Small Business Administration overdue for an update: Landsman

With a record 10.5 million small business applications filed in the past two years, Rep. Greg Landsman (D-Ohio) said Wednesday that the Small Business Administration (SBA) needs to rethink how it defines a small business. 

Landsman, who serves as ranking member of the Small Business Subcommittee on Economic Growth, Tax, and Capital Access, spoke Wednesday at The Hill’s event How New Pathways to Credit are Changing the Small Business Landscape.

“The SBA — for child care providers and a whole host of other small businesses — was really built for an economy 20, 30, or 40 years ago, not this one,” Landsman said. “We need to fundamentally update the SBA so that it is helping all of our small businesses, not just the ones that have been in the mix for some time.”

Landsman said more child care centers should fall under the small business designation. Some of his colleagues agree, introducing a bicameral and bipartisan bill earlier this year that would categorize certain nonprofit child care providers as small business concerns so that they can participate in SBA loan programs.

Mark Madrid, associate administrator of the SBA Office of Entrepreneurial Development, told The Hill’s Editor-in-Chief Bob Cusack that given the variety of small businesses that exist, there will be no one-size-fits-all solution to the problems that small businesses face. 

“Those that are scaled, let’s say, over a million plus in annual gross revenues … are different from those small businesses that are five employees or less that have built financial success,” Madrid said at Wednesday’s event, which was sponsored by Wells Fargo. 

“We have to take a look at what their compensating factors are … splitting our small business ecosystem into personas and understanding them and the terrains that they’re in, including industry and geography.”

The real-life experiences and data presented by the event’s speakers showed there are broad challenges facing the small business sector. 

Holly Wade, the executive director of National Federation of Independent Business Inc., said that out of the 300,000 small business owners within their network, 24 percent reported hiring as their biggest challenge, with another 24 percent pointing to inflation. 

However, Diana Rios Jasso, founder and CEO of Jarabe Gourmet Pops, says her biggest challenge has been accessing capital. Though she registered her business in 2018, she wasn’t able to launch until 2021 because every bank she applied to for capital denied her request, so she had to save up the money instead.

“My partner and I saved $30,000, which meant saving 50 percent of our salary so we could start our business,” Rios Jasso recalled. “That just gave us enough to pay for a little ice cream push cart, a couple [pieces of] equipment and just supplies … it was just enough to keep the lights on.”

She and her partner continue to raise capital on their own, pushing their cart to farmers markets to sell their Mexican-style gourmet pops.

Her experience is reflected by 2023 data released by the Kauffman Foundation, showing that while the financial needs of 48 percent of white small business owners are met, that number is much lower for people of color — 16 percent for Black owners and 28 percent for Latino owners. 

Jonathan Ortmans, head of the Global Entrepreneurship Network, agreed some of that discrepancy is due to discrimination, but said it also has to do with bad or lack of credit history, something common among mothers and veterans who may not have had the opportunity to build credit. 

Landsman said he is continuing to help advance bipartisan legislation to promote earned-income tax credit and make small business interest payments tax-deductible. 

Madrid added that the SBA will continue to meet with stakeholders, and that they will provide education and technical assistance to business owners. 

“Every single day there’s a new challenge for a small business owner,” Madrid said. “So it’s my job to make sure that I’m in tune with them.”