6 Reasons Why Small Business Doesn't Need the SBA

Federal budget cutters' proposal to merge the Small Business Administration into the Department of Commerce unleashed an avalanche of angst that the move would be disastrous for small firms. What will happen with the SBA is unknown. But clearly almost any federal spending cut is at least on the table. Should the SBA go away, the Debunker doubts it would hurt small business much.

In the first place, the Small Business Administration isn't really about small business. The SBA defines a small business as one employing fewer than 500 people. Most people rightly don't consider a 499-employee business small. At best, this is the Medium-Sized Business Administration.

Second, the training offered by the SBA's network of Small Business Development Centers is for the most part rudimentary. People unaware of, say, the difference between revenues and profits can profit from the SBA's instruction. But if there's any sizable, successful venture today that got its start in a SBDC "How to Write a Business Plan" course, it's news to me.

Third, the SBA's best-known initiatives are its financing offerings. But SBA-backed loans are, in reality, little if any more accessible than bank loans for most small businesses. And the paperwork is far more burdensome. Few entrepreneurs would miss them.

Fourth, the SBA has an Office of Advocacy that, among other things, funds studies and assembles statistics on small business. But more and better academic research happens without SBA funding, according to Anne Marie Knott, entrepreneurship professor at Washington University in St. Louis and author of "Venture Design" (Sage, 2008). "In fact, none of the research I teach to either my Ph.D. students or my BSBA/MBA students designates itself as being funded by the SBA," Knott says. "A better source of funding for this research is the Kauffman Foundation."

Sixth, the SBA's role as small business advocate includes lobbying for fewer regulations, better health care, and more government contracts for small business. Recently some examples of slackness in allowing big companies to snag contracts supposedly set aside for small firms have raised big questions about how well they're doing with that.

So what would happen if the SBA were to disappear? Even those steeped in the world of entrepreneurship might not notice. "I don't have much intersection with them, which may be informative in and of itself, since I've been teaching and researching entrepreneurship for 15 years," Knott says.

One thing would change: If the SBA and Commerce are combined into a new Department of Commerce and Innovation with a combined budget that's trimmed by 10 percent, in 2015 the nation's budget will shrink by about $1 billion. That's 10 digits worth of taxes that won't have to be collected, money that could go to reduce the debt or another worthy cause. If small business owners want lower taxes, less public debt and less government intrusion, it behooves them to let this proposed merger proceed.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications. Follow him on Twitter @bizmyths.
Image courtesy of Flickr user spaceodissey, CC2.0