Golden Anniversary Celebrates Beginning of Golden Opportunity for Businesses
By Linda Cruse

Nationwide celebration marks 50 years of SBA helping small businesses.

Some of the businesses are internationally well-known: Nike. America Online. Federal Express. Compaq. Apple Computer.
Others—like Intel, Ben and Jerry’s Ice Cream, Outback Steakhouse and Calloway Golf—are national household names.
And there’s a long list of local success stories too: PB&J Restaurant Group, The Roasterie Inc., Williams Foods, All Pro Construction, J.M. Neil & Assoc., Californos Restaurant and Able Employment to name just a few.

All of these companies—from international conglomerates to thriving small businesses in Kansas City—comprise the more than 20 million businesses the U.S. Small Business Administration (SBA) has helped to start, grow or expand over the past 50 years.

In August as the SBA marks its 50th anniversary, the spotlight will shine on all the entrepreneurs for whom the SBA helped turn dreams into gold. Celebrations are planned throughout the country to mark the impact of the federal agency.

Celebrating the Big 5-0
A ceremony and luncheon is planned at the Dwight D. Eisenhower Library and Museum on August 1 in Abilene, Kan., to commemorate President Eisenhower’s signing of the Small Business Act on July 30, 1953.

Invited guests include Vice President Dick Cheney, SBA Administrator Hector V. Barreto Jr., congressional leaders, SBA district directors, numerous small business owners the agency has helped and more. According to Sam Jones, the regional administrator for SBA’s Region 7, the Region 7 office has issued more than 5,000 invitations throughout Kansas, Missouri, Iowa and Nebraska.
In addition to the festivities in Abilene, a November 17 celebration is scheduled in Davenport, Iowa, and an April 2004 event is planned for either Kansas City or Springfield.

“The regional events will include administration and cabinet level participation,” said Jones. “We will tour a small business that has shown a great deal of growth, particularly in employment. That will help emphasize the SBA’s hand in creating jobs. Then we’ll have a small business roundtable, with business owners discussing what the SBA has done—and needs to do—for small business.”

Historical Significance
Since its creation a half century ago, the SBA has placed more than $170 billion in direct or guaranteed loans into the hands of entrepreneurs, said Jones. SBA’s current business loan portfolio of about 219,000 loans worth more than $45 billion makes it the largest single financial backer of U.S. businesses in the nation.

“I suspect—with the possible exception of the GI Bill—that the act creating the SBA has had more impact on the American economy than any other federal act,” said Jones.

The SBA evolved from predecessor agencies such as the Reconstruction Finance Corporation, created in 1932 to alleviate the financial crisis of the Great Depression, and the Smaller War Plants Corporation, created in 1942 to help small businesses participate in World War II production.

After these agencies were abolished, President Eisenhower created a new small agency to continue the functions of its prior agencies. He named it the Small Business Administration.

“Probably the biggest change in the SBA through the years is that instead of making direct loans to the borrower, the SBA is now guaranteeing loans,” Jones said. “But the philosophy remains unchanged.”

The SBA has expanded its programs to include financial and federal contract procurement assistance, management assistance and specialized outreach to women, minorities and veterans. Loans are also provided to victims of natural disasters and specialized advice and assistance in international trade.

Local Economic Impact
The very first SBA loans made in Region 7 went to companies building grain elevators, said Jones. “In 1953, loans were made to companies in Norton, Kan., and Nebraska for grain elevators.”

Currently, the SBA maintains a loan portfolio of $1.5 billion in Region 7, which covers a four-state area. The SBA District Office, which serves Kansas City and includes the western half of Missouri and the eastern third of Kansas, is carrying $310 million in outstanding loans, and their borrowers are 91 percent current on their repayment, said Jones.

Kathy Hunter, vice president of business banking at Commerce Bank, notes that the SBA has had a significant influence on Kansas City’s business climate. “It’s had a wonderful impact,” she said.

“The 7(a) loan program, where the bank makes a loan and receives an SBA guarantee for part of that loan, is just one type of financial assistance the SBA offers,” Hunter said. “The 504 program also has significantly helped businesses and community development corporations—adding new jobs and boosting the economy.”

Through the 504 program, banks and certified development companies partner with the SBA on loans to assist businesses on large capital investments, such as land, equipment, building expansion and construction of a headquarters.

“Businesses receive favorable financing and, in return, they make expansions that create new jobs and boost the economy,” Hunter said. “It’s a two-way street for the businesses and the bank, which has a lower loan risk. They finance 50 percent rather than 100 percent of the project thanks to assistance from the SBA.”

From Start-Up to Success
When a potential small business owner can’t meet conventional loan requirements, SBA loan guarantees have proved invaluable, said Diane Wier, vice president, government lending products, Bank of America.

“The SBA has helped the small business community tremendously in that banks can consider different types of companies that we otherwise wouldn’t be able to,” she said. “It also gives them a longer repayment time period and better cash flow.”

Consider Paul Khoury, who founded the PB&J Restaurant group 15 years ago with his partner, Bill Crooks. Khoury said that receiving SBA assistance was invaluable to his business success.

“It is nearly impossible to receive money from a bank when you’re a new restaurant owner without an SBA loan guarantee,” he said. “All of the banks told us that.”

An Overland Park bank loaned the partners $115,000 to open their first restaurant. A second $150,000 loan allowed the company to open its next restaurant, The Coyote Grill. Now the award-winning business operates six casual dining restaurants in the Kansas City area as well as restaurants in Wichita, Denver, St. Louis and Memphis. The company has nearly 900 employees.

“It’s amazing to see the impact that $115,000 had,” said Khoury. “Every year, on the Fourth of July, we close our restaurants and take our employees to Oceans of Fun and Worlds of Fun for the day. When you see the parents, children and grandparents all gathered out there, you realize the impact that one loan had on the lives of more than 1,000 people.”

Judy Hohn, owner of Serenity The Rejuvenating Day Spa, credits the SBA loan program with giving her a solid start. She applied for a $70,000 loan to start her successful Overland Park business. The 10-year-old company now reports revenue in excess of $700,000 annually.

Fueling Expansions
While many area small businesses used SBA loans for start-up capital, others have relied on the agency’s funding to grow their companies.

Tabco Inc. is a thriving international custom label manufacturing business that Gene Kubicki Sr. founded in his garage in 1955. His sons Eugene Jr. and John took over the business in 1981. This spring the two brothers were named the 2003 SBA Small Business Person of the Year for the state of Kansas.

To keep up with customer demands and to stay current with technology, Tabco has relied on the SBA’s 504 loan program. The financial assistance has given Tabco an opportunity for both building and equipment expansion.

Danny O’Neill, owner of The Roasterie, Inc., said he received a $100,000 loan for expansion shortly after starting the coffee business in his home.

“I’ll never forget receiving that first loan,” O’Neill said. “It was vital to our business. At that point we were still operating on a hope and a prayer.”

The Roasterie, now celebrating its 10th year in business, has grown to 20 employees and has customers throughout the United States.

An unsuccessful bid to purchase a building led Guy Merola, owner of Oggi Modern Furnishings, to the SBA. He said that in 1994 when he attempted to purchase a five-story building in downtown Kansas City as a new headquarters, “bankers were laughing at me. I heard things about the building being functionally obsolete. It had been empty for five years, but it certainly wasn’t derelict. So I persevered.”

Eventually, several bankers said they would consider loaning Merola the money for the building at 600 Central if he could obtain an SBA guarantee.

Rick Brucker, vice president, US Bank’s SBA division, said, “I think the biggest benefit to small businesses is that the SBA expands the credit pot. You’ve got businesses that have been around a long time and would like to increase their capacity, but conventional financing credit restraints keep them from doing so. With an SBA guarantee, banks are able to go outside the credit restraints and provide the money these companies need to grow their businesses.”

Celebrating the Past, Shaping the Future
In September, small business owners throughout the nation will converge upon Washington, D.C. for the National Entrepreneurial Conference and Expo.

Participants will meet potential clients at a national contracting match-making event and attend educational seminars on access to capital, entrepreneurial development, importing and exporting, contracting, e-government, regulatory relief, franchising and protecting their small business.

Event highlights will include the presentations of the annual SBA awards, including the announcement of the National Small Business Person of the Year, and the unveiling of a new Hall of Fame that will honor the highest achievements of entrepreneurialism.

“We received nominations from all 50 states and two territories, and one company will be named to the Hall of Fame from each of SBA’s 10 regions,” Jones said.

But the year-long celebration won’t end there. Ten public forums will be held around the country from October through April 2004. At these events, business owners and others will discuss the needs of small businesses and how the SBA may better assist them. The feedback the business owners provide at these forums will be used to help shape the SBA’s future.
One satisfied SBA client, Merola of Oggi Modern Furnishings said, “I get a warm, fuzzy feeling every time I think about the SBA.” He notes that working with the agency “wasn’t a bureaucratic nightmare . . . I think it’s the best government agency in existence.”

Linda Cruse is managing editor of Kansas City Small Business Monthly.