When most people hear there is a government agency backing bank loans for small businesses, they think, “wow, that’s sure a nice thing the government is doing — supporting small businesses.”
However, anyone who owns a small business who has sought such a loan knows this reality: An SBA loan is one of those “last resort” financing ideas you pursue just before seeking a loan from a guy who looks like a character from the Sopranos.
If you have refinanced a mortgage since late 2008, you may have a sense of what it’s like to pursue an SBA loan — most of the process is focused on proving you don’t really need the money and generating paper work that seems designed solely to fill a folder full of paper proving the bank did everything possible to keep from making the loan. (I have refinanced a mortgage during that period, but have avoided the SBA route after about ten minutes of looking into it.)
Frankly, it’s not such a bad thing that the bar is set high on such business loans. The pool of available funds has, historically, been rather small. While larger in the past few years, the chances of a business failure has probably risen, as well. However, as with anything you’d turn over to the dynamic duo of bureaucracies, the federal government and banks, the “work flow” of an SBA loan application can be, if stories I’ve heard are true, “epic.”
In today’s New York Times, an interview with Neil Blumenthal, one of the founders of Warby Parker, an online eyewear company, provides insight (no pun intended) into the reality of the SBA loan process — and dealing with government agencies, in general. (Unlike for the SBA, he has praise for New York City initiatives like the Bloomberg administration’s, “New Business Acceleration Team.”)
“For the $200,000 SBA-backed loan that we got, the bank wanted $100,000 in collateral in either cash or marketable products. The reason they wanted so much collateral was that if we default, the regional bank is not going to go through the process of getting the money from the SBA because it’s so onerous.”
It’s natural for lawmakers — Republicans and Democrats, alike — to wrap themselves up in the banner of small business. As I’ve written before, small businesses are admired by Americans while giant corporations (especially banks) and politicians (especially Congress) are not.
The frustration of Neil Blumenthal is not isolated. I believe lots of small business owners would like lawmakers to stop talking about how important small businesses are — frankly, we’d prefer that lawmakers just stop talking, period — and either do something, or not do something, just stop talking. I don’t know of too many small business owners — even those with SBA loans — outside of the categories of businesses that receive government contracts, who believe politicians of either party do much more than pay lip-service to how important small businesses are.
I believe most small business owners believe “the government,” (including the SBA) is something that is 1) Mostly irrelevant, 2) An impediment to growth, and 3) to be avoided, if at all possible.
While I often believe that the interest of big businesses and small businesses are at odds when it comes to politics, I think that small business owners may find some resonance in the message of Starbucks CEO Howard Schultz, who is calling for a political contribution boycott until lawmakers stop their theatrics and start actually addressing the problems we face. And by “addressing,” I mean, “stop the intransigence.”
If what we have to look forward to over the next 15 months is more of the current spew of populist posturing, there’s very little reason to think anyone’s opinion of politicians is going to improve. And even less reason to believe lawmakers will have the fortitude to make decisions that can actually help the economy — or, at least any decisions that haven’t been pre-filtered by polling data into, yes, talking points.
[Follow me on Twitter: @R]