Help for the self-employed; new SBA head Erskine Bowles presents a proactive plan to revitalize small business - U.S. Small Business Administration - Watchdog

Home Office Computing, Oct, 1993 by Nick Sullivan

"My first year in business, I made $5,000," says Erskine Bowles, a former small-business owner who was sworn in by President Clinton as administrator of the United States Small Business Administration (SBA) last May. "That's revenues, not profits. A lot of people in Washington confuse those two terms."

Bowles, dapper and convivial with a slight Southern drawl, may be making outsider jokes now, but he has his work cut out for him. "The SBA was a demoralized agency that had been living under a death threat for 12 years," says Bowles, who was chairman and chief executive officer of Bowles Hollowell Conner & Co., an investment banking firm with 52 employees in Charlotte, North Carolina, that focused on serving small- and medium-size businesses. "I'm going to go out into the marketplace, talk to the customers, and then do what I can to fulfill their needs. I want small-business people, who are my customers, to hold me accountable. I want to be judged by what I do, not by what l say."

PIPELINE TO THE PRESIDENT

This bottom-line businesslike attitude excites many small-business groups, who feel they finally have an ally in Washington. When Bowles spoke at the 50th anniversary conference of the National Federation of Independent Business last June, he was given a thunderous ovation. Even more encouraging, though, is the entree Bowles has to the White House.

He is the first head of the SBA to hold a seat at any President's economic table, in this case the National Economic Council chaired by Robert Rubin.

"I have tremendous access to the White House," says Bowles. "That's what convinced me to take the job. I know that the John Sculleys and the big labor leaders can go directly to the President, but small-business people haven't had that opportunity. The President is committed to using the SBA as the eyes and ears of small business."

Already Bowles has brought small-business people to several luncheons with the President, which previously had been attended only by Fortune 500 executives. When asked if he would invite HOME OFFICE COMPUTING subscribers to represent the voice of the self-employed, Bowles said he could not "overpromise" but would take it under consideration.

In addition, Bowles is holding small-business town meetings around the country to solicit the views of business owners (see "We Salute" in last month's Up Front). "I'll act as a listening post for the President and report back directly to him."

At the first town meeting, in West Hartford, Connecticut, where about 300 people showed up, Bowles heard from those who run small businesses express their worries about having to shoulder the burden for health-care reform. He replied that he was lobbying within the Administration to ease the reform's impact by forcing employees to contribute. He also said that he wants the new system to let self-employed people deduct the entire cost of health insurance from their taxes.

What will come of this access, this energy, this free-market approach to running the stodgy old SBA? After Bowles had been in his post for a month and a half, we asked him about his business plan for the next four years. In a nutshell: Free up capital and reduce government regulations, and small businesses will thrive.

FREE UP CAPITAL

Drawing on his background as an investment banker (before he started his own company, he worked at Morgan Stanley & Co.), Bowles's primary mission is to free up money for businesses. "Small businesses are starved for capital," he says. "You know it, I know it, the President knows it.

"Since 1958, the SBA has only had two loan programs [7A and 504], which back lending banks with a 90 percent and a 40 percent government guarantee, respectively. I've been meeting with lending officers--not bank presidents-- to see what new kinds of programs we can institute. We have innumerable opportunities. Already, President Clinton has eased regulations so it will be easier for banks to return to character-based lending. In addition, we want to expand the number of Small Business Investment Companies by 150 or 200." Each of these venture capital organizations, regulated by the SBA but funded by private capital, pump anywhere from $10 million to $15 million annually into existing small businesses.

MICROLOAN EXCITEMENT

Bowles is especially excited about the microloan program (see "Little Loans, Big Benefits" in the July issue), through which selected nonprofit community development agencies can lend up to $25,000--but he is evaluating it like a businessperson.

"We now back 96 lenders [the SBA kicks in $375,000 to each loan pool], and my hope is to do more. But it's a pilot program, set up by Congress to run through 1996. We're now evaluating the data to make sure these loans, which are averaging $7,500, are generating jobs. When you consider that two-thirds of the businesses in this country are started with less than $10,000, and one-half with less than $5,000, the microloan program should create businesses and jobs."