SBA: Small Business Friend?
Small business is pretty big business in the federal government’s bureaucracy. President Obama elevated the position of Small Business Administration administrator to cabinet level back in 2012 and its operating budget – just salaries and general overhead costs – is about $430 million.
Of course, there’s a lot more cash involved in SBA loans and loan guarantees. Between 2007 and 2013, this figure totaled $67.23 billion. The money was handed out to almost 35,000 entities.
Watchdog groups have recently called attention to some potentially troubling observations in the awarding of loans and guarantees:
- Organizations qualified for standard bank loans have received SBA loans, and
- Groups catering to the “lifestyles of the rich and famous” are being funded.
Let me make some general observations before I give you some specifics. The SBA is handing out tax dollars collected from individuals and corporations. Much of this tax money comes from hard-working small business owners. Because of the source of the money, there are certainly many cases were a portion of a small business owner’s tax payment goes to fund the competition down the block.
One must ask the question: Would it be better to leave those billions of dollars in taxpayers’ pockets rather than send the money to Washington D.C. – where much of it disappears in operating costs – and have bureaucrats redistribute it to many companies who don’t really need it in the first place?
Most small business owners go through normal means to raise startup and expansion money. They save. They borrow from family members. They max out credit cards. They go to a local bank. Is it fair for those folks to be competing against someone who is using public funds?
Those are questions for all of us to consider and I’m sure we could have some good discussions over coffee someday, but until that day comes, let’s look at some loans that causes many of us to question the priorities and even existence of the SBA.
The taxpayer advocacy group Open the Books highlights several exclusive private clubs that received large amounts of SBA loans or guarantees:
Gun clubs. The administration may rail against guns on the campaign trail, but when it comes to handing out money, gun clubs hit a bullseye, including the Centennial Gun Club in Englewood , CO, which received $4.0 million and the Frisco Gun Club in Frisco TX, which scored $3.282 million.
Yacht clubs. The Pequonnock Yacht Club in Bridgeport, CT and Houston Yacht Club in La Porte, TX each floated $2.0 million loans.
Also among the recipients of SBA approval were Napa Valley wineries, Rolex and Lamborghini dealers, resorts, Fortune 100 companies, and even private equity firms.
Please don’t get me wrong. I think all of these kinds of businesses and clubs are great and I don’t know of any illegal activity behind the awarding of loans or loan guarantees. But I generally think that the government should stay away from picking winners and losers and let the market sort those things out.
Something like the SBA may have a role in tough times – and it does grant disaster relief loans – but when the economy went south several years ago, SBA loans actually decreased. What’s the point of handing out more money in the good times, when smart, hard-working entrepreneurs can make it on their own?
As I climb off my soapbox, let me send you to a very interesting website that should give you an excellent local perspective on the SBA. Open the Books has a searchable database of SBA loans between $1 million and $5 million (account creation required). You can plug in your state or even city to see who scored big with the SBA.
Then you can decide if it was public money well spent.
