Today's news carried an item about the
Small Business Administration considering some small changes to their
definition of small business. The SBA generally uses a definition of
under 500 employees is a small business.
In my banking days I set up a
conference for all the “small businesses” in San Bernardino
County as a marketing tool for the bank. I found out a week before
the conference that no one was planning to come. I quickly went out
and interviewed prospective attendees. Any business that had more
than 50 employees considered themselves a “big business”,
certainly they were big for San Bernardino. All the one to three
person shops considered themselves to be too small, “mom and pop”
operations. The one to three person shops had the SBA, “under
500 employees” definition in mind.
The definition doesn't really matter.
What matters is that the SBA and the minority MSBA are the two most
irrelevant agencies in the Federal government. Most truly small
businesses, 90% of them will fail in the first year and shouldn't
have a loan (unless it is a family member willing to lose money). The
small number who survive starting a small business, more than a year,
have to make it through two or three years before their revenue can
warrant a loan and cover the associated interest. Any business that
would qualify for an SBA loan would qualify for a bank loan. Go to
the bank, it has fewer restrictions on the way you run your business.
The SBA gets customers by offering slightly lower interest rates and longer loan periods. In return the small business applicant has to fill out more papers and more complicated papers than would be needed to get zoning for a whore house a block from the Supreme Court. In order to get through the paper work and the ultimate restrictions on the loan, nearly all applicants need a loan-greaser. The greaser does the paperwork and gets the loan. Problem is that greaser fees usually cost more than is saved in lower interest payments. We don't need the SBA. (I said the same thing twenty years ago in my book Honest Business and nothing has changed.)