created Smaller War Plants Corporation (SWPC) to provide direct loans to small business, worth with larger banks to provide credit to small business and to assist small business to obtain contracts.  The SWPC disbanned after the war and activities previously handed by them were turned over to Reconstruction Finance Corporation.  Since many believed that the primary cause of failure in small business was lack of knowledge, the Office of Small Business (OSB) continued to provide counseling and informational brochures for small business entrepreneurs.

In roder to facilitate small business government contracts, Congress created the SDPA during the Korean War.  This group was responsible for certifying small business and lending was still handled through the RFC.  The Small Business Act of July 30, 1953 created the Small Business Administration and Congress defined their function as a group that would "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." The charter also stipulated that the SBA would ensure small businesses a "fair proportion" of government contracts and sales of surplus property."

While the SBA continued to help make direct loans, guarantee bank loans and help with loans for those who faced devastation from natural disasters, they also continued to help businesses with information including training, assistance and help procuring government contracts. In 1958, the SBIC (Small Business Investment Company Program) was formed and helped provide debt and equity investments for higher risk businesses.  The EOL (Equal Opportunity Loan) Program was established in 1964 for the sole purpose of providing those who were unable to secure business loans (typically due to income restraints) but had good possibilities.  Today, the SBA continues to work on these pograms and they offer a variety of porgrams to help encourage new small businesses.  Today, the SBA continues to offer specialized programs to minorities, armed forced veterans, assistance for international trade, outreach to women and continue to provide information to small businesses regarding federal contracts and management of small business.

Source: SBA.GOV/History

Facts about Small Business

What is small firms’ share of employment?

Small businesses employ just over half of U.S. workers. Of 119.9 million nonfarm private sector workers in 2006, small firms with fewer than 500 workers employed 60.2 million and large firms employed 59.7 million. Firms with fewer than 20 employees employed 21.6 million. While small firms create a majority of the net new jobs, their share of employment remains steady since some firms grow into large firms as they create new jobs. Small firms’ share of part-time workers (21 percent) is similar to large firms’ share (18 percent).

Source: U.S. Dept. of Commerce, Bureau of the Census: Statistics of U.S. Businesses, Current Population Survey.

How many small businesses are there?

In 2008, there were 29.6 million businesses in the United States, according to Office of Advocacy estimates. Census data show that there were 6.0 million firms with employees in 2006 and 21.7 million without employees in 2007 (the latest available data). Small firms with fewer than 500 employees represent 99.9 percent of the 29.6 million businesses (including both employers and nonemployers), as the most recent data show there were about 18,000 large businesses in 2006.

Source: Office of Advocacy estimates based on data from the U.S. Dept. of Commerce, Bureau of the Census, and U.S. Dept. of Labor, Employment and Training Administration

What is the role of women, minority, and veteran entrepreneurs?

In 2007, the overall rate of self-employment (unincorporated and incorporated) was 10 percent, and the rate was 7.1 percent for women, 7.4 percent for Hispanic Americans, 5.2 percent for African Americans, 10.1 percent for Asian Americans and Native Americans, and 14.4 percent for veterans.  According to a recent study, service-disabled veterans were less likely than non-service-disabled veterans to be employed, and they had lower self-employment rates.

Source: U.S. Dept. of Commerce, Bureau of the Census, Survey of Business Owners; Office of Advocacy: Women in Business (www.sba.gov/advo/research/rs280.pdf) and Minorities in Business (www.sba.gov/advo/research/rs298.pdf); Open Blue Solutions, 2007 (www.sba.gov/advo/research/rs291tot.pdf), and Office of Advocacy: The Small Business Economy, 2009 (Table A.13, www.sba.gov/advo/research/sbe.html).

What is the survival rate for new firms?

Seven out of ten new employer firms last at least two years, and about half survive five years. More specifically, according to new Census data, 69 percent of new employer establishments born to new firms in 2000 survived at least two years, and 51 percent survived five or more years. Firms born in 1990 had very similar survival rates. With most firms starting small, 99.8 percent of the new employer establishments were started by small firms. Survival rates were similar across states and major industries.

Source: U.S Dept. of Commerce, Bureau of the Census, Business Dynamics Statistics. Note that the figures could be skewed slightly by the rare occurrence of new firms opening multiple establishments in their first few years.

How are small businesses financed?

Commercial banks and other depository institutions are the largest lenders of debt capital to small businesses. They accounted for almost 65 percent of total traditional credit to small businesses in 2003. (This includes credit lines and loans for nonresidential mortgages, vehicles, equipment, and leases.) Credit cards account for much of the growth in small business lending over the past few years. For more information, see Advocacy’s annual publication, Small Business Lending in the United States.

Source: SBA FAQs